Larger Basket Sizes Lead to Strong Same-Store Sales for Couche-Tard
LAVAL, Quebec — Despite the challenges of the novel coronavirus global pandemic, Alimentation Couche-Tard Inc.'s convenience store network rang up strong same-store merchandise sales in the first quarter of its 2021 fiscal year.
"We had an exceptional quarter, I think both financially and operationally, as we see an increase in shopping occasions and solid execution by our teams to take advantage of changing consumer behaviors during this COVID period," President and CEO Brian Hannasch reported during the company's first-quarter earnings call, held Sept. 1.
The strong same-store merchandise sales numbers were primarily driven by larger basket sizes as consumers consolidated shopping trips, he noted.
For the quarter, Couche-Tard's same-store merchandise revenues increased by 7.7 percent in the United States, by 3.4 percent in Europe, and by 19.9 percent in Canada compared to the same quarter last year.
Also driving this growth was the gradual reopening of economies in which the retailer operates, and the continued strength in average basket size as customers relied more on the proximity of its locations to fill their needs and as Couche-Tard adapted its offer to address new consumer demands, according to Hannasch.
Particular categories that showed strength included alcohol, packaged beverages, lottery and various grocery items — in addition to tobacco, specifically in Canada.
"We've also worked hard to drive more traffic to our locations through increased awareness of our loyalty programs and ensuring we remain focused on our core value proposition," the chief executive said.
As COVID-19 drove consumers to consolidate shopping trips, the company continued to see a switch from dispensed beverages to packaged beverages, including larger package sizes for future consumption. As a result, the packaged beverages category continued its double-digit growth in the first quarter of the fiscal year, driven by energy drinks and carbonated soft drinks, which maintained a strong upward trend.
In age-restricted products, alcoholic beverages continued to grow at a rapid pace during the quarter as consumers shifted from on-premise restaurant and bar consumption to purchasing product at c-stores. More specifically, Hannasch pointed out that beer and hard seltzer turned in strong performances during the period.
Cigarettes and other tobacco products also experienced strong demand in the three-month timeframe. Cigarette sales grew in all geographies, although not at the pace of the other categories in the U.S., the CEO reported.
PERFormance at the pump
On the forecourt, same-store fuel volume during the first quarter remained negative due to the adverse impact of COVID-19 on miles driven. However, Couche-Tard is seeing some improvement in demand in portions of its network as areas return to more normal operations, particularly in Europe, according to Hannasch.
Same-store fuel volumes decreased by 21.2 percent in the U.S., by 12.4 percent in Europe, and by 25.6 percent in Canada compared to a year ago. Despite the declines, the retailer continues to realize "healthy fuel margins" across its network, he noted.
During the first quarter, Couche-Tard converted more locations to the Circle K fuel brand, bringing the total to more than 2,350 sites in North America.
"We continue to be pleased with this fuel rebranding effort as a driver of traffic to our sites and as a way to increase overall brand awareness and loyalty from our customers," Hannasch said.
The retailer's fuel customers are also benefiting from promotional moves. Notably, Circle K's Easy Pay program delivered increased trip frequency and growing transaction size vs. non-Easy Pay customers. Easy Pay is now available across its entire U.S. network, with the exception of the Northern Tier Business Unit.
"Although we had a very strong quarter, we fully recognize the significant uncertainty ahead, both in the course of the pandemic and the global economy. We will therefore continue to be prudent and operate with a long-term mindset as we keep a clear focus on our strategy," Hannasch said. "We will always continue adapting to different consumer and customer demands, whether it's for larger-basket future consumption items, different assortment, or changing or different shopping experiences."
As of July 19, Laval-based Couche-Tard's network comprised 9,274 convenience stores throughout North America in 18 business units, including 14 in the U.S. covering 47 states and four in Canada covering all 10 provinces. In Europe, Couche-Tard operates a broad retail network across Scandinavia, Ireland, Poland, the Baltics and Russia through 10 business units. As of July 19, its European network comprised 2,714 stores. In addition, under licensing agreements, close to 2,350 stores are operated under the Circle K banner in 15 other countries and territories.