Alimentation Couche-Tard Announces its Results for its Second Quarter of Fiscal Year 2022

Alimentation Couche-Tard Announces its Results for its Second Quarter of Fiscal Year 2022
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  • Net earnings were $694.8 million, or $0.65 per diluted share for the second quarter of fiscal 2022 compared with $757.0 million, or $0.68 per diluted share for the second quarter of fiscal 2021. Adjusted net earnings1 were approximately $693.0 million compared with $735.0 million for the second quarter of fiscal 2021. Adjusted diluted net earnings per share1 were $0.65, representing a decrease of 1.5% from $0.66 for the corresponding quarter of last year.
  • Total merchandise and service revenues of $4.0 billion, an increase of 5.8%. Same-store merchandise revenues increased 1.4% in the United States and 3.9% in Europe and other regions, and decreased 2.1% in Canada. On a 2-year basis, same-store merchandise revenues increased at a compound annual growth rate of 2.9% in the United States, 6.3% in Europe, and 4.5% in Canada.
  • Merchandise and service gross margin increased 0.2% in the United States to 33.8%, and 0.4% in Canada to 32.3% and decreased 1.8% in Europe and other regions to 38.4%, which was impacted by the integration of Circle K Hong Kong.
  • Same-store road transportation fuel volume increased 3.3% in the United States and 2.8% in Canada, and decreased 0.3% in Europe and other regions. On a 2-year basis, same-store road transportation fuel volume decreased at a compound annual rate of 6.5% in the United States, 2.0% in Europe, and 4.9% in Canada, still impacted by work from home trends.
  • Road transportation fuel gross margin of 36.39¢ per gallon in the United States, an increase of 0.18¢ per gallon, and CA 11.03¢ per liter in Canada, an increase of CA 1.02¢ per liter. In Europe and other regions, it decreased by US 0.53¢ per liter to US 10.57¢ per liter. Fuel margins remained healthy throughout our network, from a favorable competitive landscape and a strong sourcing efficiency.
  • As the COVID-19 pandemic had a significant impact on our prior year financial results, looking at gross profit1 on a 2-year basis provides additional insight given the volatility in the various key measures of our business. Excluding the disposal of CAPL and the acquisition of Circle K Hong Kong, merchandise and service, as well as road transportation fuel gross profit1, are higher by 9.8% and 17.9%, respectively, compared with the pre-pandemic second quarter of fiscal 2020.
  • On a 2-year basis, excluding the costs of employee retention measures implemented, which totaled approximately $24.0 million, normalized expenses increased at a compound annual growth rate of only 2.2%.
  • 25.7% increase of the quarterly dividend, from CA 8.75¢ to CA 11.0¢.
  • Under its current share repurchase program, the Corporation repurchased shares for an amount of $238.5 million during the quarter, and an amount of $50.0 million subsequent to the end of the quarter, reaching a total of $587.7 million under this program.

LAVAL, QC, Nov. 23, 2021 /CNW/ - For its second quarter ended October 10, 2021, Alimentation Couche- Tard Inc. ("Couche-Tard" or the "Corporation") (TSX: ATD.A) (TSX: ATD.B) announces net earnings of $694.8 million, representing $0.65 per share on a diluted basis. The results for the second quarter of fiscal 2022 were affected by a pre-tax net foreign exchange gain of $4.9 million, as well as pre-tax acquisition costs of $1.8 million. The results for the comparable quarter of fiscal 2021 were affected by a pre-tax gain on disposal of $40.9 million related to the sale of a property located in Toronto, Canada, a pre-tax net foreign exchange loss of $8.9 million, as well as pre-tax acquisition costs of $1.2 million. Excluding these items, the adjusted net earnings1 were approximately $693.0 million, or $0.65 per share on a diluted basis for the second quarter of fiscal 2022, compared with $735.0 million, or $0.66 per share on a diluted basis for the second quarter of fiscal 2021, a decrease of 1.5% in the adjusted diluted net earnings per share1, explained by higher operating expenses, partly offset by organic growth in both convenience and road transportation fuel activities as well as by the favorable impact of our share repurchase program. All financial information presented is in US dollars unless stated otherwise.

"I am pleased to report that across our global network, we had solid results during the second quarter in both convenience and fuel. Same-store sales were particularly notable in our U.S. and European markets as we continue to see growing momentum with our food program. Fuel volumes showed an upward trend in Europe, while other geographies remained impacted by COVID-19 traffic patterns. Across the board, we continue to achieve healthy fuel margins. I am particularly proud of the work we did this quarter to improve the customer experience and drive traffic to our stores from enhancing Sip & Save, our beverage subscription offer, to introducing frictionless checkout in our Arizona stores and pioneering a global partnership bringing our stores to life in a leading augmented reality mobile game," said Brian Hannasch, President and Chief Executive Officer of Alimentation Couche-Tard.

_____________________________

1 Please refer to the section "Non-IFRS Measures" for additional information on performance measures not defined by IFRS.

"Like our peers across the retail and convenience landscape in North America, this quarter we continued to face unprecedented labor and supply chain challenges. No doubt, this is the most difficult market in recent history, and we are working hard to mitigate the situation. We have instituted hiring and retention initiatives including bonuses and other offers and increased recruitment capacity and pipeline visibility. We have also focused more intensely on training and engagement to be recognized as an employer of choice. After meeting our summer goal of hiring over 20,000 store team members, we are starting to see some stabilization. We are also working with our partners and finding new solutions to critical supply chain issues. As we faced these obstacles head-on, I am proud that we delivered a solid quarter and kept on track with our strategic goals," concluded Brian Hannasch.

Claude Tessier, Chief Financial Officer, added: "We delivered another solid quarter despite the unparalleled staffing hurdles in North America combined with an overall challenging inflationary environment. This has put pressure on expenses as we work to alleviate the situation. As we start to see improvements in the various economies in which we operate, we will continue with our customary cost discipline and advance our network-wide cost optimization projects. I am especially proud of our teams' execution this quarter as we furthered our strategic plans and our strong financial position, highlighted by our leverage ratio of 1.23, resulting in the announcement today of a dividend increase of 25.7% to CA 11.0¢ per share."

Significant Items of the Second Quarter of Fiscal 2022

  • As the COVID-19 pandemic had a significant impact on our prior year financial results, looking at gross profit1 on a 2-year basis provides additional insight given the volatility in the various key measures of our business. Excluding the disposal of CAPL and the acquisition of Circle K Hong Kong, merchandise and service, as well as road transportation fuel gross profit1, are higher by 9.8% and 17.9%, respectively, compared with the pre-pandemic second quarter of fiscal 2020.

  • On April 21, 2021, the Toronto Stock Exchange approved the implementation of a share repurchase program, which took effect on April 26, 2021. The program allows us to repurchase up to 4.0% of the public float of our Class B subordinate voting shares. During the second quarter and first half-year of fiscal 2022, we repurchased 6,351,895 and 14,822,895 Class B subordinate voting shares, respectively. These repurchases were settled for amounts of $238.5 million and $537.7 million, respectively. During the first half-year of fiscal 2022, 6,351,895 Class B subordinate voting shares were repurchased, for an amount of $238.5 million, from a related party. In addition, subsequent to the end of the second quarter of fiscal 2022, we repurchased 1,294,700 Class B subordinate voting shares for an amount of $50.0 million.

Changes in our Network during the Second Quarter of Fiscal 2022

  • We acquired 36 company-operated stores, including the acquisition of 35 stores operating under the Porter's brand and located in the United States. We settled these transactions using our available cash and existing credit facilities.

  • On July 30, 2021, we entered into a binding agreement in connection with the acquisition of Cape D'Or Holdings Limited, Barrington Terminals Limited and other related holding entities, which operate an independent convenience store and fuel network in Atlantic Canada under the Esso, Go! Store and Wilsons Gas Stops brands ("Wilsons"). The Wilsons network comprises 79 company-operated convenience retail and fuel locations, 147 dealer locations, and a fuel terminal in Halifax, Canada. The transaction is expected to close in the first half of calendar year 2022 and is subject to customary closing conditions and regulatory approvals, including those under the Competition Act (Canada).

  • On September 9, 2021, we entered into a binding agreement to acquire 10 company-operated stores, operating under the Londis brand and located in Ireland. The transaction is expected to close in the third quarter of fiscal 2022.

  • On March 22, 2021, we announced our intention to sell certain sites across 28 states in the United States and 6 provinces in Canada. The decision to dispose of these sites was based on the outcome of a strategic review of our network. As at October 10, 2021, 261 sites in the United States and 36 sites in Canada met the criteria for classification as held for sale, including 210 sites already subject to multiple sales agreements with various buyers.

  • We completed the construction of 7 stores and the relocation or reconstruction of 3 stores, reaching a total of 40 stores since the beginning of fiscal 2022. As of October 10, 2021, another 77 stores were under construction and should open in the upcoming quarters.

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1 Please refer to the section "Non-IFRS Measures" for additional information on performance measures not defined by IFRS.

Summary of changes in our store network

The following table presents certain information regarding changes in our store network over the 12–week period ended October 10, 2021:

 

12week period ended October 10, 2021

Type of site

Company- 

operated

CODO

DODO

Franchised and 
other affiliated

Total

Number of sites, beginning of period

9,906

397

689

1,263

12,255

Acquisitions

36

36

Openings / constructions / additions

7

3

9

11

30

Closures / disposals / withdrawals

(33)

(1)

(5)

(12)

(51)

Store conversion

9

(7)

(2)

Number of sites, end of period

9,925

392

691

1,262

12,270

Circle K branded sites under licensing agreements

       

1,917

Total network

       

14,187

Number of automated fuel stations included in the period-end figures

979

9

988

Exchange Rate Data

We use the US dollar as our reporting currency, which provides more relevant information given the predominance of our operations in the United States.

The following table sets forth information about exchange rates based upon closing rates expressed as US dollars per comparative currency unit:

 

12week periods ended

 24week periods ended

 

October 10, 2021

October 11, 2020

October 10, 2021

October 11, 2020

Average for the period

       

Canadian dollar

0.7923

0.7541

0.8045

0.7416

Norwegian krone

0.1142

0.1101

0.1165

0.1064

Swedish krone

0.1154

0.1136

0.1171

0.1097

Danish krone

0.1581

0.1582

0.1600

0.1538

Zloty

0.2572

0.2653

0.2617

0.2568

Euro

1.1758

1.1777

1.1901

1.1453

Ruble

0.0137

0.0134

0.0136

0.0137

Hong Kong dollar

0.1285

0.1287

         

Summary Analysis of Consolidated Results for the Second Quarter and First Half-year of Fiscal 2022

The following table highlights certain information regarding our operations for the 12 and 24–week periods ended October 10, 2021 and October 11, 2020Europe and other regions include the results from our operations in Asia.

 

12-week periods ended

24-week periods ended

(in millions of US dollars, unless otherwise stated)

October 10,
2021

October 11,
2020

Variation
%

October 10,
2021

October 11,
2020

Variation
%

Statement of Operations Data:

           

Merchandise and service revenues(1):

           

United States

2,754.0

2,736.4

0.6

5,583.4

5,587.8

(0.1)

Europe and other regions

580.4

394.6

47.1

1,141.8

737.8

54.8

Canada

644.5

629.8

2.3

1,321.7

1,293.0

2.2

Total merchandise and service revenues

3,978.9

3,760.8

5.8

8,046.9

7,618.6

5.6

Road transportation fuel revenues:

           

United States

6,654.8

4,438.3

49.9

13,118.5

8,344.3

57.2

Europe and other regions

2,154.9

1,496.2

44.0

3,948.5

2,678.6

47.4

Canada

1,267.7

875.7

44.8

2,405.6

1,552.7

54.9

Total road transportation fuel revenues

10,077.4

6,810.2

48.0

19,472.6

12,575.6

54.8

Other revenues(2):

           

United States

11.4

9.5

20.0

22.2

17.0

30.6

Europe and other regions

147.6

69.5

112.4

247.6

144.7

71.1

Canada

4.4

5.4

(18.5)

9.3

9.3

Total other revenues

163.4

84.4

93.6

279.1

171.0

63.2

Total revenues

14,219.7

10,655.4

33.5

27,798.6

20,365.2

36.5

Merchandise and service gross profit(1)(3)(4):

           

United States

932.1

920.3

1.3

1,899.8

1,897.1

0.1

Europe and other regions

222.8

158.6

40.5

438.2

297.8

47.1

Canada

208.3

200.7

3.8

427.3

407.0

5.0

Total merchandise and service gross profit

1,363.2

1,279.6

6.5

2,765.3

2,601.9

6.3

Road transportation fuel gross profit(3)(4):

           

United States

791.7

759.7

4.2

1,596.5

1,565.5

2.0

Europe and other regions

278.0

283.2

(1.8)

524.7

519.7

1.0

Canada

115.7

97.3

18.9

223.7

179.0

25.0

Total road transportation fuel gross profit

1,185.4

1,140.2

4.0

2,344.9

2,264.2

3.6

Other revenues gross profit(2)(4):

           

United States

11.4

9.5

20.0

22.2

17.0

30.6

Europe and other regions

23.8

27.4

(13.1)

46.5

58.3

(20.2)

Canada

4.4

5.4

(18.5)

9.3

9.3

Total other revenues gross profit

39.6

42.3

(6.4)

78.0

84.6

(7.8)

Total gross profit(3)(4)

2,588.2

2,462.1

5.1

5,188.2

4,950.7

4.8

Operating, selling, administrative and general expenses(3)

 

1,321.3

 

1,171.1

 

12.8

 

2,599.4

 

2,319.7

 

12.1

Loss (gain) on disposal of property and equipment and

           

other assets

3.2

(35.1)

(109.1)

(34.1)

(43.9)

(22.3)

Depreciation, amortization and impairment

325.7

305.8

6.5

640.0

595.3

7.5

Operating income

938.0

1,020.3

(8.1)

1,982.9

2,079.6

(4.6)

Net financial expenses

67.3

77.2

(12.8)

141.6

165.2

(14.3)

Net earnings

694.8

757.0

(8.2)

1,459.2

1,534.1

(4.9)

Per Share Data:

           

Basic net earnings per share (dollars per share)

0.65

0.68

(4.4)

1.36

1.38

(1.4)

Diluted net earnings per share (dollars per share)

0.65

0.68

(4.4)

1.36

1.38

(1.4)

Adjusted diluted net earnings per share (dollars per share)(4)

 

0.65

 

0.66

 

(1.5)

 

1.35

 

1.37

 

(1.5)

<
 

12week periods ended 

24week periods ended

(in millions of US dollars, unless otherwise stated)

October 10,
2021

October 11,
2020

Variation
%

October 10,
2021

October 11,
2020

Variation
%

Other Operating Data:

           

Merchandise and service gross margin(1)(3):

           

Consolidated

34.3%

34.0%

0.3

34.4%

34.2%

0.2

United States

33.8%

33.6%

0.2

34.0%

34.0%

Europe and other regions

38.4%

40.2%

(1.8)

38.4%

40.4%

(2.0)

Canada