U.S. store expansion hits Couche-Tard sales, stock

U.S. consumers sparked a shopping spree for Alimentation Couche-Tard Inc. in recent years as the Canadian convenience store giant scooped up rivals south of the border. Now that expansion is slowing its growth.

Shares of the Laval, Que.-based owner of Circle K fell 6.5 per cent, the biggest intraday decrease in two years, after it reported anemic same-store sales and a drop in fuel volume and margins in the U.S. Adjusted earnings fell short of the lowest analyst estimate for the quarter ended Feb. 4.

Same-store merchandise revenue, excluding the recently acquired Holiday Stationstores Inc., rose 0.1 per cent in the U.S., Couche-Tard’s biggest market, compared with 1.9 per cent a year ago. Same-store road transportation fuel volume slipped 0.4 per cent, with the volatile fuel margins dropping 2.67 cents per gallon, the company said in a statement.

The US$550 billion convenience store industry in the U.S. is getting squeezed by competition. Fastfood restaurants and supermarkets are slugging it out in price wars, while dollar stores keep popping up. Couche-Tard, which has blamed weak real-wage growth for the struggles of its lower-income customers in the past, is also being held back by CST Brands Inc., the gas-station company it bought for almost US$4 billion last year.

The tepid U.S. same-store sales and gas volumes, and margins was the biggest surprise in the quarter, Irene Nattel, an analyst at RBC Capital Markets, wrote in a note.

Couche-Tard said same-store sales at CST, while down one per cent, are improving. It said fuel volumes fell in Texas as stores recovered from hurricane Harvey.

The shares closed at $59.60 in Toronto, down 6.45 per cent on the day, after earlier dropping the most in almost a decade. The stock has slipped nine per cent this year.

Earnings excluding some items rose 1.9 per cent to 54 cents a shares. Analysts’ average estimate was 74 cents. Among excluded items was a net tax benefit of $196.3 million in the U.S. Revenue for the 16-week period ended Feb. 4 totalled $15.79 billion, up from $11.42 billion.

President and CEO Brian Hannasch said its network in Europe, Canada and the acquired CST Brands sites experienced improving trends from higher same-store fuel volumes, merchandise revenues and in-store gross margins.