Alimentation Couche-Tard sells fuel for you and your car on both sides of the US-Canada border. It's the second-largest convenience store operator in North America and the leader in Canada with some 6,000 outlets: Couche-Tard in Québec; Mac's in central and western Canada; and more than 4,600-plus Circle K shops in more than 40 US states and a dozen countries. (It bought the Circle K chain in the US from ConocoPhillips in 2003.) Most of its sales are rung up in the US. Alimentation Couche-Tard, French for "food for those who go to bed late," sells gas at more than three-quarters of its stores. The fast-growing chain is known for expanding, at home and abroad, through splashy acquisitions.
In Couche-Tard's global operations, Statoil, Couche-Tard, Mac's, and Circle K are its key brands. Fuel makes up a majority of sales in every geographic region but merchandise helps even out fuel volatility and delivers generally better profit margins.
Couche-Tard operates and licenses a total of about 13,100 global locations with more than 6,000 convenience stores in North America. The company divides the US market into nine geographic business units, with the largest retail presence in the Great Lakes region and Arizona. Its European operations include about 2,260 stores concentrated in Scandinavia and the Baltics with a growing presence in Poland. In Asia it licenses the Circle K brand to operators of more than 4,600 stores in a dozen mostly Asian countries.
Sales at Couche-Tard's convenience stores in fiscal 2014 (ends April) climbed to $38 billion, an increase of 7% over the prior year due to higher sales driven by recovering economic conditions and new store acquisitions. Net earnings rose about 42%, from $573 million to $812 million, due to higher revenue and some non-recurring costs in 2013 that made 2014's books look good by comparison. Without the one-time events, net earnings still would have grown 23% due to contributions from acquisitions, higher fuel margins in Europe and Canada, and growth in same-store merchandise sales. Cash from operations rose 23%, from $1,161 to $1,429, based on the higher net earnings, one-off events in 2013, and a better exchange rate for foreign currency.
Acquisitions are a big part of Couche-Tard's growth strategy. Its purchase of The Pantry Inc. is the latest is the latest in a long chain of acquisitions that includes the 2012 purchase of Statoil, its largest ever, and the purchase of Circle K nearly a decade ago. The Circle K acquisition established the Canadian firm as a major player in the US market while Statoil moved it into Europe. The fragmented US convenience store market and trend by major oil companies to cast off their retail operations has afforded Couche-Tard (and rival 7-Eleven) ample opportunity to acquire small, independently-operated chains, and occasionally a big fish. With about 70% of its sales (even more in the US) coming from gas, Couche-Tard is vulnerable to fluctuations in motor fuel prices. To protect itself from such volatility, the retailer is focused on developing its in-store merchandise sales (especially fresh foods), which return higher margins and are less volatile.
Mergers and Acquisitions
Overall, in fiscal 2014 the company acquired about 166 stores and built only 25. The big news came at the end of the calendar year with Couche-Tard said it would pay $860 million for The Pantry, Inc. with more than 1,500 Kangaroo Express stores in 13 US states; locations are concentrated in the southeast part of the country.
The $2.6-billion purchase of Statoil Fuel & Retail ASA, with about 2,300 locations in northern Europe, mainly in Scandinavia, closed in June 2012. Statoil is a Norway-based road transport fuel retailer and operates a network of retail stores across Scandinavia, Poland, the Baltic States, and Russia. Statoil owns and operates a dozen key terminals as well as 38 depots in eight countries and a fleet of about 400 road tankers.