Alimentation Couche-Tard earnings fall as consumers watch spending
Alimentation Couche-Tard, a Canadian multinational operator of convenience stores with locations in Canada, the United States, Europe, and Asia, says that while its net earning fell by almost a third this fourth quarter, the company remains optimistic about its business going forward into fiscal 2025.
Brian Hannasch, president and CEO of Couche-Tard—who before an analyst call to go over the company’s fiscal picture announced his retirement from the company and the appointment of Alex Miller as president and chief executive officer effective September 6—says the resulting earnings drop was due to “persistent inflation and continued pressure on consumers who are carefully watching their spending. However, we believe this is transitory and we remain very optimistic about our business.”
He adds that even with this recent softness in the market, including same-store sales overall, steady growth continues to be seen overall globally for the last two years. On the fuel side of Couche-Tard’s business, Hannasch says the company continues to strengthen its leadership position in most markets and margins continue to remain healthy.
“We are also please that our focus on providing everyday value and ease for our customers and leveraging competitive advantages of our global scale and diversified business continues to take market share and drive long-term growth,” he adds.
While the convenience side of Couche-Tard’s business softened this quarter and for the year, down 0.5% in the U.S., 2% in Europe and other regions and 3.4% in Canada, “these results were impacted by near-term headwinds in the economy and continued inflation compared with an exceptionally strong quarter last year.
Focus on loyalty and fresh foods
To continue to grow into the new fiscal year going forward, Hannasch says Couche-Tard will “focus on improving and expanding our loyalty programs both in the U.S. and in Europe.”
“In the U.S., Inner Circle registrations and enrollments continue to grow, and we ended the year with over 6.3 million customers fully enrolled in the program across the 30 states. With the membership program we are seeing visit frequency and spends per member growing consistently month-over-month. Florida, which is our first business unit on the program, finished its inaugural year with about 20% of customer transactions linked to our Inner Circle program.”
Hannasch adds that are particularly strong driver of sales going forward will be its Fresh Foods Fast offerings, now offered in some 5,800 locations globally. He says the company’s operations teams are continuing to work on improving profitability of these offerings “and introducing news production planning tools that improves the accuracy of forecasting, thereby allowing our store teams to better identify what products are needed and at what time of day they are needed.”
“We're seeing strong sales and satisfaction with our freshly prepared cookie program, and we've introduced some great LTOs including our breakfast slam with triple meat and double cheese this quarter.”
Hannasch also says the company with its stores will continue to strive to become “the number one thirst stop across the network. We've launched exciting summer campaigns to drive traffic and provide value for our customers in the U.S. at participating locations. We're offering Polar Pop and Frost at any size for just 79 cents and for our Inner Circle members, the same offer starts at 69 cents. We've also added exclusive Gatorade flavors called Lightning Blast, which contributed to overall growth in sports drinks. Packaged beverage sales are also performing well and we're growing market share.”
READ: Alimentation Couche-Tard announced fourth quarter and fiscal year 2024 results
Tobacco sales soften and possible acquisitions in the future
While cigarette sales continue to dip—driven by global efforts to curb smoking and it harmful effects, especially amongst the younger generation—Hannasch says Couche-Tard is staring to see some better numbers in the tobacco category. “This is partly due to the initiatives we've had underway with our supply partners, including brand focused contest and personalization programs for our age verified customers in other nicotine products. We continue to see strong growth across the network with exclusive vaping opportunities.”
In Canada, tobacco sales remain soft, driven by increasing taxes placed on tobacco and other tobacco-related products, the growth of channels selling contraband tobacco products, he says.
On the fuel-side of the business, spending globally continues to be soft, which Hannasch attributes to people watching their spending, even as fuel prices have stabilized. On the electric vehicle charging side of the business, Hannasch says the company’s EV charging network continues to grow with more than 2,600 charging points now online, including 50 sites in North America for trucks.”
Couche-Tard also has several potential acquisitions it future, according to Hannasch, possibly in Europe and North America. "In the last couple of months, we've seen quite a few deals come across our desk” he says. "We'll remain disciplined. We commit to that, But we'd like to think we can land a few opportunities over the coming quarters."
READ: Couche-Tard teams up with Too Good To Go to fight food waste
Welcoming Alex Miller to his new role
During the analyst call Hannasch also took a moment to speak about Alex Miller, who is currently chief operating officer with Couche-Tard and who will be stepping into his new role as president and CEO of Couche-Tard in September.
Hannasch’s retirement was announced shortly before the analyst call by Couche-Tard, but he will continue as a special advisor to both the new president and CEO and to Alain Bouchard, founder and executive chairman of the Board.
“On behalf of the Board of Directors of Couche-Tard, I want to congratulate Alex Miller on his appointment to be our next leader,” wrote Bouchard in a press release announcing the news. “Couche-Tard has only had two CEOs during its almost 45-year history, and we take this appointment extremely seriously. The Board and I have been planning for an orderly and seamless succession for several years, and we have carefully assessed the process and possible candidates. It is important to us that our next CEO comes from within the business and fully embraces our values, culture, and growth-oriented mindset. For those reasons, we have the utmost confidence that Alex is the best person to be our next president and CEO.”
Hannasch says that he and Miller have worked together for nearly 30 years and “Alex knows the business inside and out. He deeply cares about our culture, and he’ll have a great leadership team supporting him. I must say, it has been a true honour of a lifetime to lead this amazing company. I’m so proud of the value that we have all created together as well as the commitment and passion of our team members who serve our customers.”
“I am humbled and honored by this appointment, and I want to thank Alain, Brian and the entire Board of Directors for their confidence,” said Miller in the press release announcing his appointment. “Working with Couche-Tard—its Board of Directors, leadership, shareholders, team members and customers—has been the highlight of my career. I firmly believe that we are just at the beginning of our journey to become the world’s preferred destination for convenience and mobility, and I have full faith that with our engaged people and culture and long-term strategic plan, we will continue our incredible growth trajectory as we take market share and create lasting value.”
