LAVAL, Quebec -- While attributing a stronger revenue performance to distribution improvements and synergies from convenience-store acquisitions, executives of retailer Circle K’s parent company said on the company's July 10 fourth-quarter earnings call that the tobacco category played a significant role in those gains.
Brian Hannasch, president and CEO of Alimentation Couche-Tard Inc., said same-store merchandise revenues for the last quarter of the company's 2018 fiscal year were up 1.8% in the United States. Across its global network, merchandise and service revenues increased by about $2 billion or 18.9% for fiscal 2018, Hannasch said, attributing the increase mostly to new revenue from c-store acquisitions.
In explaining the improvements, Hannasch especially credited the chain's Circle K Tobacco Club, which the company launched this past winter. The program tied loyalty rewards to Marlboro cigarette customers and was successful enough for the chain to add Copenhagen moist smokeless customers. Hannasch said they plan to add more tobacco SKUs to the program later in 2018.
“We’re very pleased with the results so far in terms of unique membership and transaction growth,” Hannasch said.
In elaborating about the improved revenue numbers for stores from its 2016 acquisition of CST Brands, he also noted the critical role of tobacco—as well as beer and fountain drinks—in how the chain has become more competitive in those categories.
Hannasch also pointed out revenue improvements coming from new products, especially in Canada and Europe with the iQOS heat-not-burn device and in the United States with Juul e-cigarettes and similar vaping products.
Commenting about margin improvements, Couche-Tard CFO Claude Tessier, said scale and volume are fundamental drivers, as are acquisition synergies and supply-chain changes; however, he said tobacco products are bringing a higher-margin profile, with the chain’s private-label program “contributing well.”
Circle K is a wholly owned subsidiary of Laval, Quebec-based Couche-Tard. Its retail network includes nearly 10,000 c-stores in North America, including more than 8,350 in the United States. It also operates a network of 2,730 c-stores and automated fuel stations in Scandinavia, Ireland, Poland, the Baltics and Russia. Couche-Tard is No. 2 on CSP’s 2018 Top 202 ranking of c-store chains by number of company-owned retail outlets.