Couche-Tard's Global Rebranding Progresses as Footprint Grows


LAVAL, Quebec — Alimentation Couche-Tard Inc. is poised to experience another growth spurt in fiscal year 2017.

Speaking during the company's first-quarter earnings call for the new fiscal year, President and CEO Brian Hannasch said Couche-Tard is "off to a solid start to a year that promises to be more than exciting."

Inside its convenience stores, the Canadian-based retail company continues to roll out its Simply Great Coffee program, adding it to 345 more sites, along with its new bakery offering, adding it to roughly 670 stores in Europe. The retailer is also introducing food items from its Topaz Energy Group Ltd. acquisition in Ireland to other locations throughout Europe, Hannasch reported. 

Couche-Tard is making progress on its global Circle K rebranding initiative, too. Halfway through the initiative's first year, 900 stores have transitioned over to the new Circle K brand. The company began rebranding locations in Europe this past quarter and to date, 250 c-stores in Scandinavia now carry the new image.

As the global rebranding efforts continue, Hannasch noted "customer traffic remains steady" at the newly rebranded Circle K stores.  

However, even as Couche-Tard rebrands hundreds of stores, according to the chief executive, the company is adding even more locations through acquisitions. On May 1, Couche-Tard completed the acquisition of Dansk Fuel A/S from A/S Dansk Shell. This comprised 315 service stations, but as per European Commission requirements, the company will only retain 127 sites — 82 owned, 45 leased from third parties. According to Hannasch, during the 2017 first quarter, Couche-Tard reached agreements with independent dealers to convert all the retained sites to company-operated locations.

Couche-Tard followed the Dansk Fuel deal with an agreement to buy 23 company-operated sites in Estonia from Sevenoil Est OÜ and affiliates. This transaction is expected to close in the second quarter of fiscal year 2017.

The past quarter also saw Couche-Tard's continued integration of The Pantry Inc. and its 1,300-plus convenience stores, which primarily carried the Kangaroo Express banner. The company's cost reduction run rate in connection with this integration has reached $71 million, said Chief Financial Officer Claude Tessier, noting the company is confident it will meet its objective of $85 million within 24 months of the March 2015 U.S. deal. 

At the same time, integration of the Topaz sites in Ireland — which Couche-Tard officially added Feb. 1 — is "on track and going well," as is the integration of Shell's Denmark network, Hannasch reported.

Couche-Tard is now looking forward to integration of its recently acquired Imperial Oil assets, which will begin in the coming months.


While the first quarter of fiscal 2017 was busy, the past week alone indicates Couche-Tard's second quarter will be just as busy.

On Aug. 21, the company signed a definitive merger agreement to purchase CST Brands Inc. for approximately $4.4 billion. Once this deal closes, Couche-Tard will sell most of CST's Canadian assets to Parkland Fuel Corp. 

In addition, on Aug. 29 Couche-Tard inked an agreement to purchase 53 Cracker Barrel convenience stores from American General Investments LLC and North American Financial Group LLC. The stores are located in Louisiana, primarily in the Baton Rouge market.

Still, Couche-Tard does not rule out additional tucked-in deals; however, Tessier said the company will focus on de-leveraging its balance sheet in the near term.

As for possible market saturation, Hannasch said the retailer's existing presence in parts of Quebec and Canada would prohibit the company from making any meaningful moves there. But the United States is still very fragmented and as he noted, "there is a lot of runway in North America overall."


For its first quarter ended July 17, Couche-Tard reported net earnings of $324.4 million. The results for the quarter were affected by a $6.9-million pre-tax accelerated depreciation and amortization expense in connection with the corporation's global brand initiative, as well as by a net pre-tax foreign exchange gain of $3.2 million. The results for the first quarter of fiscal 2016 included a net pre-tax foreign exchange gain of $6.8 million.

Excluding these items — as well as acquisition costs from both comparable quarters' results — the diluted net earnings per share would have been 58 cents for the first quarter of fiscal 2017 compared with 51 cents for the first quarter of fiscal 2016, an increase of 13.7 percent, according to the company. This increase is attributable to higher fuel margins, continued organic growth, and the contribution from acquisitions. 

"Our performance in the quarter was both steady and gratifying," Hannasch said. "Same-store merchandise revenues were solid in the U.S. and Canada, and strong in Europe — all fueled by the growing popularity of our expanded foodservice offering, our effective merchandising strategies, as well as growing contributions from our acquisitions."

As of July 17, Laval-based Couche-Tard's network comprised 7,863 convenience stores throughout North America and 2,708 stores in Europe. In addition, under licensing agreements, more than 1,500 stores are operated under the Circle K banner in 13 other countries and territories worldwide.

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