Circle K owner misses estimates on lower fuel prices, demand
[TORONTO] Circle K owner Alimentation Couche-Tard slightly missed earnings estimates for its fiscal fourth quarter earnings because of lower fuel demand.
The Canadian convenience store and fuel retailer earned 46 US cents per share on an adjusted basis, according to a statement on Wednesday (Jun 25), a penny short of the 47 US cents estimated by analysts in a Bloomberg survey.
Revenue in the quarter was US$16.3 billion, down 7.5 per cent from last year, mainly due to lower fuel prices and weaker gas demand in the US. However, the fuel business maintained its market share in the country, the company said.
'In the face of difficult economic and geopolitical conditions, we held the line in same-store sales in the United States and had strong positive results in Canada and Europe,' chief executive officer Alex Miller said.
Same-store merchandise revenues fell by 0.4 per cent in the US, Couche-Tard's most important market, but grew by 3.5 per cent in Canada and by 3.4 per cent in Europe and other regions.
Same-store fuel volumes were down by 1.9 per cent in the US and 0.6 per cent in Europe, but Canada saw a 3.7 per cent increase.
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It's the first earnings report for Couche-Tard since it signed a non-disclosure agreement with Japanese competitor Seven & i Holdings, which it has been pursuing. Couche-Tard has offered about US$50 billion but has not been able to win over the board of the company that owns 7-Eleven, Speedway and other chains. If successful, it would be the largest foreign acquisition of a Japanese company in history.
The earnings statement did not say anything about the Seven & i deal.
Earlier this month, Couche-Tard expressed optimism about the prospects for a deal after it received proposals from buyers interested in acquiring more than 2,000 US convenience stores. The company would need to divest those stores, if it's able to take over Seven & i, to assuage US Federal Trade Commission antitrust concerns.
Couche-Tard shares are down 14 per cent this year and have underperformed the Canadian stocks benchmark as investors contemplate the potential deal while also weighing evidence of reduced consumer activity.
'The US convenience store industry does not appear to have turned the corner,' Stifel Financial analyst Martin Landry said in a report last month in which he trimmed his price target on the shares to C$84. A stronger Canadian dollar is also a headwind for earnings, Landry said.
JP Morgan Chase analyst John M Royall also cut his price target to C$84 recently, similarly citing the appreciation of the loonie. Couche-Tard shares closed at C$68.81 in Toronto on Wednesday. BLOOMBERG
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