LAVAL, Quebec -- Alimentation Couche-Tard Inc., North America's second-largest convenience chain, said third-quarter profit fell 20%, stung by declining gasoline margins.
With per-gallon fuel margins falling by one-quarter, from 17.6 cents to 13.2 cents, the operator of Circle K stores said net income for the period ending February 4, dropped to $43.7 million, versus $54.5 million for the same period last year. The chain's revenues did climb by 19% to $3.5 billion for the quarter.
Retail pump prices declined sharply in the third [image-nocss] quarter, and our motor fuel gross margin decreased substantially in the United States and to a lesser extent in Canada, said Alain Bouchard, the company's chairman, president and CEO. Remember that the volatility in margins tends to stabilize on an annual basis.
Despite the disappointing results, Couche-Tard is not likely to back down from its ambitious growth strategy, which has fueled its current store count to more than 5,300 locations in the U.S. and Canada.
Indeed, acquisitions generated roughly 70% of the company's growth in the third-quarter, it said. Couche-Tard picked up 260 stores during the period, while opening and revamping another 127, it reported. At the same time, Couche-Tard closed or stopped operating 336 stores after SSP Partners opted not to renew its Circle K license in order to pursue a private-label brand called Stripes.
Bouchard said in a conference call Tuesday that the retailer will continue to eye smaller and midsized chains for acquisition, Bouchard explained, because Couche-Tard can more easily integrate those employees and train them on the company's systems. Conversely, he noted, purchasing large chains is generally more complicated.
As for the fourth quarter, he projected, we will continue to implement our IMPACT program in order to reach our objective of 400 stores for the current fiscal year. We will also take advantage of further expansion opportunities in strategic markets in North America, insofar as they are consistent with our profit and growth criteria.
He concluded, With the benefits of the new stores that have been acquired and opened since the beginning of the year and our focus on our targeted pricing and product mix strategies, we are confident we will achieve strong results for the last quarter and the fiscal year ending April 29, 2007.
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