- Net Earnings: $790.8 million or $0.83 per share on a diluted basis.
- Adjusted Net Earnings: Approximately $790 million, down from $858 million in Q1 FY2024.
- Adjusted Diluted Net Earnings Per Share: $0.83, a decrease of 3.5% from $0.86 in the corresponding quarter last year.
- Merchandise and Service Revenues: Increased by approximately $252 million or 5.4%, excluding foreign currency translation impact.
- Merchandise and Service Gross Profit: Increased by approximately $82 million or 5.5%, excluding foreign currency translation impact.
- Merchandise and Services Gross Margin (U.S.): Decreased by 0.6% to 53.7%.
- Merchandise and Services Gross Margin (Canada): Increased by 0.9% to 34.8%.
- Merchandise and Services Gross Margin (Europe and Other Regions): Decreased by 0.1% to 39.8%.
- Road Transportation Fuel Gross Margin (U.S.): $0.4813 per gallon, a decrease of $1.92 per gallon.
- Road Transportation Fuel Gross Margin (Canada): CAD0.1311 per liter, a decrease of CAD0.014 per liter.
- Road Transportation Fuel Gross Margin (Europe and Other Regions): USD0.868 per liter, an increase of USD0.047 per liter.
- Normalized Operating Expenses: Increased by 3.8% year over year.
- Adjusted EBITDA: Increased by $73.2 million or 4.8% compared to Q1 FY2024.
- Income Tax Rate: 23.1%, up from 22.8% in the corresponding period of FY2024.
- Return on Equity: 19.8% as of July 21, 2024.
- Return on Capital Employed: 12.8% as of July 21, 2024.
- Leverage Ratio: Decreased to 2.15%.
- Cash and Liquidity: $1.6 billion in cash and $3.3 billion available through the main revolving credit facility.
- Share Repurchase: 8.7 million shares repurchased for $508.7 million.
- Quarterly Dividend: CAD0.0175 per share for Q1 FY2025.
Release Date: September 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Alimentation Couche-Tard Inc (ANCTF, Financial) announced a definitive agreement to acquire GetGo Café markets, which operates approximately 270 locations, enhancing their footprint in Pennsylvania, Ohio, West Virginia, Maryland, and Indiana.
- The company reported a 17% increase in fully enrolled customers for its Inner Circle loyalty program in the US, with over 20% of transactions coming from these members.
- Strong performance in Europe with a 0.9% same-store sales growth, excluding weak results in the Hong Kong market.
- Healthy fuel margins despite a decrease in fuel volumes, indicating effective cost management and sourcing strategies.
- Successful integration of European retail assets from TotalEnergies, with identified synergies of $187 million over the next five years.
Negative Points
- Same-store revenues decreased by 1.1% in the United States, 2.1% in Europe and other regions, and 3.9% in Canada, impacted by constraints on discretionary spending.
- Fuel volumes decreased by 0.8% in the United States, 1.4% in Europe and other regions, and 2.1% in Canada, reflecting challenging economic conditions.
- Merchandise and services gross margin decreased by 0.6% in the United States to 53.7%, mainly due to investments in summer campaigns.
- Net earnings attributable to shareholders decreased to $790.8 million from $858 million in the first quarter of fiscal 2024, representing a 3.5% decline in adjusted diluted net earnings per share.
- Pressure on cigarette sales globally, although some stabilization was noted in the US market.
Q & A Highlights
Q: I understand that you're not going to specifically address but it would be very helpful if you would remind us of your criteria for M&A? Sort of what kind of hurdle rates, how you approach it, your views on the balance sheet? And maybe you could even frame it within the context of the GetGo transaction?
A: Yes. Thank you, Irene. So as you know, historically, we have been very, very -- we have always had a very disciplined financial approach, and we aim to continue at that. We have demonstrated that again with the GetGo transaction with a single-digit multiple there. And -- put for us, as it's very important, it's always looking at returns it's not that multiple, that's important is more about returns. And as you know, on that, again, we have always aimed at looking at a 15% return on capital employed on year free that's our goal. Of course, here, emphasizing always on how we can get the best in terms -- and that has been our approach, and we will continue to do that for any transaction that we have been looking at and we'll be looking at in the future. In terms of balance sheet, as you know, we have always said that our comfort level in terms of leverage is 2.5 times. That's where we want to be, I would say, on the long term. But having said that, when we wanted to be active on the M&A side. We believe that we have the powder to do it. So as you know, we have -- we believe, at least $10 billion in terms of balance sheet means that we know that we can go up to 3.75 times leverage with no impact on our credit ratings. That's, I would say, something that we are clear. But at the same time, you know that we -- it doesn't prevent us to even consider a higher leverage if needed. But always keeping in mind a financial and disciplined approach and looking also at the deleverage. We have been historically a company that has been able to deleverage quickly -- and that's something that we will continue to do. So very confident about our ability to be disciplined. We have the solid and robust balance sheet. We have a stronger syndicate and bank and partners that to help us there. So we aim to continue to do that in the future.
Q: How are you thinking about the approval process from a competition perspective? And what are you thinking more broadly about views right now with respect to major M&A?
A: I think -- Irene, thanks for the question. Yes, we have some overlap with GetGo, but it's not material at all, and we'll go through the regular HSR process and engagement with the FTC and we have quite a bit of experience doing that. And again, we expect to be able to close this transaction in calendar 2025.
Q: I wanted to talk a little bit more about the US same-store sales. It seems like you had some of the promo campaigns appear to be mostly focused on the beverage category. Wondering if it was on other categories as well. And to what degree you consider successful -- and then would you be able to break out same-store sales excluding tobacco because tobacco is a big part of your in-store sales and seems to be a big drag still. So I'm wondering what that is. A lot of companies back it out.
A: Yes, sure. Thanks for the question. Yes, we invested heavily in the quarter into primarily thirst initiatives. The summer is our prime beverage time and we grew units. We grew traffic because of those units. While our overall traffic was still negative, we did improve traffic and had several weeks in business units that were positive. But it came at a cost. It came at a cost that you see on our margin line. We thought it was important to drive that traffic. And we don't see that continuing kind of quarter-over-quarter with those level of investments. On tobacco, as we mentioned, I think we're feeling cigarettes are stabilizing. When we look at tobacco as a whole, when we include our significant growth in other nicotine along with our outperformance of the industry in sticks, it actually would have been positive to our same-store sales, and we would have been negative 0.6%, excluding tobacco.
Q: It had a question on the health of the consumer. It seems like across your network, you've seen maybe a bit more pressure on consumer spending and traffic versus peers. So I guess hoping for a little bit more color on why this might be? And then -- could you give a little more color on the changes in consumer behavior you're seeing at the pump or on inside sales and really how those have evolved recently? And then finally, you touched on this a bit, but could you highlight possibly some of your key initiatives that you've implemented to ultimately offer more value for the consumer to drive faster traffic and sales.
A: Yes. Bonnie, I don't think we feel at all bad about how we're performing against our peers. Our data certainly suggests that we are taking share across our convenience space at a level that is fairly pronounced and quite strong. So we feel really good about how we're performing inside the industry. And we will continue to focus on doing that. I think the consumer has stretched -- why do we say that? Less visits, lower baskets. Fuel is a great example of that. We actually have higher traffic to our four courts, but the average fill is down level that leads to negative same-store volume. So we just see that consistently from our consumers in our transactions. I think your final question was what are we doing? We're looking to leverage our scale and our relationship with our vendors to show value on products that our data suggests our customers really care about. And we will continue to do that. I think going forward, we're really going to focus on meal bundles and leveraging our first expertise with food to drive that and also continuing to focus on private label. Our private label, we see customers choosing private label. Private label is growing for us, high single digits, low double digits in all of our geographies. We will add over 100 products in private label this year and look to continue to push those.
Q: Do you plan to invest in margin outside of the thirst category to help drive traffic and market share. And then a follow-up to that, are you seeing anything notable from competitor behavior on pricing either on the merchandise or fuel sales? Or have competitors been pretty rational thus far?
A: We always run promotions really across our footprint or our merged categories. We always do that. I think our investments in data and our investments in digital, I think we'll continue to get smarter at what promotions we should be running and which ones resonate with our customers. But we always run promotions across basically all areas of our stores. I think we'll likely lower the number of promotions and be more targeted using our data to advise us. I don't remember the second part of the question.
Q: Just competitor behavior on pricing on merchandise
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
