Couche-Tard Weathers 'Year of Analysis, Learning & Planning'

2014 will be "year of execution and achievements," said Bouchard

Melissa Vonder Haar, Freelance Writer

LAVAL, Quebec -- "Where fiscal year 2013 has been a year of analysis, learning and planning, fiscal 2014 should be a year of execution and achievements," Alimentation Couche-Tard Inc. president and CEO Alain Bouchard, said during the global convenience and fuel company's fiscal fourth-quarter 2013 conference call on Tuesday.

Along with the required financials, with that sweeping summation of the past year and bright forecast for the future, Bouchard set the stage for a discussion of where the company has been, what it has learned and where it is going.

The subject on the minds of most Couche-Tard watchers, of course, was acquisitions. And as usual, Bouchard's answer was enigmatic.

"We continue to be active in the acquisitions side. We are currently looking at several interesting opportunities," he said. "Some of the [opportunities] we are considering are looking very good, so we hope to be able to announce good news soon. As you can appreciate, we will not comment more than this on the subject, considering the confidential nature of the subject."

The acquisition market is "very, very active on both side of the pond," he added. "In North America, we have many [opportunities] under review; in Europe, the same. We have the capacity to buy all sizes of business that are coming available right now, so we are well-positioned."

Speculation has surrounded Couche-Tard as a potential acquirer of the Hess Corp. retail network, which is divesting its approximately 1,350 stations on the East Coast to focus on upstream; however, the company has expressed no official interest, and Bouchard gave no indication of any acquisition targets.

For network growth, in February 2013, Couche-Tard purchased 29 company-operated stores located in Illinois, Missouri and Oklahoma from Dickerson Petroleum Inc. Couche-Tard owns the land and buildings for 25 sites while it leases the land and owns the building for the other sites. The corporation was also obtained road transportation fuel supply agreements for 21 sites, of which 20 are owned and operated by independent operators and one is leased by the corporation and operated by an independent operator.

In addition, Couche-Tard acquired two additional company-operated stores through distinct transactions.

During the fourth quarter of fiscal 2013, Couche-Tard completed the construction of eight new company-operated stores for a total of 47 new stores during fiscal 2013.

For its fourth quarter of fiscal 2013, ended April 28, 2013, Alimentation Couche-Tard Inc. announced net earnings of $146.4 million, compared to the fourth quarter of fiscal 2012 net earnings of $117.8 million. For fiscal 2013, it had net earnings of $572.8 million, compared to fiscal 2012 net earnings of $457.6 million.

"Fiscal 2013 represents our fifth consecutive year with an increase in net earnings," vice president and CFO Raymond Pare said during the call, dubbing 2013 as "still a pretty solid year."

That solid year included Couche-Tard's largest acquisition to date--the June 2012 purchase of 2,000-unit Statoil Fuel & Retail in Norway--while battling falling cigarette sales and less-than-ideal weather conditions across the pond in the United States and Canada.

"Looking back at 2013 I'm very proud of what we accomplished, including the largest acquisition of our history and its financing at very good condition, our fifth straight year of recurred earnings and a continued focus on organic growth and cost control," said Bouchard.

Leading the charge in fourth-quarter 2013 earnings were merchandise and service sales and margins, both of which saw year-to-year increases, despite the fact that fourth-quarter 2012 had an additional week on fourth-quarter 2013. Pare reported a 9.3% increase in merchandise and service sales and a margin increase of 15.4% compared to fourth-quarter 2012.

Same-store merchandise sales saw a less impressive increase: only a 0.1% increase in the United States. While poor weather didn't help, Pare also cited struggling cigarette sales.

"In the U.S., just like in the last few quarters, the cigarette category remains a challenge on a short-term basis," he said. "We continue to monitor the situation closely with the objective to maintain and even improve the contribution from this category. Our proprietary cigarette brand Crown is an integral part of our strategy and continues to maintain its position in our sales."

While he declined to give specific forecasts, Bouchard reiterated this enthusiasm for both Crown and overall cigarette sales, predicting a "bright future" for the segment.

The good news is that foodservice and other solid in-store sales are already helping make up for some of the sales and margins lost by cigarettes--discounting the cigarette category, Pare revealed Couche-Tard's same-store merchandise sales in the U.S. increased by 2%.

"Best practices are being shared and implemented across both continents to either boost sale or improve efficiency and this makes us very excited and optimistic about what is to come in 2014 and after," said Bouchard.

Click here for more financial details.

Laval, Quebec-based Couche-Tard's network currently includes almost 6,200 c-stores throughout North America, including approximately 4,500 stores with fuel. It has agreements for the supply of motor fuel to more than 350 sites operated by independent operators. Its North American network consists of 13 business units, including nine in the United States covering 40 states and the District of Columbia (under the Circle K banner) and four in Canada covering all 10 provinces (under the Couche-Tard and Mac's banners). Through its acquisition of Statoil Fuel & Retail, Couche-Tard also operates a broad retail network across Scandinavia (Norway, Sweden, Denmark), Poland, the Baltics (Estonia, Latvia, Lithuania) and Russia.