Convenience store operator Alimentation Couche-Tard says its net profit grew almost nine per cent to US$324.4 million in the first quarter of its fiscal year, despite a drop in revenues caused by lower fuel prices.
The Quebec-based company that runs Couche-Tard, Mac's and Circle K convenience stores said Tuesday it earned 57 cents per share for the three months ended July 17, up five cents from a year earlier.
Excluding one-time items, Couche-Tard, which reports in U.S. currency, earned US$328 million or 58 cents per share in adjusted profits. That compared with US$293 million or 51 cents per share in the first quarter of fiscal 2016.
Couche-Tard attributed the increased profit to higher fuel margins, continued growth of its existing network and acquisitions.
During the quarter, the company introduced its global Circle K brand to Europe with the conversion of 250 stores from Statoil in Scandinavia.
"Customer traffic has remained steady in stores where we have rolled out the new brand in Norway, Sweden and Denmark— indicating that we are maintaining our momentum in our largest and most profitable European markets,'' CEO Brian Hannasch said in a news release.
It has also converted 477 stores in North America as part of its effort to operate only under Circle K in all markets, except Quebec. Mac's, Couche-Tard and other banners will eventually be rebranded.
Revenues were $8.4 billion, a 6.2 per cent decrease from almost $9 billion a year ago. A drop in fuel revenues was partially offset by higher sales of merchandise and food.
Lower fuel prices didn't hurt gross fuel margins, the company said.
"In fact, a lower fuel selling price usually works in our favour as customers tend to travel more in this context—buying more fuel —while also leaving them with more cash for their discretionary spending,'' it stated.
Couche-Tard was expected to earned 58 cents per share in adjusted profits on $8.8 billion of revenues, according to analysts polled by Thomson Reuters.
The financial results were the first since the convenience store chain announced the largest acquisition in its history, with a US$4.4-billion friendly deal to buy Texas-based CST Brands. That would make Couche-Tard the largest convenience store operator in Canada and the U.S.
Irene Nattel of RBC Capital Markets said the "solid'' operating results reflect a good performance by its existing network, helped by prior acquisitions.
Although investors perceive that Couche-Tard's growth is primarily fuelled by acquisitions, they contributed only 30 per cent of pre-tax operating earnings growth in the quarter, with 70 per cent coming from continuing operations, Nattel wrote in a report.
Alimentation Couche-Tard has 7,863 convenience across North America and 2,708 across Scandinavia. In addition, more than 1,500 stores operate under the Circle K banner under licensing agreements in 13 countries around the world.