Skip to main content

Alimentation Couche-Tard sees gradual return to normalcy amid reopening

Quebec-based convenience store retailer says it is looking at acquisition opportunities in such sectors as dollar stores and grocery
7/2/2021

Alimentation Couche-Tard Inc. remains on the path to doubling its pre-tax profits by 2023 as its business moves toward pre-pandemic levels, its CEO said Wednesday.

The Quebec-based convenience store retailer beat expectations in its fourth quarter as fuel margins surged despite lower volumes as people haven't yet fully resumed their driving habits.

Couche-Tard expects to double its earnings before interest, taxes, depreciation and amortization from 2018 levels to about US$6 billion in its 2023 financial year by growing existing sales through a series of efforts including expanding fresh food sales and acquisitions.

"Setting aside the uncertainties of COVID, I feel right on track to deliver the organic growth rates we planned for three years ago,'' chief executive Brian Hannasch told analysts during a conference call.

He said the company had made "notable progress" in accelerating organic growth by expanding fresh food to 2,000 stores, including expanding its Fresh Food, Fast program to Canada in the quarter. It plans to add fresh food to more than 3,000 locations in fiscal 2022.

Couche-Tard has unloaded some stores, including 49 in Oklahoma to rival Casey's General Stores Inc., as part of a strategic review of its operations. More than 300 other sites are being evaluated by potential buyers.

Still, it remains on the hunt for acquisitions, primarily in the United States, but also to expand in Asia.

"The appetite is absolutely there," said Hannasch, noting some failed attempts over the past couple of years, including France's Carrefour SA grocery chain.

"We're not going to do a deal for the sake of hitting this target. But at the same time, we remain optimistic that M&A can and will be a part of our growth story. It's part of our DNA. We're good at it."

The company is also looking at adjacent sectors such as dollar stores, travel retail, grocery and quick service retail, added chief financial officer Claude Tessier.

Couche-Tard beat expectations as its adjusted profit increased 11% to 52 cents US in the quarter, which was 21% above analyst forecasts.

Irene Nattel of RBC Dominion Securities said the company's margins underscored its earnings power.

"With vaccination rates rising across regions, and reopening in progress, we expect underlying demand trends to strengthen as we move through the second half and calendar year 2021 and into 2022," she wrote in a report.

Couche-Tard said the results strengthened where COVID restrictions had eased with traffic returning to rural and suburban locations at a faster rate than in urban stores.

While fuel sales remain impacted by restrictions, Hannasch said there's an improvement as vaccinations increase, especially in the U.S., where it is seeing a return to more normal driving patterns, but still below 2019 levels.

"So as states and borders continue to open, we believe there's a pent-up demand and people will hit the roads."

However, he noted the U.S.-Canadian border remains closed and many workers continue to work from home.

"It's a journey, but it's headed in the right direction."

Overall same-store sales growtha key retail metricincreased 8.1% from a year earlier in the U.S., 1.6% in Canada and 9.7% in Europe. Fuel same-store sales rose 5.4% in the U.S., 4.9% in Canada and 3.6% in Europe.

Couche-Tard said its alcohol business continues to be strong, especially in Canada, but it foresees sales moderating in the U.S. a bit as more bars and restaurants reopen.

Advertisement - article continues below
Advertisement
X
This ad will auto-close in 10 seconds