Couche-Tard still has hopes of selling cannabis in Western Canada

Quebec company boasts proven track record of selling age-restricted products
11/29/2017

Alimentation Couche-Tard hasn't given up hope of selling cannabis as some Western Canadian provinces turn to the private sector for over-the-counter sales, the convenience store operator's CEO said Tuesday.

Brian Hannasch said the large convenience store chain, which operates as Circle K outside Quebec, had a proven track record of selling age-restricted products like cigarettes and beer.

"We welcome the opportunity to work with one of the provinces here in Canada to demonstrate we can be a good partner in the space," he said during a conference call about its second-quarter results.

"And we are open to other formats that in the near term meet the concerns of these regulators."

While most provinces plan to sell marijuana in government-owned stores, Alberta, British Columbia and Manitoba are looking at partnering with the private sector.

The Quebec-based retailer's earnings surged 35% to a record US$435.3 million in its latest quarter as the CST Brands acquisition more than offset the negative impact of hurricane Harvey in Texas and hurricane Irma in the southeast United States.

"At one point we had over 1,300 of our stores closed during the storms, including every store at one time in our Florida market," said Hannasch.

No employees were injured but the company took a $4.8-million financial hit from the loss of sales, incremental expenses to replace inventories and cleaning up costs.

Excluding one-time charges, Couche-Tard earned $458 million for the three months ended Oct. 15. That compared to $328 million in the prior year.

Revenues were $12.1 billion, up 44% from $8.44 billion in the second quarter of fiscal 2017.

Hannasch said the company took a hit that likely equalled more than 1% of sales because of distribution problems in Quebec following the acquisitions of Esso and Ultramar.

"We underestimated the impact of adding both these networks to our Quebec distribution centre and we had significant supply disruptions."

Hannasch said the U.S. industry faces challenges as shoppers, particularly low-income consumers, reduce the number of automobile trips that spawn convenience store sales.

"Despite an eight-year bull run in the stock market, real wage growth in much of our geographies have been fairly anaemic," he said.

In Canada, Couche-Tard faces minimum wage increases in Ontario and Alberta that is forcing it to become more efficient and reduce costs, in part, through the use of new technology, said chief financial officer Claude Tessier.

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