Mergers & Acquisitions

Couche-Tard Would ‘Love’ to Do More U.S. Acquisitions

Circle K CEO says convenience-store market is ‘best he’s seen in 4 or 5 years in terms of the number of opportunities’
circle k convenience store
Photograph courtesy of Alimentation Couche-Tard

Circle K convenience-store brand owner Alimentation Couche-Tard Inc. is proceeding with the integration and rebranding of the MAPCO Express locations it acquired from Compañía de Petróleos de Chile S.A. (COPEC) in November.

“We're … advancing nicely on integration of 112 MAPCO sites that we closed on last quarter, including the rebranding of many of these stores, and we're excited to have these locations and team members as part of our family as we increase our presence in the southern part of the U.S.,” Brian Hannasch, president and CEO of Alimentation Couche-Tard, said Thursday during the company’s fiscal third-quarter 2024 earnings call.

The company acquired the stores for a total cash consideration of $468.6 million.

In Europe, Couche-Tard saw strong network growth with the addition of 2,175 sites from Paris-based TotalEnergies SE, for a total cash consideration of approximately $3.8 billion.

On the mergers-and-acquisitions (M&A) front, Couche-Tard would “love to do more in the U.S., which is probably our best market for synergies, and then being opportunistic in Canada and Europe,” said Hannasch. “The deal flow has been good, probably the best I've seen in four or five years in terms of the number of opportunities that are out there in front of us.”

“There’s not been a lot that’s closed,” he added. “I certainly feel less competition from the private equity space than we had over the last three or four years. Yes, I think there's an opportunity to get some things done at a better price. And some of that just has to happen with the interest rates being where they're at, and that's why we continue to be pleased that we're investment grade and have a balance sheet that's really for almost any opportunity that's out there in front of us. So our appetite is there, and we're actively looking at some things.”

Third-Quarter Financials

Couche-Tard has reported net earnings of $623.4 million for the third quarter of fiscal 2024 compared with $737.4 million for the third quarter of fiscal 2023.

This decrease is primarily driven by lower road transportation fuel gross margin in the United States and softness in traffic as a portion of our customers remains affected by challenging economic conditions, partly offset by the favorable effect of the share repurchase program and the contribution from acquisitions, which amounted to approximately $27 million.

During the quarter, earnings before interest, taxes, depreciation and amortization (EBITDA) stood at $1.5 billion, a decrease of $21.4 million, or 1.4%, compared with the corresponding quarter of fiscal 2023.

The company saw total merchandise and service revenues of $5 billion, an increase of $78.4 million or 1.6% compared with the corresponding quarter of fiscal 2023. Same-store merchandise revenues decreased by 1.5% in the United States, which the company said was affected by constraints on discretionary spending due to challenging economic conditions, as well as the continuous decline in the cigarettes category, partly offset by the growth in the other tobacco products category. Merchandise and service gross margin decreased by 0.1% in the United States to 33.1%.

Total road transportation fuel revenues for the third quarter of fiscal 2024 were $14.3 billion, a decrease of $382.2 million compared with the corresponding quarter of fiscal 2023. The company attributed the decrease to a lower average road transportation fuel selling price, which had a negative effect of approximately $1.4 billion, and softness in traffic, while being partly offset by the contribution from acquisitions, which amounted to approximately

$1.1 billion. Same-store road transportation fuel volumes decreased by 0.8% in the United States. During the quarter, fuel demand remained unfavorably affected by challenging macroeconomic conditions.

Couche-Tard reported road transportation fuel gross margin of 43.19 cents per gallon (CPG) in the United States, a decrease of 3.66 CPG. And despite the modest decline from previous levels, fuel gross margins remained healthy throughout the network, the company said.

“As we continue to navigate near-term headwinds, especially in the United States, we remain focused on providing value and ease for our customers with a growing selection of private-label options, continued rollout of our Inner Circle loyalty program, and reoccurring Fuel Day promotions. All of these offerings are providing meaningful rewards and compelling value, especially for our more cash-strapped customers,” said Hannasch. “However, as our business is extremely diversified around the globe, we feel very good about its proven resilience and our continued focus on our strategy of building on our key points of differentiation with our customers and maximizing the advantages of our scale.”

Filipe Da Silva, CFO, said, “Our commitment to disciplined operational cost control has led to a normalized decrease in expenses of 1.6%, a performance that is notably better than the weighted average of inflation affecting our business operations. This standout achievement in the quarter highlights our commitment to financial prudence and operational excellence, even amid widespread economic challenges.”

Adding MAPCO to the Couche-Tard Map

On Nov. 1, the company closed on the acquisition of 112 company-owned and operated convenience retail and fuel sites operating under the MAPCO brand in Alabama, Georgia, Kentucky, Mississippi and Tennessee The acquisition also includes surplus properties and a logistics fleet. The transaction was settled for a consideration of $468.6 million, subject to post-closing adjustments, and Couche-Tard financed it using available cash and its U.S. commercial paper program.

The company also acquired 17 company-operated stores, reaching a total of 27 company-operated stores purchased through various transactions since the beginning of fiscal 2024. It settled these transactions using available cash.

And Couche-Tard completed the construction of 16 stores and the relocation or reconstruction of two stores, reaching a total of 60 stores since the beginning of fiscal 2024. As of Feb. 4, 2024, the company had another 39 stores under construction.

“We continue to grow our pipeline of new-to-industry locations,” Hannasch said. “On the organic front, we're making good progress on our five-year goal of building 500 new industry stores,” Hannasch added. “We're on track to open about 100 in North America in this fiscal year, and we have a great pipeline for the coming years.”

  • Alimentation Couche-Tard is No. 2 on CSP’s 2023 Top 202 list of convenience-store chains by store count.

Laval, Quebec-based Alimentation Couche-Tard operates in 29 countries and territories, with more than 16,700 stores, of which almost 13,100 offer road transportation fuel. Its network includes more than 7,100 stores in the United States, primarily under the Circle K and Holiday Stationstores banners, and approximately 2,100 in Canada under the Circle K, Mac’s and Couche-Tard banners. In Europe, under the Circle K and other banners, Couche-Tard operates a retail network in Scandinavia, Ireland, Poland, the Baltics and Russia with more than 2,700 stores and unmanned automated fuel stations. And under licensing agreements, more than 2,200 stores operate under the Circle K banner in 15 other countries and territories (Cambodia, Egypt, Guam, Guatemala, Honduras, Hong Kong, Indonesia, Jamaica, Macau, Mexico, Mongolia, New Zealand, Saudi Arabia, the United Arab Emirates and Vietnam). This brings Couche-Tard’s total worldwide network to approximately 14,400 stores.

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