Couche-Tard Weathered Some Challenges in Q2

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Couche-Tard Weathered Some Challenges in Q2

By Melissa Kress, Convenience Store News - 11/22/2016

LAVAL, Quebec — Alimentation Couche-Tard Inc. had a busy second quarter of fiscal year 2017 when it came to expanding its footprint. However, the global convenience store retailer also ran into some bumps in the road with its existing U.S. operations in the form of lower-margin fuels and unforeseen weather events.  

According to CEO Brian Hannasch, the retailer's U.S. business was negatively affected by floods in Louisiana in August, the disruption in the Colonial Pipeline in the Southeast United States in September, and Hurricane Matthew, which struck the Southeast coast in October.

These events affected, on varying levels, 500-plus of Couche-Tard's convenience stores — primarily through loss of merchandise and fuel sales and incremental expenses, Hannasch said, adding that the company's "team members did a tremendous job" and the retailer was able to minimize the impact.

Still, Couche-Tard estimated these three events had a combined negative impact of $4 million before taxes on the company's second-quarter fiscal 2017 results.

Looking at the numbers for its second quarter ended Oct. 9, Couche-Tard reported net earnings of $324 million, compared to $415.7 million for its second quarter of fiscal 2016. Excluding certain items for both comparable periods, Q2 2017 net earnings would have been approximately $331 million compared to $375 million for the year-ago period, a decrease of 11.7 percent.

The company said the year-over-year decline was mostly attributable to unusually high fuel margins in the U.S. during the second quarter of fiscal 2016.

Couche-Tard's continued organic growth and the contribution from recent acquisitions made partially offset the challenges of the most recent quarter for the parent of Circle K. 

Other Q2 2017 earnings report highlights were:

  • Same-store merchandise revenues were up 2.3 percent in the United States, 3.4 percent in Europe, and 1.2 percent in Canada.
  • Merchandise and service gross margin was 33.3 percent in the U.S., up 20 basis points; 41.4 percent in Europe, up 70 basis points; and 33.6 percent in Canada, up 70 basis points. 
  • Same-store road transportation fuel volumes grew by 3.5 percent in the U.S. and by 0.1 percent in Europe. Volume decreased by 0.8 percent in Canada. 

As of Oct. 9, Laval-based Couche-Tard's network comprised 8,001 convenience stores throughout North America, including 6,616 stores with road transportation fuel dispensing. Its North American network consists of 15 business units, including 11 in the U.S. covering 41 states and four in Canada covering all 10 provinces.

In Europe, Couche-Tard operates a broad retail network across Scandinavia, Ireland, Poland, the Baltic states and Russia through 10 business units. As of Oct. 9, Couche-Tard's European network comprised 2,759 stores, the majority of which offer road transportation fuel and convenience products, while the others are unmanned automated fuel sites that only offer road transportation fuel.

In addition, under licensing agreements, more than 1,500 stores are operated under the Circle K banner in 13 other countries and territories worldwide, which brings the total network to close to 12,300 stores.