LAVAL, Quebec -- Alimentation Couche-Tard Inc. said that for the first quarter of fiscal 2007 (the 12-week period ended July 23, 2006), net earnings were $44.6 million or 22 cents per share (21 cents per share diluted), compared with $54.1 million or 27 cents per share (26 cents per share diluted) for the same quarter last year.
Revenues amounted to $2.9 billion for the 12-week period ended July 23, 2006, up 30.9% or $674.8 million, of which $52.8 million is attributable to the acquisition of 90 company-operated stores in Alabama and Georgia from Spectrum [image-nocss] Stores Inc. and Spectrum Holding Inc. for $139.9 million.
This was a very good acquisition in markets with strong potential and it contributed $52.8 million to revenues for the first six weeks in our U.S. Southeast market," said Alain Bouchard, Laval, Quebec-based Couche-Tard's chairman, president and CEO. [See related story in this issue of CSP Daily News for more on Couche-Tard's acquisitions.]
The growth in merchandise and service revenues was $102.5 million or 10.3%, of which $40 million is related to the 11.5% appreciation of the Canadian dollar compared with the U.S. dollar. In the United States, growth of same-store merchandise revenues was 4.7%, while it was 2.9% in Canada. The cigarettes, beverages and foodservice categories recorded the most significant increases, with combined growth of $55 million. Energy drinks and water posted the sharpest increase in the beverage category. With an increasing number of beer caves in the U.S. markets, this category was also able to record constant growth in sales. The company also continues to benefit from its pricing and product mix strategies, as well as the ongoing implementation of the IMPACT program throughout its network. Nevertheless, poor weather in Canada during six weeks of the quarter slowed sales to a certain degree.
Motor fuel revenues increased by 48% or $572.3 million of which $324.8 million is attributable to a higher average retail price at the pump in U.S. and Canadian company-op stores.
In the United States, growth in same-store motor fuel volume was 3.6% in the first quarter of fiscal 2007, while it was 3.4% in Canada. These increases mainly reflect the selective pricing strategies implemented by the company in certain regions of the United States to stimulate sales, which was partially offset by the volatile nature of the motor fuel business and strong competition in some regions.
The merchandise and service gross margin was 34.1%, an increase of 1% over the 33.1% for the same quarter of fiscal 2006. The merchandise and service gross margin in the United States was 33.6%, also up 1% over the 32.6% for the same quarter last year. In Canada, it was 34.9% compared with 34.1% for the first quarter of fiscal 2006, an increase of 0.8%. In both U.S. and Canadian markets, improvements in purchasing terms, changes in product mix with a focus on higher-margin items, the launch of new products that it said were well received by customers and generated higher margins, as well as the implementation of the IMPACT program in an increasing number of stores are behind the increase in gross margin; however, the increase in merchandise and service gross margin in the United States and Canada was also affected by the company's pricing strategies on certain product categories designed to increase volume.
In the United States, the motor fuel gross margin, for company-op stores, decreased to 13.60 cents per gallon compared to 14.86 cents per gallon in the corresponding quarter of the previous fiscal year. In Canada, the motor fuel gross margin for the entire network was relatively stable, reaching 4.75 cents (Canadian) per liter for the quarter ended July 23, 2006 compared with 4.76 cents per liter for the quarter ended July 17, 2005. As it was stated in previous quarters, the volatility in margins from one quarter to another tends to stabilize on an annual basis.
For the first quarter of fiscal 2007, the motor fuel gross margin for the company-op stores in the U.S. fell $6.4 million (excluding the increase due to the rise in volume). Net of expenses related to electronic payment modes, the gross margin (excluding the increase due to the rise in volume) fell $10.7 million; however, these factors were offset by the positive impact of the increase in volume generated by the company's pricing strategies in the U.S. amounting to approximately $9 million for its company-op stores.
Operating, selling, administrative and general expenses increased by 0.9% as a percentage of merchandise and service revenues. These costs were mainly affected by expenses related to electronic payment modes, which vary in line with motor fuel revenues, by higher salaries attributable, among other things, to labor shortages in certain regions, and by increasing number of fuel drive-offs resulting from the sharp rise in motor fuel prices.
Depreciation and amortization of property and equipment and other assets increased primarily because of investments made over the past year through acquisitions and the ongoing implementation of the IMPACT program in the Company's network.
"The first quarter featured solid growth in total revenues and in merchandise and service gross margins, both in Canada and the United States, despite unfavorable weather during half of the quarter in some regions of Canada. Our innovation and product mix strategies made a substantial contribution to this growth," said Alain Bouchard, chairman, president and CEO.
During the quarter, Couche-Tard implemented its IMPACT program in 39 company-op stores. This means that 47.4% of its company-op stores have now been converted to the IMPACT program, providing excellent scope for future internal growth. The slight decline in this ratio compared to the information released on April 30, 2006 is attributable to stores acquired during the quarter that have not yet been renovated.
"Quality of management and cost control at every level of our organization remain a priority, along with innovation, deployment of our IMPACT program and the ongoing expansion of our network in strategic markets. As planned and announced, we will continue to invest over the coming periods to have our IMPACT program implemented in some 500 stores by the end of fiscal 2007, while closing current acquisitions and taking advantage of new expansion opportunities consistent with our growth objectives in our North American markets, concluded Bouchard.
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