Couche-Tard Sees Same-Store Revenue Increase During Latest Quarter

The Circle K Sip & Save subscription program is drawing new users as inflationary pressures drive customers to seek out deals.
Melissa Kress
Executive Editor
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Alimenation Couche-Tard logos

LAVAL, Quebec — Alimentation Couche-Tard Inc. recorded solid results for the fourth quarter of 2022 and full fiscal year despite inflation and lingering struggles related to the COVID-19 pandemic.

"With our unique geographic diversification, scale and operating resilience, we had record-breaking results across many key metrics. We made good progress on our strategic goals," CEO Brian Hannasch said during Couche-Tard's recent earnings call, noting that the company saw in-store sales growth accelerate during the fourth quarter.

For the three-month period, same-store merchandise revenue increased 2.3 percent in the United States, 6.2 percent in Europe, and 0.1 percent in Canada compared to the fourth quarter of 2021.

"In the U.S., the quarter cycled against a very strong comp last year at plus 8.1 percent, and food was very positive compared to prior year with strong double-digit growth," Hannasch reported.

"Across the network, our Fresh Food, Fast program is now in over 4,000 stores around the globe, meeting our objective for the fiscal year," he added. "We are excited about the acceleration, sales and engagement of our operators, as we refine our offer for our customers."

The retailer also has been able move past pandemic-related supply chain issues in foodservice, which impacted its ability to reliably source chicken as a key SKU, according to the chief executive.

"I'm happy to say today, as we sit here, that we are in the chicken business. We launched a variety of great-tasting chicken items in the quarter and they are generating very strong incremental growth in our stores, and we are expanding that across North America," Hannasch said.

"We continue to optimize our assortment as we identify new items that are desired by our customers, and increase purchase frequency. While supply chain issues have been a challenge in some items, our expanded supplier relationships and duplicate supply sourcing have enabled us to improve our in-stock positions vs. prior quarters," he added. "We are pleased with the progress we have made in our food journey and we are excited with the additional opportunities and new items in our pipeline."

In the beverage category, the Circle K Sip & Save subscription program is drawing new users as inflationary pressures drive customers to seek out deals. Currently, there are more than 450,000 active subscribers in the program. The retailer continues to refine the online enrollment experience to make it easier for customers to sign up and renew monthly.

Packaged beverage growth also increased in the fourth quarter, led by substantial growth in the immediate-consumption soda and sports drinks segments. The growth was largely due to innovation and first-to-market opportunities, including a Circle K Mountain Dew proprietary flavor.

Hannasch also pointed out that the company's localized pricing initiatives are creating new data and analytics tools to make category managers' lives easier, allowing them to respond more rapidly to the changing cost environment. In addition, Couche-Tard is working with more sophisticated analytics to optimize its assortment.

"We are aiming to more effectively identify products that are top and bottom performers across the network on a store-by-store basis and adjust our assortment more quickly to better meet our customers' needs," he said.

Q4 & FY22 by the Numbers 

During its latest quarter, merchandise and service revenues increased by approximately $75 million or 2 percent. "This increase is particularly attributable to organic growth and to the contribution from acquisitions, which amounted to approximately $27 million, while being partly offset by the disposal of stores following the strategic review of our network," said Chief Financial Officer Claude Tessier.

For the full fiscal year, merchandise and service revenues increased by approximately $623 million or 3.9 percent. "This is primarily due to organic growth, including the positive impact from our Fresh Food, Fast program, as well as pricing initiatives," he said.

For the quarter, merchandise and service gross margins increased by 1.2 percent in United States to 33.1 percent, by 0.2 percent in Europe and other regions to 38.3 percent, and by 1.4 percent in Canada to 32.4 percent.

For fiscal 2022, merchandise and service gross margins increased by 0.6 percent in the U.S. to 33.7 percent, decreased by 0.9 percent in Europe and other regions to 38.2 percent, and increased by 0.8 percent in Canada to 32.2 percent. The decrease in Europe and other regions was due to the inclusion of Circle K Hong Kong in the full-year results, the CFO noted.

Overall, Couche-Tard reported adjusted net earnings of approximately $573 million for the fourth quarter of fiscal 2022, compared to $564 million for the same period in fiscal 2021. Adjusted net earnings for all of fiscal 2022 were approximately $2.8 billion, compared to $2.7 billion for the previous fiscal year. This represented an increase of $54 million.

"Our results for both the fourth quarter and fiscal 2022 have exceeded our expectation on many fronts, especially in light of a challenging global environment," Tessier said.

"Inflation was particularly notable during the fourth quarter, impacting many aspects of our business," he continued. "We once again diligently managed through these challenging conditions and were able to mitigate the impact from a higher inflation level and continued pressure on wages."

Laval-based Couche-Tard operates in 24 countries and territories, with more than 14,000 stores, of which approximately 10,700 offer road transportation fuel. With its well-known Couche-Tard and Circle K banners, it is one of the largest independent convenience store operators in the United States, and it is a leader in the convenience store industry and road transportation fuel retail in Canada, Scandinavia, the Baltics, as well as in Ireland. It also has an important presence in Poland and Hong Kong SAR. 

About the Author

Melissa Kress
Melissa Kress is Executive Editor of Convenience Store News. Read More