Couche-Tard Still Hungry for Acquisitions
LAVAL, Quebec -- Alimentation Couche-Tard Inc.'s completed acquisition of 13 convenience stores from Garvin Oil Co. and its pending purchase of 55 locations from Tri Star Marketing Inc. is just the beginning.
The Canada-based c-store operator has a strong balance sheet and is "actively looking for opportunities of various sizes," President and CEO Alain Bouchard said during the company's 2015 fiscal first-quarter earnings call Wednesday.
Bouchard said he could not mention any specific acquisition targets, but did stress that the company will maintain discipline and not overpay for assets.
"Believe me, we were busy during the summer," Bouchard said regarding its acquisition strategy.
In the meantime, Couche-Tard plans to ramp up store rebuilds and new builds throughout fiscal year 2015. The retailer opened 11 new stores during the first quarter, and intends to open 80 to 100 such locations during the course of the fiscal year -- many of which are Circle K stores in the southern and western United States, noted Brian Hannasch, Couche-Tard's chief operating officer and soon-to-be CEO.
"We have the best portfolio of landbanks in our history," Hannasch said.
As Couche-Tard looks to the future, its recent past is definitely something for the company to cheer about. The Laval-based retailer reported record net earnings of $269.5 million for the first quarter ended July 20, a 5.7-percent increase year over year.
"We had strong organic growth on every front, with same-store sales and margins rising," said Bouchard.
The company's U.S. Circle K division was a main driver of the strong earnings. U.S. merchandise and service revenues advanced 3.8 percent year over year to $1.2 billion. Merchandise and service gross profit enjoyed a 5.4-percent rise to $392 million.
"We saw double-digit growth in foodservice sales," noted Hannasch.
Chief Financial Officer Raymond Paré added that Couche-Tard's U.S. division was able to accomplish the difficult task of increasing both in-store traffic and margins.
Fuel sales were also on the rise in Couche-Tard's latest quarter. Road transportation fuel revenues rose 8.8 percent to $3.9 billion vs. the same period in fiscal 2014. Fuel gross profits increased by an impressive 31.2 percent to $249 million. Also moving up were fuel gross margins, rising 18.8 percent to 23.08 cents per gallon.
Bouchard cited "improved supply contract terms and favorable market conditions" as the main drivers for the hefty fuel sales increases. He did acknowledge that fuel sales are volatile from quarter to quarter, however.
As of July 20, Couche-Tard had 6,236 company-operated sites internationally.
CHANGING OF THE GUARD
Hannasch is set to replace Bouchard on Sept. 24 as president and CEO when Couche-Tard hosts its annual meeting of shareholders. Bouchard alluded to this fact during Wednesday's earnings call, stating that it would be his last webcast with financial analysts.
Bouchard will become executive chairman of Couche-Tard's board of directors in three weeks. He is expected to focus heavily on acquisitions in this new role.
The current CEO also noted on the call that Couche-Tard sold its aviation fuel business to Air BP, operated under its indirect subsidiary Statoil Fuel & Retail AS, for an undisclosed sum. This transaction is expected to close by the end of the 2014 calendar year.