LAVAL, Quebec -- “We're off to a solid start for a year that promises to be more than exciting,” said Brian Hannasch, president and CEO of Alimentation Couche-Tard Inc., during the retailer’s fiscal first-quarter 2017 earnings call. “It has been a busy start to the year, but amidst all the [mergers and acquisitions] and rebranding activities, our team remains focused on our customers, growing our basket size, traffic and delivering solid same-store growth.”
- Click here for a report on Couche-Tard’s fiscal first-quarter 2017 results.
“Our work around the brands really lays out a framework to enable that to remain a strong focus despite the M&A activity,” he said.
On May 1, Couche-Tard completed the acquisition of Dansk Fuel, Shell's retail business in Denmark that consists of 315 locations. On May 26, it signed a deal with Sevenoil Est OÜ to purchase 23 sites in Estonia.
After the end of the quarter, on Aug. 21, the company announced a deal to acquire approximately 2,000 locations from CST Brands Inc. and 1,100 locations from CrossAmerica Partners in North America. And on Aug. 29, Couche-Tard signed a deal to purchase 53 Cracker Barrel c-stores in Louisiana.
“The coming quarters will focus on examining our newest additions and identifying which pieces of their business are better than ours, so we can learn from them and create true top-line synergies and make this a better company,” said Hannasch. “We'll be focused on integrating and learning from Topaz in Ireland, Shell in Denmark, Premium 7 in Estonia and later this year, Esso in Canada, and we very much look forward to completing our outstanding agreement with CST Brands and further developing our customer offer globally.”
Saturation vs. Acquisition
During the call, the question of market saturation arose. With 12,000 locations worldwide, can the company keep acquiring and growing?
“If you look at Canada, there would be pockets in Quebec and the Atlantic provinces where our share would make it difficult to do meaningful acquisitions,” CFO Claude Tessier said. “In the U.S., there are probably a few small markets where share would prohibit us from doing something material. But when you look at the U.S. overall, it's still fragmented and our market share is relatively small. … We’re still less than 20% of the U.S. market. So we think there is still a lot of runway in North America overall.”
He said that they are studying and would like to enter more markets in Europe and Asia “for the right opportunities.”
He emphasized, however, that the company is still focused on organic growth. “We know that needs to be a bigger and bigger piece of our story, and that’s very much the foundation for what we’re doing with the brand.”
Following the recent acquisitions, Couche-Tard’s plan in the next 18 to 24 months is “to deleverage the company and get back to … where we’re comfortable and where we would be able to look at sizeable acquisition,” said Hannasch. While he didn’t discount the idea of looking at “small tuck-in” acquisitions in its network and to its network, he said the company will focus on deleveraging its balance sheet.
Laval, Quebec-based Couche-Tard’s network includes 7,888 convenience stores in North America under the Circle K and other brands. The network consists of 15 business units, including 11 in the United States covering 41 states and four in Canada covering all 10 provinces. In Europe, Couche-Tard operates a retail network across Scandinavia (Norway, Sweden and Denmark), Ireland, Poland, the Baltics States (Estonia, Latvia and Lithuania) and Russia. And under licensing agreements, almost 1,500 Circle K stores are operated in 13 other countries and territories worldwide (China, Costa Rica, Egypt, Guam, Honduras, Hong Kong, Indonesia, Macau, Malaysia, Mexico, the Philippines, the United Arab Emirates and Vietnam), bringing the total network to more than 12,000 stores.
Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.