Alimentation Couche-Tard considers mergers and acquisitions amid management shake-up and economic difficulties

Canada’s largest convenience store chain may soon expand again.

Alimentation Couche-Tard Inc. said Wednesday that it has several potential acquisitions on its radar.

“We’ve had quite a few deals come across our desk over the last few months,” President and CEO Brian Hannasch told analysts during a conference call to discuss the company’s latest results.

Potential deals span both Europe and North America and range in size from “nice raises” to acquisitions almost as large as the company’s recent purchase of European retail assets from French oil giant TotalEnergys SE for €3.1 billion.

“We will remain disciplined. We are committed to this,” Hannasch said, noting that the company cannot guarantee that any deals will come to fruition. “However, we would like to think that we will be able to create some opportunities in the coming quarters.”

The focus on acquisitions comes as the Quebec-based chain behind the Couche-Tard and Circle K banners prepares for only its second CEO change in its nearly 45-year history and battles an economic landscape in which customers are cash-strapped and less likely to spend.

On Wednesday, the company said Hannasch, who has been with the company for 10 years, will retire on September 6.

Once Chief Operating Officer Alex Miller takes over the top job, Hannasch will become a special advisor to his successor and chairman of the company’s board of directors, tasked with helping with mergers and acquisitions.

The news about Hannasch’s future came the same day the company held a call to discuss fourth-quarter results with analysts.

In the period ended April 28, the chain’s net profit attributable to shareholders fell to $453 million from $670.7 million a year earlier.

RBC Capital Markets analyst Irene Nattel called the results “not a quarter for the history books” but said it was a “better result” than the company reported in the previous quarter.

Couche-Tard blamed the results on lower gross margins on fuel (the quarter was a week shorter than last year) and expenses and depreciation related to investments and acquisitions, but said the period was also marked by economic difficulties.

“It was undoubtedly another challenging quarter with persistent inflation and continued pressure on consumers to closely monitor their spending,” Hannasch said.

When it comes to fuel, he noticed that customers were purchasing smaller quantities per visit.

There is a tendency in stores to focus on private label products, with customers moving from premium to lower brands in categories such as alcohol.

Cigarette sales are also “a problem,” he said.

“As prices have risen, consumers have become more restrictive and the percentage of people buying from illegal channels has been steadily increasing, which is a serious problem that needs to be tackled,” he said.

“It will still be a bit of an issue for us in Canada.”

These factors have already hampered operations, causing same-store revenue to decline by 0.5% in the U.S., 2% in Europe and 3.4% in Canada in the last quarter alone.

These results caused the company’s share price to decline by approximately two percent, or $1.65, to $77.85 shortly after markets opened on Wednesday.

However, Hannasch was still optimistic about the business’s growth.

He noted that he is working on expanding the loyalty program, improving employee training and introducing promotions in the beverage category, which in his opinion is the main reason for visiting the chain’s stores.

“We feel good – regardless of the weather – that summer will be good for us,” he said.

This report by The Canadian Press was first published June 26, 2024.

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Tara Deschamps, Canadian Press