After getting ‘crushed by Omicron,’ Couche-Tard says store traffic is improving
Alimentation Couche-Tard Inc. says an improved economy and reopening from COVID-19 restrictions should allow consumers to absorb the pain of higher prices at the pump resulting from surging crude prices.
"It's not great news for consumers in terms of a price shock. But in terms of behaviour in our industry, these price increases were so large that the industry had no choice but to pass them through in a very competitive industry," CEO Brian Hannasch said Wednesday during a conference call to discuss its third-quarter results.
He said it's going to take a quarter or so to measure the fallout, but a relatively short-term shock shouldn't have a meaningful impact on consumer behaviour in terms of miles driven or type of cars purchased.
He noted that European benchmark Brent crude prices have dropped back to US$100 per barrel last week after surging above US$133 in response to the Russian invasion of Ukraine. North American prices have also pulled back from recent highs.
Persistently higher crude prices risk some demand disruption, Hannasch told analysts, but any customer hesitation has been offset by society reopening as pandemic lockdowns recede.
U.S. and Canadian consumers are in much better economic condition than they were during the downturn in 2008 and 2009, he added.
"So while we don't like these high fuel prices at all and their impact on the consumer and their pocketbook, we think we're as a society in a much better place to weather that storm."
Hannasch said the morning commute was a very important driver of store traffic for the convenience store chain.
After getting "crushed" by the Omicron variant at the end of the quarter, the situation has improved early into the current quarter.
"I just think we're scratching the surface in terms of people going back to work yet," he said, noting that Couche-Tard is among the companies that is just beginning to reopen its offices.
The Quebec-based convenience store company, which keeps its books in U.S. dollars, said its profit increased to US$746.6 million or 70 cents per diluted share for the 16-week period ended Jan. 30, up from US$607.5 million or 55 cents per diluted share a year earlier.
Revenue totalled US$18.58 billion, up from US$13.16 billion.
On an adjusted basis, Couche-Tard said it earned 70 cents per diluted share, up from an adjusted profit of 56 cents per diluted share in the same quarter last year.
Earlier this month, Couche-Tard suspended its operations in Russia and Hannasch condemned Russia's aggression against Ukraine and the impact it is having on both Ukrainians and Russians.
He said its Polish business had struggled to keep items in stock after being overrun by refugees arriving from Ukraine.
"So demand's actually spiked there but for horrible, horrible reasons," Hannasch said, noting a lesser impact in the Baltics.
Meanwhile, Couche-Tard said it was preparing to launch a loyalty program that rewards its most active customers and getting into the competitive chicken sandwich business by introducing the fast-food item to its growing fresh food operations.