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Couche-Tard Remains Cautious

Despite positive quarter, “downward pressures” continue to weigh on Circle K parent

LAVAL, Québec -- The need to cut prices as consumers continue to seek value in their merchandise purchases made the first quarter of fiscal 2012 a tough one for Alimentation Couche-Tard. However, the chain’s size and collective experience paid off in a nearly 10% increase in net earnings compared to the previous year.

For its first quarter of 2012, Alimentation Couche-Tard Inc. announced net earnings of $139.5 million, up $12.6 million or 9.9% from the comparable period of last fiscal year. The increase is mainly attributable to the drop in financial expenses, to the strengthening of the Canadian dollar, to Couche-Tard’s sound management of its expenses, to the increase in merchandise and service sales contribution, as well as to a lower income tax rate.

These items that contributed to the growth in net earnings were partly offset by the drop of the motor fuel sales contribution.

“I am pleased to announce that our results are on the rise despite the obstacles we are facing, namely rising motor-fuel prices, a still fragile economic environment, adverse weather conditions and a highly competitive environment,” said Alain Bouchard, president and CEO. “In this context, consumers seem to be very price-sensitive, and many retailers seem to have understood that.

“We see more promotions on certain product categories from our competitors and we must adapt, which creates a certain deflation in our sales and puts pressure on our margins. But our decentralized management structure, sound management of expenditures and the excellent performance of some of our new programs, including fresh food, allow us to continue to create value.”

In its earnings presentation, Couche-Tard announced that the chairman of its Board of Directors, Richard Fortin, will hand over this responsibility to Réal Plourde effective Sept. 6. Fortin will remain a member of the Board of Directors and of the Executive Committee. Also, at its meeting held Aug. 30, the Board of Directors agreed to reduce to nine the number of directors to be elected at the upcoming shareholder’s meeting considering that Roger Longpré would not be seeking a reelection due to his health condition.

Operating Results

Couche-Tard’s revenues amounted to $5.2 billion in the first quarter of fiscal 2012, up $1.0 billion, an increase or 23.9%.

More specifically, the growth of merchandise and service revenues for the first quarter of fiscal 2012 was $52.8 million or 3.5%, of which approximately $37.0 million was generated by a stronger Canadian dollar and 7.0 million by acquisitions. As for internal growth, same-store merchandise revenues increased by 1.5% in the United States while they decreased by 0.2% in Canada.

For the Canadian and U.S. markets, the variance in same-store merchandise sales is attributable to Couche-Tard’s merchandising strategies, to the economic condition in each of its market, as well as to the investments the corporation made to enhance service and the offering of products in its stores. As indicated in the fourth quarter of fiscal 2011, Couche-Tard sees some slowdown on the part of consumers, likely due to rising motor fuel prices, unemployment level remaining high in the United States, pressure on personal disposable income and the level of household indebtedness.

This seems to be supported by the University of Michigan Consumer Sentiment Index preliminary report for August 2011, which came in at 54.9, its lowest level since May 1980, and the third lowest in the history of this indicator.

Also, in the United States, cigarette manufacturer Philip Morris modified its supply terms and price structure to encourage retailers to decrease or maintain low unit prices on certain of its products, which has put a deflationary pressure on Couche-Tard’s cigarettes sales. Thus, the corporation estimates that excluding cigarettes sales, its same-store merchandise sales increased by 3.9 %.

Motor fuel revenues increased by $947.4 million or 35.5% in the first quarter of fiscal 2012. In light of the still fragile economy and higher retail prices at the pump which have put downward pressure on motor-fuel consumption, same-store motor fuel volume fell 1.6% in the United States and 0.9% in Canada.


For the remainder of fiscal year 2012, Couche-Tard expects to pursue its investments with caution to, among other things, improve its network. Given the economic climate and its attractive access to capital, Couche-Tard believes to be well-positioned to realize acquisitions and create value. However, the corporation will continue to exercise patience in order to benefit from a fair price in view of current market conditions. Couche-Tard also intends to keep an ongoing focus on supply terms and operating expenses.

Finally, in line with its business model, Couche-Tard intends to continue to focus its resources on the sale of fresh products and on innovation, including the introduction of new products and services to satisfy the needs of its large clientele.

Alimentation Couche-Tard Inc., Laval, Quebec, is the leader in the Canadian convenience-store industry. In North America, Couche-Tard is the largest independent convenience store operator (whether integrated with a petroleum Corporation or not) in terms of number of company-operated stores. As of April 24, 2011, Couche-Tard had a network of 5,741 convenience stores, 4,117 of which include motor fuel dispensing. The network consists of 13 business units, including nine in the United States covering 43 states and the District of Columbia, and four in Canada covering all 10 provinces.

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