“I am pleased to announce that our results are on the rise,” says CEO of Couche-Tard.
For its first quarter of fiscal 2012, Alimentation Couche-Tard Inc. announced net earnings of $139.5 million, up $12.6 million or 9.9% from the comparable period of last fiscal year.
The increase is mainly attributable to the drop in financial expenses, to the strengthening of the Canadian dollar, to Couche-Tard’s sound management of its expenses, to the increase in merchandise and service sales contribution as well as to a lower income tax rate. These items that contributed to the growth in net earnings were partly offset by the drop of the motor fuel sales contribution.
“I am pleased to announce that our results are on the rise despite the obstacles we are facing, namely rising motor fuel prices, a still fragile economic environment, adverse weather conditions and a highly competitive environment,” said Alain Bouchard, president and CEO. “In this context, consumers seem to be very price-sensitive and many retailers seem to have understood that. We see more promotions on certain product categories from our competitors and we must adapt, which creates a certain deflation in our sales and puts pressure on our margins. But our decentralized management structure, sound management of expenditures and the excellent performance of some of our new programs, including fresh food, allow us to continue to create value” he concluded.
Other Financial Highlights include:
• Diluted earnings per share were 75 cents compared to 67 cents last year, an improvement of 11.9%.
• Same-store merchandise sales up 1.5% in the U.S., constantly improving during the quarter, and slightly down 0.2% in Canada. Weather conditions have been an important factor, mainly in Canada, but also in certain regions of the U.S.
• Consolidated merchandise and service gross margin at 33.5%, a slight decrease of 0.1%. The margin was 33.2% in the U.S., an increase of 0.3% and it was 34.0% in Canada, a decrease of 1.1%.
• Same-store motor fuel volume down 1.6% in the U.S. and 0.9% in Canada, a performance in line with market data.
• Motor fuel gross margin in the U.S. at 19.95 cents per gallon, and 5.53 cents per litre in Canada. The gross margin net of electronic payment fees is similar to last year.
• Excluding electronic payment fees, operating expenses represented 27.4% of merchandise and service sales during the first quarter of fiscal 2012 compared to 27.7% during the first quarter of fiscal 2011.
• Couche-Tard’s total consolidated assets amounted to $4.1 billion as at July 17, 2011, an increase of $204.4 million over the balance as at April 24, 2011.
“The nice performance and efficiency of our operations, along with the contribution of fresh food, our proactive management of our balance sheet and of our debt, as well as our share repurchase program, continue to create value and to withstand the economic sluggishness. It is a set of elements that contribute to earnings growth, demonstrating Couche-Tard’s exceptional strength, even in challenging times,” added Raymond Paré, vice-president and chief financial officer. “We also continue to be active on the acquisition front while maintaining our usual discipline.”
First Quarter Acquisitions
In May 2011, Couche-Tard acquired 11 company-operated stores located in Ontario, Manitoba, Saskatchewan, Alberta and British-Columbia, Canada from Shell Canada Products. Couche-Tard owns the land and buildings for seven sites and leases these same assets for four sites. Two out of the 11 sites have not yet been integrated into the Corporation’s network. Couche-Tard also acquired five company-operated stores in May, operating under the Gas City banner. Of those locations, one is located in Arizona and four in the Chicago area. The four sites in Chicago were acquired through Couche-Tard’s RDK joint venture. The Corporation owns the land and buildings for three of these sites and leases the others.
In addition, during the first quarter of fiscal 2012, Couche-Tard acquired one additional company-operated store.
In June 2011, Couche-Tard signed an agreement with Exxon Mobil for 322 stores and a motor fuel supply agreement for another 65 stores. All stores are operated in Southern California. Assuming the closing of the transaction, out of the 322 stores, 72 would be operated by the Corporation, while 250 would be operated by independent operators. Couche-Tard would own the real estate for up to 202 of the sites while the balance would be leased. The transaction is anticipated to close in stages between the third quarter of calendar year 2011 and the second quarter of calendar year 2012.
In June 2011, Couche-Tard signed an agreement to acquire 26 company-operated stores operating in the mid-Atlantic states. Assuming the closing of the transaction that is scheduled before the end of the 2011 summer season, the Corporation would own the real estate for 25 sites while it would lease the other one.
In August 2011, Couche-Tard signed an agreement to acquire from ExxonMobil, 33 company-operated stores operating under the “On the Run” banner in Louisiana. Assuming the closing of the transaction, which is scheduled for December 2011, the Corporation would own the real estate for 27 sites while it would lease the other sites.
Also in August, through its RDK joint venture, Couche-Tard signed an agreement for 27 stores operating in the Midwest region of the U.S. The agreement also includes the transfer to RDK of two vacant land parcels. Out of the 27 stores, 14 are expected to be company-operated while the other 13 are expected to be operated by independent operators. Assuming the closing of the transaction that is expected in the early fall of 2011, RDK would own the real estate for 24 sites, as well as the two land parcels, while it would lease the real estate for the other sites. All of the above transactions are subject to standard regulatory approvals and closing conditions.
Couche-Tard completed the construction of five new stores during the 12-week period ended July 17, 2011.
Board of Directors
After three years as Chairman of Couche-Tard’s Board of Directors, Richard Fortin will hand over this responsibility to , effective following the next shareholders’ meeting to be held next Sept. 6. Fortin will continue to play an active role within the Corporation since he will remain a member of the Board of Directors and of the Executive Committee. In addition to his new role, Plourde will continue to play an active role on the Executive Committee. At its meeting held on Aug. 30, 2011, the Board of Directors decided to reduce the number of directors to be elected at the upcoming shareholders’ meeting to nine, considering that Roger Longpré will not be seeking a reelection due to his health condition.