Alimentation Couche Tard sees earnings rise on gas sales in latest quarter

LAVAL, Que. - Canadian convenience store giant Alimentation Couche-Tard (ACT) reported earnings for the second quarter ended Oct. 9 were up 16.6%.

Net earnings for the quarter were $810.4 million, or 79 cents per diluted share, up from $694.8 million or 65 cents per diluted share a year earlier.

The Quebec-based company says its total revenues were $16.9 billion, up 19.7% from last year.

This was largely due to a 24.3% increase in road transportation fuel revenues as gas prices rose, while merchandise and service revenues were up 2.3%.

Same-store merchandise revenues were up in the U.S., Europe and other regions, but were down in Canada, the company said.

Couche-Tard president and CEO Brian Hannasch said the company has piloted its new loyalty program in the U.S. and a new tiered concept in Europe, and is preparing for expansions on those pilots in the upcoming quarters.

Highlights:

• Total merchandise and service revenues of $4.1 billion, an increase of 2.3%. Same-store merchandise revenues increased by 5.6% in the United States, by 2.9% in Europe and other regions, however decreased by 1.5% in Canada.

• Merchandise and service gross margin increased by 0.9% in Canada to 33.2%, by 0.2% in the United States to 34.0%, and decreased by 0.1% in Europe and other regions to 38.3%.

• Same-store road transportation fuel volumes decreased by 1.9% in the United States, by 6.3% in Europe and other regions, and by 6.5% in Canada.

• Road transportation fuel gross margin of 49.16¢ per gallon in the United States, an increase of 12.77¢ per gallon, US 9.76¢ per litre in Europe and other regions, a decrease of US 0.81¢ per litre driven by the impact of currency translation, and CA 12.55¢ per litre in Canada, an increase of CA 1.52¢ per litre. Fuel margins remained healthy throughout the network due to favourable market conditions and the continued work on the optimization of the supply chain.

• ACT completed the acquisition of 218 sites within the Wilsons network, consisting of 79 company-owned and operated convenience retail and fuel locations, two company-owned and dealer-operated locations, 137 dealer-owned and operated locations, and a fuel terminal in Atlantic Canada. According to ACT's agreement with the competition bureau, a portion of this network will be divested.

• During the second quarter and first half-year of fiscal 2023, ACT repurchased shares for amounts of $205.2 million and $683.2 million, respectively. Subsequent to the end of the quarter, shares were repurchased for an amount of $396.2 million.

• Sustained healthy financial situation as demonstrated by a leverage ratio of 1.20 : 1, and a return on capital employed of 16.4%, both driven by strong earnings.

• 27.3% increase of the quarterly dividend, from CA 11.0¢ per share, bringing it to CA 14.0¢ per share.

"We are pleased to report strong results this quarter, especially in the face of the continued challenges of high inflation, energy and fuel prices across the global economy. We had good performance in convenience with favourable same store sales, particularly in our U.S. market, which had strong growth in food, and positive promotional activity," says Hannasch, adding the organization is proud of the recent milestones achieved in innovation and mobility. "Over 1,000 units have been deployed so far in the roll out of our easy-to-use, smart checkout technology. We passed one million pay-by-plate fuel transactions on Circle K forecourts in Europe and launched the first-ever public EV-chargers for trucks in Scandinavia. We have also piloted our new loyalty program in the U.S. and new tiered concept in Europe. We are pleased with the early results of those pilots and are preparing for an expansion in the upcoming quarters."

CFO Claude Tessier added: "We delivered once again a solid quarter with impressive bottom-line growth notwithstanding the challenging inflationary environment."

- with files from Michelle Warren