Couche-Tard Works to Get Sales Hopping at Pantry Stores
LAVAL, Quebec — Alimentation Couche-Tard Inc.’s $850-million acquisition of The Pantry Inc. has “impressive contribution potential to our company’s growth,” Brian Hannasch, president and CEO, said during the retailer's 2015 fiscal fourth-quarter earnings call Tuesday afternoon.
Couche-Tard’s CEO added that his company believes “we can turn around The Pantry’s trends” by further improving sales and in-store performance at The Pantry’s Kangaroo Express convenience stores.
“We are applying all of our best practices to The Pantry’s network and the integration is going well,” Hannasch reported. “In line with our business model, our people are already actively working on sharing best practices, benchmarking and on the identification and realization of synergies, which should not only benefit our newly acquired network, but also our existing network. We have just completed The Pantry’s budget process and I am very excited about what I have seen and heard.”
Adding fresh food items and private-label products are two ways Couche-Tard expects to improve results at Kangaroo Express c-store locations. In fact, Couche-Tard has launched more than 100 private-label products in the past 12 months at its North American locations, according to Hannasch.
On the forecourt, Couche-Tard’s chief said the company also expects to grow fuel volumes at the approximately 1,500 stores it acquired from The Pantry.
BY THE NUMBERS
Couche-Tard’s 2015 fiscal fourth-quarter earnings for the three-month period ended April 26 included 41 days of contribution from The Pantry, as the acquisition closed March 16. Hence, a majority of its fourth-quarter U.S. results came from its Circle K convenience stores.
With this in mind, U.S. same-store metrics improved across the board. U.S. same-store merchandise revenues increased 5.2 percent, while merchandise and service gross margins stood at 33.4 percent at U.S. stores.
Same-store road transportation fuel volumes grew by a robust 6.4 percent in the United States, with fuel gross margins reaching 15.46 cents per gallon.
“In the U.S., we have experienced our strongest growth since the beginning of the financial crisis in 2008,” remarked Hannasch.
Companywide, Couche-Tard earned $129.5 million in its most recent quarter. However, if excluding one-time items, the Laval-based company would have earned $142 million for the fiscal fourth quarter, compared to $123 million during the same period in 2014.
“Our performance in the fourth quarter was a great way to end an exceptional fiscal year,” said Hannasch. “It allowed us to begin fiscal year 2016 with the momentum needed to achieve the ambitious goals we have set for ourselves.”
Looking ahead, despite The Pantry acquisition, Couche-Tard Vice President and Chief Financial Officer Raymond Paré said the company in May issued $700 million (Canadian dollars) in senior unsecured notes at “very satisfactory conditions.” Hence, Couche-Tard is “well positioned to take advantage of any opportunities that might present themselves in the future.
“The pipeline [for acquisitions] remains robust in Europe and North America,” Paré continued. He did not expand on any specific acquisitions Couche-Tard is currently considering.
As of April 26, Laval-based Alimentation Couche-Tard had 7,787 company-operated convenience stores in North America and Europe.