LAVAL, Quebec -- Alimentation Couche-Tard Inc. said it expects a shakeout in the U.S. convenience store sector in the months ahead as frustrated players struggle with stagnant sales in a weak economy, reported The Financial Post. The c-store giant would be a buyer in that scenario and said it is looking for targets big or small.
The company reported a profit of $54.8 million or 29 cents per diluted share for its latest quarter Tuesday, a 23% decline caused mostly by a drop in gross margins on U.S. gasoline sales. (Click here for coverage in this issue of CSP Daily News.)
Last year, U.S. convenience stores enjoyed high margins on the gasoline they sold to the public. In Couche-Tard's case, the margin was 18 cents per gallon for the third quarter ended Feb.1, 2009. This year the margin has dropped to 12 cents, which may change the game for certain operators.
"We have no problem with a quarter like this one. It's just good for the M&A environment," CFO Raymond Pare told the newspaper. "It's exactly what we did not have in the past two years, that didn't allow us to be able to close good deals. It was too good on the results. Today, we're back in an environment where you need to be a good operator to make money."
With gas margins strong, operators were comfortable with the cash that they were generating with their stores, Pare added. "What we're seeing now is that people are starting to understand that this beautiful moment is now part of history. We're back to a normal market."
Approximately 60% of c-stores in the United States are run by single, independent operators that are not part of a chain. While those operators held out during good times, refusing to sell or setting high prices for their shops, some are under pressure now amid the continued economic uncertainty and weighing whether to get out, Couche-Tard executives said.
"We keep looking" for acquisition opportunities, CEO Alain Bouchard said during a webcast to discuss third quarter results. He declined to offer any details, the report said.
Couche-Tard shares fell 5.9% to close at $18.86 on the Toronto Stock Exchange, the Post said, adding that analysts had been expecting U.S. gasoline margins to be down, but not as much as they were.
Laval, Quebec-based Couche-Tard currently operates a network of 5,883 convenience stores, 4,142 of which include motor fuel dispensing, located in 11 large geographic markets, including eight in the United States (under the Circle K brand) covering 43 states and the District of Columbia, and three in Canada (under the Mac's brand) covering all 10 provinces.
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