(Montreal) Sales at Alimentation Couche-Tard convenience stores in the United States were lower than expected. Without the decline in cigarette sales, the results would have been more vigorous, his big boss suggests.
This was explained by the president and chief executive, Brian Hannasch, during a conference call on Thursday to discuss the results of the first quarter. “There are significant headwinds for the tobacco industry, not just for Couche-Tard. »
The cigarette market is in decline due to declining numbers of smokers and competition from the illicit market.
Comparable merchandise sales (which exclude fuel) increased 2.1% in the United States, compared to a pace of 3.5% in the same period last year. Convenience stores in Canada fared better with comparable sales growth of 6.4%.
The decline in revenue from the sale of cigarettes would mask the resilience of spending by Couche-Tard customers in the United States, Hannasch said. “If you took tobacco out, we would have growth in the middle of the range between 0% and 10%. »
Finance chief Filipe Da Silva added that an increase in the tobacco tax in Hong Kong also had an adverse effect outside North America.
Even though the company revealed earnings per share that were significantly higher than expected, investors remained on the sidelines on the Toronto Stock Exchange in the morning. Couche-Tard shares lost 92 cents, or 1.29%, to $70.64 by late morning.
“The outperformance appears to be coming from fuel, a segment that has less impact on the share price,” says analyst Michael Van Aelst of TD Securities.
“The stock has already gained 20% since the start of the year, including 8% in the last four weeks. […] At the same time, comparable store sales are lower than analysts’ expectations. »
Last June, Mr. Hannasch spoke of a “very targeted” promotional offensive to do better than its competitors in tobacco-related activities. The American Lung Association called the strategy “cynical.”
The executive was less explicit about his strategy to boost cigarette sales during Thursday’s conference call, but he said the company would make efforts to outperform its competitors in this segment.
Tobacco products enabled Couche-Tard to generate sales of US6.39 billion across all regions where the company operates, during the 2023 financial year ended April 25. Last year, this figure was 6.48 billion US dollars.
Aside from the headwinds blowing for cigarette sales, Hannasch expressed cautious optimism about consumer resilience in the United States. He concedes that inflation is putting pressure on households and that the savings rate is falling, but he adds that employment is doing well and that average salaries are increasing in several regions.
“We continue to see more than 10% growth on the private label side, which demonstrates that some of our customers’ finances are tighter. »
In the fourth quarter, Couche-Tard unveiled, the day before after the markets closed, a net profit down 4.4% to 834.1 millionUS. Revenues, for their part, fell by 16.3% to 15.6 billionUS.
The company reported adjusted diluted earnings per share of 86 cents. Before the results were released, analysts had expected a profit of 78 cents, according to financial data firm Refinitiv.
Analyst Irene Nattel of RBC Capital Markets is positive about the results. She finds that fuel margins in the United States are “very good,” which management attributes to her promotional efforts.
“In broad terms, the first quarter results demonstrate, once again, the strength of Couche-Tard’s business model,” reacts Ms. Nattel.
Company in this news report: (TSX: ATD)