Couche Tard on hunt for acquisitions but CEO doesn't get rival's Speedway deal

=Alimentation Couche-Tard continues to be on the hunt for acquisitions even as it claims convenience store rival 7-Eleven's blockbuster US$21-billion acquisition of the Speedway network in the U.S. doesn't make sense.

Chief executive Brian Hannasch told investors September 2 that the deal announced last month for the 3,900-store network owned by Marathon Petroleum “traded at value, quite honestly, I can't understand.''

He said potential acquisition deals have been relatively quiet in the quarter but that activity should pick up as the focus on the COVID-19 pandemic lessens.

“Now that COVID has become a bit of the new normal, we are starting to see a little more deal flow ... And if the value is there, we'll certainly take advantage of those opportunities.''

The fragmented U.S. market remains a prime target as are significant opportunities in Western Canada.

Asia-Pacific, including Australia, remains “a strong area of focus due to long-term growth potential.''

“We are exploring several opportunities actively there,'' Hannasch said, adding that the pandemic has created uncertainty Down Under.

He said Ampol (formerly called Caltex), which Couche-Tard had previously targeted, has been weaker than expected. Peter Sklar of BMO Capital Markets said he doesn't believe Couche-Tard will pursue a deal in the near-term because of its weak financial performance.

While there are markets in Europe that are interesting, the region isn't a priority, Hannasch noted.

Acquisitions are part of Couche-Tard's strategy to double its size within five years.

Hannasch said its five-year plan remains on track after two years despite the coronavirus.

“I'm pleased that we continue to make good progress on most of our initiatives. While the pandemic has had an impact short-term on traffic patterns and behaviours, there's a lot of pushes and pulls.''

Couche-Tard's shares surged 7.5% Sept. 2, after it reported strong first-quarter results after markets closed on Tuesday.

The company said its net profit surged 44% despite a big drop in fuel sales at its convenience stores because of COVID-19.

The Quebec-based retailer that operates the Circle K brand says it earned US$771.1 million or 70 cents per diluted share in its first quarter, up from US$538.8 million or 48 cents per share a year earlier.

Adjusted earnings attributable to shareholders came in at 71 cent per share, up from 40 cents per share forecast by analysts, according to financial markets data firm Refinitiv.

“We had an exceptional quarter, I think, both financially and operationally, as we've seen an increase in shopping occasions and solid execution by our teams to take advantage of changing consumer behaviours during this COVID period,'' Hannasch told analysts.

Revenues for the three months ended July 19 decreased 31.4% to US$9.71 billion, compared with US$14.2 billion a year earlier and below forecasts of US$10.55 billion.

The retailer said its in-store sales benefited from shoppers buying more, while fuel sales were hurt by lower demand and prices, partially offset by strong fuel margins.

Tobacco sales were strong, especially in Canada.

Same-store fuel volume decreased 21.2% in the U.S., 25.6% in Canada, and 12.4% in Europe.