Couche-Tard's Remarkable Margins

Retailer chalks up nearly 17-cpg margins to geography of stores

Steve Holtz, Editor in Chief, CSP Daily News

LAVAL, Quebec -- Despite flat gasoline volumes in comparable stores, Alimentation Couche-Tard Inc. reported very healthy gasoline margins and revenues as it wrapped up its fiscal 2012 this past week.

The Canada-based parent company of the Circle K chain of convenience stores in the United States reported motor-fuel gross margin in the U.S. of 16.98 cents per gallon for its fourth quarter, compared to 14.06 cpg for the corresponding period of the previous fiscal year. In Canada, motor-fuel margin stood at 5.60¢ (Canadian) per liter compared to 5.01¢ per liter the previous year.

"Despite high fuel retail prices, as well as the competitive environment, we managed to maintain our same-store volume in both countries," CFO Raymond Pare said on an earnings conference call this past week. "Both through acquisitions and new-store openings, we were nevertheless able to increase total volume by 14% in Canada and by more than 25% in the United States."

For the fourth quarter, motor-fuel revenue increased by $1.1 billion, or 33%, of which approximately $527 million came from acquisitions, Pare said. On a 12-week comparable basis, same-store motor-fuel volume grew by 0.2% in the United States and by 0.1% in Canada, which is a satisfying performance in light of the high retail prices and competitive pressures on volume.

Pare chalked the healthy margins up to geography.

"Our pricing approach didn't change. On the procurement side, it could have a small effect, but it's not the main reason," he said. "It is because of the margin that we have realized in certain markets vs., let's say, in California. It's mainly related to the geography because certain markets contribute more than others."

For fiscal 2012, motor-fuel revenues increased by $4.0 billion or 32.6%, of which approximately

$1.1 billion stemmed from acquisitions, according to the company. As for the same-store motor fuel volume, on a 52-week comparable basis, it stayed unchanged in the United States while it dropped by 0.9% in Canada. The higher average retail price of motor fuel generated an increase in revenues of approximately $2.4 billion.

As of Jan. 29, 2012, Laval, Quebec-based Couche-Tard had a network of 5,817 c-stores, 4,225 of which include motor fuel dispensing. It supplies 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 (primarily under the Circle K flag), and four in Canada covering all 10 provinces (primarily under the Mac's and Couche-Tard flags).

Steve Holtz, CSP/Winsight By Steve Holtz, Editor in Chief, CSP Daily News
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