couchetard revenues continue to climb

Strong gasoline margins and merchandise same store sales, which increased by 4.2% in the U.S. and 6.6% in Canada, fuel boost.

Sales generated by stores acquired in the last 12 months powered Alimentation Couche-Tard Inc., Convenience Store Decisions 2007 Chain of the Year, to another robust performance in the second quarter of fiscal 2008.

Revenues for the 12-week period ended October 14, 2007 rose 26.8% to reach $3.5 billion. Of the $740.1 million increase, $504.3 million was generated by stores acquired in the past 12 months. Net earnings of $54.2 million compared to $74.7 million. This is mainly due to the impact of U.S. fuel margins which were at an extraordinary level a year ago. Restated with the same margin for both periods, net earnings would have increased by 12.1%.

“Last year’s second quarter is a tough comparable because of the U.S. gas margin,” said Alain Bouchard, Couche-Tard’s chairman, president and CEO. “I’m happy with our performance. Our in-store merchandise same store revenue growth and recovery in certain markets shows that our pricing and strategies are on target.”

During the second quarter, Couche-Tard, the second largest independent convenience store operator in North Amrerica with a network of 5,637 stores, implemented its IMPACT program in 147 company-operated stores. As a result, 56.2% of the company-operated stores have now been converted to the IMPACT program, which gives the Company considerable opportunity for future internal growth.

Operating Results
Revenues amounted to $3.5 billion for the 12-week period ended October 14, 2007, up $740.1 million, for an increase of 26.8%, of which $504.3 million is attributable to the major acquisitions carried out over the past 12 months. For the first six months of the year, Couche-Tard’s growth in revenues was $1.5 billion or 25.9%, which boosted its revenues to $7.1 billion, of which $1.1 billion is attributable to the major acquisitions. The proportion of its business in the U.S. is now 79.9% compared with 78% for the 24-week period ended October 15, 2006.

Merchandise and service revenues grew $185.1 million or 17.2%, of which $92.6 million was generated by the stores acquired during the past 12 months and $32.6 million was generated by the 8.3% appreciation of the Canadian dollar against its U.S. counterpart. Internal growth, as measured by the increase in same-store merchandise revenues, was 4.2% in the U.S. and 6.6% in Canada. Growth in the U.S. followed the positive trend seen in the first quarter and stems primarily from Couche-Tard’s aggressive promotions in certain customized categories and from its continued implementation of one of its key success factors: the IMPACT program.

Over a 24-week period, revenues jumped $354.5 million, of which $193.9 million stems from the stores acquired over the past 12 months and $48.8 million is attributable to the sharp rise in the Canadian dollar. The growth of same-store merchandise and service revenues was 3.9% in the U.S. and 6% in Canada for the same reasons as those mentioned above.

Motor fuel revenues increased $555 million or 33% for the 12-week period ended October 14, 2007, of which $21.8 million is generated by the appreciation of the Canadian dollar and $71.4 million stems from a higher average retail price at the pump in its U.S. and Canadian company-operated stores, as shown in the following table, beginning with the third quarter of the year ended April 29, 2007.

Over a 24-week period, motor fuel revenues increased $1.1 billion, which represents a growth of 32%. The increase in the retail price at the pump is behind $139 million of the increase and the appreciation of the Canadian dollar explains another $32.6 million.

Merchandise and service gross margin was 33.8% in the second quarter of 2008, compared with 34.1% in the second quarter of 2007. In the U.S., the gross margin was 33.2%, down from 33.7% last year, and in Canada, it increased slightly to 35.1% compared with 35%. Several American markets continued their customized and aggressive promotions from the first quarter in order to maintain and even increase the number of customers per store, which produced positive results with respect to same-store revenues, but was somewhat negative with respect to margin.

Outlook
During fiscal 2008, Couche-Tard will pursue its investments in order to deploy the IMPACT program in approximately 400 stores and build or acquire approximately 60 stores on a individual basis. The company’s capital budget for the fiscal year 2008 is approximately $300 million, which Couche-Tard plans to finance with its net cash provided by operating activities. The company is still confident to be able to carry out approximately 250 store acquisitions.

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