LAVAL, Quebec — The second-largest c-store chain in America is bracing for the worst regarding ongoing government mandates surrounding the COVID-19 pandemic. At the same time, the company continues to pursue a major chain in Australia, executives report.
Speaking on a March 18 earnings call, Brian Hannasch, president and CEO of Alimentation Couche-Tard, parent of the Circle K chain, said the company has the tools to face “financial volatility.” He said the Laval, Quebec-based chain has “good cash liquidity, a very healthy balance sheet and solid contingency plans.”
Meanwhile, Hannasch spoke briefly on the company's proposal to buy Caltex, an Australian integrated downstream company. In mid-February, Couche-Tard made a “revised nonbinding indicative offer” to the board of Caltex to acquire 100% of Caltex for a price of $35.25 per share in Australian currency.
“While it does not guarantee an agreement will be reached or transaction will be concluded, we are now actively engaged in due diligence to work with Caltex,” Hannasch said. “Couche-Tard is focused on strategically developing our Asia Pacific presence to drive continued growth in that region in the future.”
In terms of its performance for its third fiscal year, Circle K’s U.S. network saw an increase in same-store merchandise revenue of 3% compared with the same quarter last year. Across its global network, the chain is seeing “positive benefits driven by the successful rebranding activities [and] continued improvements to our offerings, as well as various initiatives to drive traffic into our stores.”
Couche-Tard’s U.S. fuel volumes were stable and outperformed the industry, with same-store road transportation fuel volumes increasing by 0.1% compared to the same quarter last year. Fuel margins continued to experience positive trends, even as the chain cycled against an “exceptional performance” last year, Hannasch said.
Net earnings were $1.8 billion for the first three quarters of fiscal 2020 compared with $1.5 billion for the comparable period of fiscal 2019, an increase of 15.3%, said Claude Tessier, chief financial officer of Couche-Tard.
All of the former CST sites in the United States have been rebranded to Circle K, and it is seeing “meaningful reverse synergies” from its Holiday Stationstores integration, Hannasch said. In particular, Circle K has put Holiday’s labor program on a new IT platform, which it has rolled out across Circle K’s U.S. network. The result combines a labor model with a scheduling tool that allows for greater efficiencies, he said.
Circle K also has brought Holiday’s promotional activities and tools to the wider network, such as the Smart Value program, as well as foodservice programs.
For its part, Circle K has installed its Lift promotional upselling tools to Holiday locations as a way to drive basket rings, Hannasch said.
Returning to the coronavirus discussion, Hannasch said that much of the company's workforce—payroll, IT, supply chain ordering and human resources—is working from home. It also issued information for health procedures such as proper hand washing, as well as guidelines for hygiene and cleaning inside stores and at pumps.
For hourly store employees, Couche-Tard instituted an emergency sick care plan to provide workers with some financial relief if they need to stay home because they’re getting tested or if they have been diagnosed with the virus.
With more than 5,933 stores in the United States, Circle K is No. 2on the Top 40 update to CSP’s 2019 Top 202 ranking of U.S. c-store chains by number of retail outlets. CSP will release the complete 2020 list in June.