LAVAL, Québec -- Using targeted promotions and a continued focus of foodservice, Circle K parent company Alimentation Couche-Tard yesterday reported a 24.7% increase in net earnings for the third quarter of its 2012 fiscal year.
“We continued to favor a strategy focused on maintaining and increasing store traffic, which has really paid off this quarter,” said Alain Bouchard, president and CEO. “Thus, with some targeted promotions and continuous improvement of our fresh food offering, our same-store merchandise sales growth has accelerated during the quarter, which helped to increase the contribution of in-store sales. This good performance, combined with continuous monitoring of our costs, has enabled us to deliver very satisfactory results."
The Laval, Quebec-based company reported net earnings of $86.8 million, up $17.2 million or 24.7% from the comparable period of the previous fiscal year. The increase is mainly attributable to the contribution from acquisitions, the increased contribution of merchandise and service sales, and to the drop in financial expenses, as well as to Couche-Tard’s sound management of its expenses. These items have been partly offset by the growth in the depreciation and amortization expense as well as by acquisitions costs recorded to the quarterly earnings.
"Our teams continue to work hard on developing our fresh-food offering and on the integration of stores, whether newly acquired or on the verge of being acquired, which suggests to me that great things are ahead for the coming quarters,” Bouchard said.
During the quarter, same-store merchandise sales rose 3.4% in the United States and 3.1% in Canada. In the United States, excluding tobacco products influenced by the deflationary effect of the price strategy of Altria, the increase is 6.7%.
“The very satisfactory increase of 29.7% of diluted net earnings per share reflects the increased contribution of merchandise and services sales, our cost control for several years, proactive management of our balance sheet, redemption of shares and contribution from recent acquisitions," said Raymond Paré, vice president and CFO. "On this last point, we must remember that most acquired stores were only integrated into our network in the third quarter, making the 13.6% increase in year-to-date diluted net earnings per share even more meaningful, considering it has not yet fully benefited from the incremental contribution of acquisitions."
Since the beginning of fiscal 2012, Couche-Tard has signed agreements for the acquisition of 227 company-operated stores, 243 stores operated by independent operators and 80 motor fuel supply agreements.
"Many stores have yet to be integrated into our network over the coming quarters, which should contribute toward increasing our results in the medium term," Pare said. "We also continue to work on other acquisition opportunities. Thus, increasing value remains a priority for us, and we use the various means at our disposal in a balanced manner as we have done for years.”
Revenues amounted to $6.6 billion in the third quarter of fiscal 2012, up $1.1 billion, an increase of 20.4%, mainly attributable to an increase in motor fuel sales due to higher average retail prices at the pump, to acquisitions, to the growth of same-store merchandise and service sales in the United States and Canada, as well as the growth of same-store motor fuel volume in the United States. These items contributing to the growth in revenues were partially offset a weaker Canadian dollar.
For the first three quarters of fiscal 2012, revenues grew by $3.1 billion, an increase of 22.6% compared to the first three quarters of fiscal 2011.
More specifically, the growth of merchandise and service revenues for the third quarter of fiscal 2012 was $82.1 million or 4.6%, of which approximately $35.0 million was generated by acquisitions.
In the United States, cigarette manufacturer Altria modified its supply terms and price structure at the beginning of the first quarter of fiscal 2012 to encourage retailers to decrease or maintain low unit prices on certain of its products. That has put a deflationary pressure on cigarettes sales.
Thus, Couche-Tard estimates that excluding tobacco products sales, its same-store merchandise sales in the United States increased by 6.7%.
In the first three quarters of fiscal 2012, merchandise and service revenues rose by $202.9 million, a 4.2% increase compared to the same period last fiscal year for reasons similar to those of the third quarter, including an increase in same-store merchandise revenues of 2.5% in the United States and 2.1% in Canada.
Motor fuel revenues increased by $1.0 billion or 28.0% in the third quarter of fiscal 2012, of which approximately $469.0 million stems from acquisitions. The still fragile economy and higher retail prices at the pump have continued to put pressure on motor-fuel consumption, which can explain the stagnation of same-store motor fuel volume in Canada as well as the limited growth of 1.1% in the United States.
For the remainder of fiscal year 2012, Couche-Tard expects to pursue its investments with caution in order to, among other things, improve its network. Given the economic climate and the corporation’s attractive access to capital, it believes to be well-positioned to realize acquisitions and create value. However, Couche-Tard will continue to exercise patience in order to benefit from a fair acquisition price in view of current market conditions. It also intends to keep an ongoing focus on supply terms and operating expenses.
Alimentation Couche-Tard Inc. is the largest independent convenience store operator in North America (whether integrated with a petroleum Corporation or not) in terms of number of company-operated stores. As of Jan. 29, 2012, Couche-Tard had a network of 5,817 convenience stores, 4,225 of which include motor-fuel dispensing. At the same date, the corporation had agreements for the supply of motor fuel to 338 sites operated by independent operators. Couche-Tard’s network consists of 13 business units, including nine in the United States covering 42 states and the District of Columbia, and four in Canada covering all 10 provinces.
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