A deeper dive into Alimentation Couche-Tard’s Q1 2027
Alimentation Couche-Tard (ACT) reported its fiscal 2027 first-quarter results Wednesday (Sept. 2), highlighting strategic investments in supply chain and food platforms despite consumer spending shifts.
ACT's chief financial officer Filipe Da Silva noted some softness in this quarter, stating “This quarter is another proof point that we can continue investing in the future while maintaining a lean cost structure today, store labour hours per location declined 1.1% compared with last year.” Depreciation increased by approximately $21 million (4%) due to acquisitions and ongoing network investments.
Alex Miller, ACT president and chief executive officer, detailed the rollout of the Inner Circle program across the Northern Tier business unit. Following the acquisition of Holiday, the company is leveraging its ability to plug various partners into the platform to drive engagement.
Couche-Tard’s loyalty program expansion plans
The program focuses on delivering personalized, relevant value to increase member usage and basket sizes. After acquiring Holiday in 2017, Couche-Tard notes that its loyalty program had something to offer ACT. “Holiday had a pretty advanced loyalty platform; they had multiple partners. The reason we're launching Northern tier is we now have the capability to plug partners across our entire Inner Circle platform,” said Miller. “You'll be hearing more from us over the coming quarters of how we are plugging partners both nationally and regionally to drive more engagement and more use of our platforms.”
Relex deployment has expanded from approximately 200 stores to more than 1,000 locations across North America. Product availability for Relex-managed items improved by more than 5% due to better forecasting and replenishment. Three new distribution centers became operational in Q4 of last year and are already delivering tangible results in availability.
Miller expressed excitement for ACT’s new Visit Space program which has been launched to provide direct rewards based on visit frequency. “We think that will be a tool to be even more personal and to give offers and benefits for people, recognizing how often they're visiting us and [customers] seeing the direct rewards from that.”
Consumer trends and category performance
Miller noted strength in nicotine categories, with cigarette growth at 1.8% this quarter compared to 3.6% in Q4. While cigarettes remain one of the company’s key Core + More products, ACT noticed a softening in the category, stating cigarettes present “very solid growth, but a fallback versus where we were in Q4.”
Soft drinks and packaged drinks did not fare as well as hoped, though Miller is unsure if this is a transitory trend or not. “We saw some real challenges in carbonated soft drinks that impacted our packaged beverage [sales]. I think with that said, energy drinks are now twice the size of CSD, where we're growing significantly…we're also seeing really strong sales in hydration, functional beverages, protein beverages and we are actively allocating more assortment to those areas.”
Miller observed that confectionary and salty snacks have “been under challenge for some time. I certainly think GLP-1 drugs are having an impact on those categories and we did see they were softer in this quarter than they were the previous quarter. We are changing assortment and we are putting in more protein, more functional bars and chips in these categories; the vendors are actively reallocating space. So we remain optimistic as we make changes to our assortment.”
Food platform growth strategy
U.S. food sales grew by 5.2%, hot foods grew by over 11% and food in Canada grew by 4.3%. Successful partnerships, such as the Flaming Hot Chicken partnership with Pepsi, help drive premium and midpoint price items. Meal deals and value-driven platforms are being used to increase customer engagement and margins.
“Finding midpoint price and more premium price items to bring into our mix that can help with margins and and deliver additional sales growth beyond just the compelling value offers,” said Miller. “We grew food by 5.2% in the U.S. We grew hot foods over 11% in the U.S. We grew food in Canada 4.3% We grew food in Europe 3.6%, so we are growing food across the network.” Miller added that hot wings and having very targeted at prices ranges at three levels, ‘value,’ ‘midpoint,’ and ‘premium’ will accelerate ACT’s growth to their goal to four times of what was currently shared in the morning’s revenue report.
Market outlook and resilience
Da Silva described the U.S. consumer as “resilient but increasingly discerning and targeted in their spending choices,” some of which can be attributed to reduced SNAP benefits, a food-purchasing assistance program for lower-income Americans in the U.S.
Despite this, management remains confident in delivering long-term growth targets of 15% EPS growth and 10% EBITDA growth. Although store traffic was slightly negative this quarter, customers are making more targeted, value-driven visits.
“It's really about being there for the consumer with the right customer value proposition in terms of assortment, in terms of price.”
International growth and acquisitions
ACT confirmed its commitment to adding at least 750 stores by FY30, utilizing both New To Network (NTI) sites and acquisitions. The NTI continue to be a primary driver with an average return on capital in the high teens. The real estate team is actively pursuing single-site and small-scale opportunities (1–10 sites).
Large-scale acquisitions like the Żabka Group remain central to ACT’s plans for international growth; Żabka aims to build sites in Poland and Romania within over five years. “Żabka's plan for this year is to build 1,300 sites and they are on track to deliver that.” promised Miller. "Their plan is to deliver another six to 7000 sites in Poland and another seven to 8000 sites in Romania over the coming five years. They are a tremendous growth platform that we're excited to bring into the family; obviously our goal is to accelerate that growth of that unique platform.”
This article was first published on Canadian Grocer's sister site, Convenience Store News Canada.
