Marking a record first quarter haul, Parkland earned $387 million in adjustable EBITDA (before interest, taxes, depreciation and amortization) in the first three months of the year.
That is an impressive 23% increase over Q1 2021.
“Parkland delivered an exceptional quarter against a volatile backdrop: the ongoing COVID recovery, inflation and the invasion of Ukraine,” said Bob Epsey, Parkland’s president and CEO, in a conference call with analysts. “[This] has set the stage for a strong year.”
In the Canadian market, adjusted EBITDA was $191 million – an increase of 22%, or $42 million, on a comparable basis from Q1. That represents 49% of the Calgary-based retail and petroleum company’s total EBITDA.
Marcel Teunissen, CFO at Parkland, credited “robust margins, ongoing recovery of fuel volumes, the impact of the Crevier Group [In Montreal] and M&M food acquisitions, and organic growth” for the strong result.
Excluding cigarettes, year-over-year same-store sales increased 1.7%. This was underpinned by the beverage category, up 8.5%. Parkland also expanded its c-store margins from 29.8% to 32.9%, owing to the inclusion of M&M and changes in the sales mix.
Retail delivery, provided by third partners like SkipTheDishes, DoorDash and Uber Eats, was introduced last year, and continues to grow exponentially. “During the first three months of the year, we saw a 40% year-over-year growth in this channel, and will continue to progress on this initiative,” said Teunissen.
Parkland also continues to see strength in its customer loyalty program, Journie. It added 300,000 new members in the first quarter. Journie, which rolled out nationwide in early 2020, finished 2021 with about 2.9 million members, putting its current total well over 3 million.
Teunissen credits the uptick to the fact that customers are looking for value and relevant offers in an inflationary environment, as well as its partnerships with Tim Hortons’ Roll Up the Rim contest. “It was a 100% digital and proved effective to delivering double our typical new membership run rate,” he said.
A new co-branded credit card between CIBC, Parkland’s financial partner, and Costco also boosted Journie’s membership, as the card could also linked to the program.
However, there are signs of changing consumer behaviour, particularly as it relates to inflation.
“Average fill rates and basket sizes have declined,” Teunissen told investors. “However, total transactions are up year-over-year. In other words, customers are buying less fuel each visit but are coming to see us more often as a result.”
Parkland added 37 On the Run convenience brand locations in the quarter. Parkland aims to have about 1,000 stores across Canada and the U.S. by 2025.
Parkland’s international market (primarily the Caribbean) had EBITDA of $82 million, an increase of 22% from Q1. The U.S. business had EBITDA of $47 million. up 147%.
The growth was fuelled by a full quarter of results from its acquisition of Urbieta Oil Co., a retail, convenience and fuel distribution business in south Florida and Lynch Oil, including of its five large-format convenience stores, in the Pacific Northwest.
Both acquired brands are being actively integrated into the On the Run brand to maximize synergies.
Rest of year outlook
Parkland is hoping to generate further growth this year from its acquisition in the quarter of M&M Food Market for $322 million. The Mississauga, Ont.-based frozen food retailer has more than 300 stores and over 2,000 M&M Express locations, as well as a rewards program with two million active members.
“We are excited about the coming together of these brands, which will enhance our quality food offering and provide customers with even greater convenience,” said Epsey, calling the acquisition a “runway of organic growth opportunity.”
“M&M is one of many steps we are taking in our retail diversification strategy to expand our proprietary food offer,” he added.
In the call with analysts, Epsey doubled down on a goal for Parkland to reach $2 billion of adjusted EBITDA by the end of 2025, a commitment the company made early last year.
It finished 2021 with $1.26 billion of adjusted EBITDA.