LAVAL, Quebec -- Alimentation Couche-Tard Inc. fell short of its expansion goals in the last half of fiscal 2008 but might announce a "medium-sized acquisition" in a few weeks, CEO Alain Bouchard said yesterday, according to a report by The Montreal Gazette. "I'm puzzled why our stock price has fallen so far through 2007 and again in the past four months, but I know the market is expecting the pace of acquisitions to speed up and wants more action," he said after addressing the Canadian Club of Montreal. "There's still plenty of room for growth in the U.S., and we're always looking closely at [image-nocss] what's still a fragmented industry."
He added, however, "It's not an easy task to negotiate the right deal, and you have to exercise extreme care."
Couche-Tard stock topped at almost $28 in Toronto early in 2007 and has since fallen below $15 with declining volume, said the report. The company confirmed in its third-quarter report in March that though the Canadian market was strong, especially in the West, margins were under pressure in the United States, both for merchandise and gasoline sales. But a slowing U.S. economy might drop asking prices for family-owned businesses.
A medium-sized acquisition for Couche-Tard would be about 100 stores, said the Gazette.
During the weekend, Bouchard announced a master franchise and licensing pact with GR Vietnam International Ltd. to develop convenience stores in Vietnam using Couche-Tard's U.S. Circle K banner, the report said. The Vietnam firm will own the exclusive rights to the Circle K brand for 25 years. "This is a step into one of the world's fastest-growing markets," Bouchard said. "But there won't be any material impact. It parallels our earlier entry into China, where progress has been slowed because the government allows foreign-affiliated stores to sell only international tobacco brands."
Third-quarter earnings were $50.5 million (U.S.) versus $43.7 million a year earlier. Revenue rose 31% to $4.6 billion. Couche-Tard has since raised $131 million in a sale-and-leaseback deal, the Gazette said. In fiscal 2007, Couche-Tard earned $196.4 million on revenue of $12.1 billion. It bought 420 stores and built or modernized 100. Bouchard warned last August the takeover pace would ease in fiscal 2008.
Couche-Tard's latest deals have added almost 100 stores in Missouri and Illinois. They are scheduled to close in July. [Click here to read CSP Daily News coverage.]
Sara O'Brien, an analyst with RBC Dominion Securities Inc., estimated that the purchases will add $400 million to $500 million to Couche-Tard's revenue in fiscal 2009, bringing the total to almost $16 billion. "It suggests Couche-Tard is finding targets within its price range.... Further similar additions can be expected over the short term, along with earnings growth when the fourth-quarter results are disclosed on July 8," she told the newspaper.
Laval, Quebec-based Couche-Tard now operates a network of 5,690 convenience stores in North America and 3,600 more in Asia and Mexico.
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