Alimentation Couche-Tard misses on top and bottom lines in Q2
Alimentation Couche-Tard Inc. fell as much as 2.4 per cent after it missed quarterly estimates, as fuel volumes declined and the company was hit by higher wages and electrical bills.
The global chain of 14,300 gas stations and convenience stores earned US$810 million in the quarter ended Oct. 9. The company made 82 cents a share on an adjusted basis, which was 26 per cent higher than a year earlier but lower than analysts’ consenus forecast of 85 cents.
Gross profit from the fuel business jumped 20 per cent to US$1.4 billion, mostly because of high US gasoline prices. But volumes were down everywhere, falling 1.9 per cent in the US and 6.5 per cent in Canada on a same-store basis.
Drivers are buying less fuel, on average, with each stop -- about 15 per cent fewer liters per fill, Chief Executive Officer Brian Hannasch told analysts. “We view this as transitory.”
Couche-Tard was down 1.6 per cent to $60.45 as of 10:47 a.m. in Toronto.
“ATD failed to maintain its streak of recent beats, as fuel margin upside seems to have finally moderated,” Wells Fargo analyst Anthony Bonadio said in a report. “In the end, the quarter could have certainly been better, but it’s difficult to be too disappointed with 26 per cent EPS growth.”
Circle K has been rolling out a fresh food marketing push, even trying food trucks to convince customers to sample hot sandwiches, pizzas, cookies and other products. Sales related to its so-called “Fresh Food, Fast” initiative were up more than 20 per cent, Hannasch told analysts.
Merchandise and service revenue, which includes food, grew 5.6 per cent in Couche-Tard’s US locations on a same-store basis and 2.9 per cent in Europe, though it dropped in Canada.
“When people are thinking about becoming more cost-conscious, it’s easier to buy some food at the local convenience store than going out to a fancy restaurant,” Brett Girard, portfolio manager at Liberty International Investment Management Inc., said on BNN Bloomberg Television.
Operating expenses, including higher energy prices and wages, rose 8.5 per cent from last year.
Electricity costs in European markets have risen 500 per cent to 600 per cent and the company has tried to reduce usage between 10 per cent and 20 per cent on sites, Hannasch said. “It’s lowering the heat, unplugging coolers that we don’t think are key, raising the temperature of our walk-in coolers.”
Since its failed attempt to buy grocery chain Carrefour SA in 2021, the Laval, Quebec-based company has been looking for another sizable deal of as much as US$15 billion.
“I think it’s a question of timing,” said Hannasch. “But I’m cautiously optimistic that this environment with tighter credit, higher interest rates will be better for Couche-Tard then it has been the last three or four years where there’s been a lot more competition.”
Couche-Tard shares are up 14 per cent this year, making it one of the best-performing non-resource stocks in Canada’s S&P/TSX 60 Index.