Alimentation Couche-Tard feels ongoing pain from weak economy in Western Canada

Challenging economic conditions in Western Canada

MONTREAL — Challenging economic conditions in Western Canada continued to weigh down on Alimentation Couche-Tard in the third quarter, despite the addition of 278 former Esso locations in Ontario and Quebec, the company said Tuesday.

While Canadian fuel margins increased, merchandise revenues from stores open for at least a year decreased by 0.9 per cent as a result of the region’s struggling economy, while same-store fuel sales were off 0.8 per cent, the convenience store operator said.

“Canada was flat without Esso,” CEO Brian Hannasch told analysts during a conference call.

Eastern Canada was stronger while western provinces, particularly Alberta, were the weak point.

“That trend has continued really since we saw the decline in crude oil prices from the low $100s to as low as the $20s,” he said.

Hannasch said the expansion in Ontario that primarily came with the Esso deal should help Canadian fuel margins since they have historically been higher in the province than other parts of the country.

Chief financial officer Claude Tessier added that the higher Canadian fuel margins should be sustainable because Couche-Tard is now more exposed to Central Canadian markets.

During the quarter, Couche-Tard (TSX:ATD.B) reported higher overall net income as revenue rose 22 per cent, largely due the acquisition of Esso locations and operations in the United States and Europe.

The Laval, Que.-based company said it earned US$287 million or 50 cents per share in the quarter ended Jan. 29, up from US$274 million or 48 cents per share in the comparable period last year.

Adjusted earnings were 53 cents per share, about the same as last year, but well below analyst forecasts of 66 cents per share, according to Thomson Reuters.

Revenue at the company, which reports in U.S. currency, rose to $11.4 billion from $9.33 billion a year earlier.

Hannasch said the convenience store chain was negatively affected during the quarter by a weak U.S. retail environment particularly in January, weather challenges including a hurricane, ice storm and flooding, and an increase in the legal age to purchase cigarettes to 21 from 18 in California.

Couche-Tard’s banners in Canada include Mac’s, though it’s switching to Circle K as its global brand everywhere but Quebec, where Couche-Tard will remain the company’s main banner.

Hannasch said the company is accelerating the pace of its rebranding to Circle K, which now accounts for more than 1,000 stores in North America and 910 in Europe. It hopes to have 1,700 stores rebranded in North America by the end of the fiscal year, with another 2,500 locations added next year.

With the acquisition of Esso stations complete, Couche-Tard is anticipating the closing of the US$3.4-billion purchase of CST Brands to be finalized in the summer, a few months later than previously forecast.

The CST deal is prompting the company to examine its entire global real estate portfolio to see if it could realize bigger profits by selling some locations for residential or other developments.

“We’re going to take a really hard look and see us in the coming months come out with a strategy to divest some non-core assets as part of that purchase,” he added.

Shares of Couche-Tard closed at $58.85, down 4.77 per cent, on the Toronto Stock Exchange after analysts described the results as disappointing.

Follow ↕RossMarowits on Twitter.

Just Posted

Huge RV resort proposed for Buffalo Lake

Some residents feel 800-lot RV resort too big for area

Updated: Red Deer gets WHL Bantam Draft and Awards Banquet

WHL will holds its draft and awards ceremony in Red Deer for next three years

Land wanted for Central Alberta Foodgrains project

23rd year for Lacombe area charity

Stolen vehicle found thanks to tip from motorist

Charges laid against Red Deer man and Leduc County woman

Updated: Red Deer gets WHL Bantam Draft and Awards Banquet

WHL will holds its draft and awards ceremony in Red Deer for next three years

How to keep local news visible in your Facebook feed

Facebook has changed the news feed to emphasize personal connections. You might see less news.

Red Deer blood clinic in need of 600 donors

Aunt encourages Central Albertans to donate blood after losing nephew

Court considers banning diesel cars in German cities

BERLIN — A German court began considering Thursday whether authorities should ban… Continue reading

US women beat Canada in Olympic hockey; Gisin tops Shiffrin

PYEONGCHANG, Korea, Republic Of — A tense shootout, a dazzling deke and… Continue reading

Trudeau: Invitation should not have gone to Sikh extremist

NEW DELHI — A man who was convicted of trying to assassinate… Continue reading

Greyhound cleared to end routes in northern B.C., Vancouver Island

Company says nine routes have dropped 30% in ridership in last five years

Evangelist Billy Graham, who reached millions, dies at 99

MONTREAT, N.C. — The Rev. Billy Graham, who transformed American religious life… Continue reading

Amid a flood of plastic, big companies see opportunity

LONDON — Public awareness of the problem of plastic waste is swelling… Continue reading

Most Read

Five-day delivery plus unlimited digital access for $185 for 260 issues (must live in delivery area to qualify) Unlimited Digital Access 99 cents for the first four weeks and then only $15 per month Five-day delivery plus unlimited digital access for $15 a month