Couche-Tard Plans to Divest 200 Non-Core Assets
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LAVAL, Quebec — Despite some challenges in the retail sector, Alimentation Couche-Tard saw growth in several areas of its business during the first quarter of its fiscal year 2018 — including total merchandise revenues and fuel volumes.
"While the overall retail industry continues to face challenging conditions, we were able to continue our growth trajectory in significant key areas, including growth by acquisitions," said President and CEO Brian Hannasch.
Notably, the company's merchandise and service revenues were up 9.8 percent, total fuel volumes were up 15.8 percent, and adjusted diluted earnings per share increased by 17.5 percent.
"As we continue to work on implementing initiatives to increase customer traffic into our stores without materially impacting margins, our successful acquisition strategy continued to make compelling contributions to our bottom line and desire to be the world's preferred destination for convenience and fuel," Hannasch said.
Couche-Tard's latest completed quarter, which ended July 23, was the company's first reporting period since CST Brands Inc. officially joined the Laval-based retailer's network, a point Hannasch noted.
"I am very excited that, for the first time, CST, our largest acquisition to date, is officially part of our company's financial reporting. By adding 1,263 sites from CST, and CrossAmerica Partners' wholesale fuel network to ours, we have critically strengthened our position in both the retail and wholesale fuel markets," he explained, adding the integration is "going extremely well."
In addition to unit growth, Couche-Tard is making headway on its rollout of the global Circle K brand.
"As we continue to expand through acquisitions, we are also pushing enthusiastically to bring our Circle K brand to life. The rollout in Poland and the Baltic countries is going very well with great customer acceptance, and the brand is now being introduced in Canada," according to the chief executive.
"In North America and Europe we now have more than 3,000 stores displaying the Circle K brand. Frankly, the support and energy around the globe for the Circle K brand has exceeded our expectations," he added.
According to Claude Tessier, chief financial officer, the company is putting its learnings from previous deals to good use.
"Our knowledge from past acquisitions such as The Pantry and Statoil Fuel and Retail is making a tremendous difference in capturing potential cost synergies and integrating resources with CST as demonstrated by our current annual costs reduction run rate of $47 million," he said.
The same knowledge will be applied to Couche-Tard's pending acquisition of Holiday Stationstores.
"We will use this deep experience and our usual financial discipline as we move to close on the Holiday Stationstores in fiscal 2018," Tessier said. "One of our highest priorities is to reduce our debt and further strengthen our balance sheet. In this regard, we are very satisfied with the positive term out on our new senior notes.
"We are also working to put together a divestment plan for non-core and surplus assets, including more than 200 stores that do not meet our profitability standards," he added.
According to the company, Couche-Tard saw several changes during the first quarter, including:
- On May 30: The acquisition of 53 company-operated sites located in Louisiana from American General Investments LLC and North American Financial Group LLC. These convenience stores operate under the Cracker Barrel brand and include 11 quick service restaurants. On the same date, the company closed seven of those stores.
- On July 7: The acquisition of 53 fuel supply contracts with independent operators in the Atlanta metropolitan area from Empire Petroleum Partners LLC.
In addition, during the first quarter of fiscal 2018, Couche-Tard completed the construction, relocation or reconstruction of 23 stores. As of July 23, 49 stores were under construction and should open in the upcoming quarters.
As of July 23, Couche-Tard's network comprised 9,471 convenience stores throughout North America, including 8,129 stores with road transportation fuel dispensing. Its North American network consists of 18 business units, including 14 in the United States covering 42 states and 4 in Canada covering all 10 provinces.
In addition, through CrossAmerica Partners LP, Couche-Tard supplies road transportation fuel under various brands to more than 1,200 locations in the United States.
In Europe, Couche-Tard operates a broad retail network across Scandinavia, Ireland, Poland, the Baltics and Russia through 10 business units. As of July 23, Couche-Tard's network comprised 2,754 stores.
In addition, under licensing agreements, more than 1,700 stores are operated under the Circle K banner in 13 other countries and territories.