Highs & Lows of Couche-Tard's Fourth Quarter

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Highs & Lows of Couche-Tard's Fourth Quarter

07/12/2017

LAVAL, Quebec — Alimentation Couche-Tard Inc.'s fourth quarter of its fiscal year 2017 was a mixed bag for the company, which saw varying earnings results across its global footprint. 

"During the last quarter, we continued to experience strong results in Europe while observing softer conditions in the broader North American retail industry as well as a weak fuel margin environment in the United States which both contributed to a slowdown in our organic growth in these regions," said Brian Hannasch, president and CEO of Couche-Tard.

Despite the challenges in North America, the retailer still delivered 36.8 percent growth in adjusted diluted earnings per share, he explained, calling it a "true testament" to Couche-Tard's many strengths.

"We continue to benefit from our geographic diversification, our excellence in integrating acquisitions and realizing associated synergies and our strong cost control culture — pursuit of our ongoing quest for financial efficiency," the chief executive said.

Notable numbers for Couche-Tard's fourth quarter include:

  • Net earnings of $277.6 million for the fourth quarter of fiscal 2017 compared with $203.9 million for the fourth quarter of fiscal 2016. 
  • Excluding certain items for both comparable periods, net earnings for the quarter would have been approximately $298 million compared with $219 for the fourth quarter of fiscal 2016, an increase of 36.1 percent.
  • Same store merchandise revenues increased by 1.6 percent in the United States and by 2.7 percent in Europe; Canada saw a 0.9-percnet decrease.
  • Merchandise and service gross margin decreased by 0.4 percent in the U.S. to 33.3 percent. Gross margin increased by 0.9 percent in Europe and by 1.8 percent in Canada, reaching 44 percent and 34.7 percent, respectively.
  • Same store road transportation fuel volumes grew 1.7 percent in the U.S. and 0.7 percent in Europe. Same-store volumes decreased by 0.2 percent in Canada.

"At Circle K and Couche-Tard, we thrive on selling people time, a main focus of our global brand strategy. In the deployment of our global positioning, fiscal 2017 was a successful year in increasing our presence by converting more than 2,400 stores throughout our network," Hannasch said, adding it was the first time the retailer introduced the global Circle K brand in Scandinavia.

"Here, the challenge was to successfully transition from the well-established Statoil brand without affecting customer traffic in stores," he explained. "We are pleased to report outstanding results and that our integration teams surpassed the desired results with increased customer traffic at the rebranded sites, all the while managing the initial risks identified for the company, a performance that exceeded our expectations."

With the rebranding complete in Scandinavia, the retailer launched the new Circle K global convenience brand in Poland and the Baltic countries. To date, more than 1,300 stores in North America and more than 1,200 stores in Europe now display Couche-Tard's new Circle K global brand.

In addition to its global rebranding efforts, the company added more than 2,000 convenience stores through new openings and acquisitions since April 24, 2016. This included the assets Couche-Tard acquired from CST Brands Inc. and 53 Cracker Barrel c-stores — including 11 quick-service restaurants — it purchased in Louisiana.

Couche-Tard closed on its $4.4-billion acquisition of San Antonio-based CST on June 28. In conjunction with the deal, the retailer also sold "a significant portion" of CST's assets in Canada to Red Deer, Alberta-based Parkland Fuel Corp. for $986 million, as CSNews Online previously reported.

In addition, Couche-Tard inked an agreement to sell 70 sites in the U.S. to Dallas-based Empire Petroleum Partners LLC, which is expected to close in the second quarter of fiscal 2018. 

"Overall, our proven ability to manage and control expenses, to grow organically and to successfully integrate acquisitions has allowed us to post record net earnings and operating cash flow which we cleverly used to further deleverage our balance sheet," said Claude Tessier, chief financial officer.

"With the CST transaction having closed, we remain committed to our usual financial discipline so that we can continue to thrive on our capacity to seek out the right acquisitions at the right price for the benefit of our stakeholders," he added.