Couche-Tard to Sharpen Fresh-Food Focus as Earnings Rise

LAVAL, Quebec -- As Alimentation Couche-Tard executives prepare to announce better-than-expected second quarter results, the company is reportedly looking to turn up its focus on fresh food.

The Canadian-based company has been coping well with the fallout from the economic slump, which has not hit the North American convenience store sector as hard as other industries. Add to that the recent lift from higher gas margins in the United States, a stronger dollar, and the 322 southern California stores recently acquired from Exxon Mobil Corp., and Couche-Tard investors can expect better-than-expected results, GMP Securities analyst Martin Landry told the Globe and Mail.

He anticipates that Couche-Tard will continue to post healthy earnings growth in the high single to double digits "for the foreseeable future" as it expands its fresh-food program, continues to trim costs and makes more acquisitions.

During its earnings call tomorrow, Couche-Tard President and CEO Alain Bouchard and his team will likely provide a progress report on the higher-margin fresh food strategy, the news outlet reported.

Fresh food is an important component for the convenience store operator, whose U.S. stores operate under the Circle K banner and whose Canadian brands include Mac's in Ontario. Competition from direct rivals and chains such as Walmart is heating up and it makes sense to shift into a higher-growth, higher-margin segment to offset shrinking cigarette sales and low-margin gasoline returns, according to the report.

Fresh food currently accounts for about 18 percent of gross margins at Couche-Tard; however, Bouchard wants to bring that figure up to 25 percent. To that end, Couche-Tard brought Joseph Chiovera on board earlier this year to head its foodservice unit. Chiovera previously served as the senior fresh food executive at Dallas-based 7-Eleven Inc.