Slumping gas sales hurt Couche-Tard's Q1

Americans driving less and everything costing more crunched profits at Alimentation Couche-Tard Inc. in its fiscal first quarter, the company said Tuesday.

Couche-Tard, which runs convenience stores in Canada and the United States, posted net earnings of $47.2 million for the three months ended July 20. That translated into a profit of 24 cents a share.

But those figures represent a drop of 21 per cent compared with earnings of $69.1 million, or 33 cents a share, for the same period a year earlier.

The problem, the company said, was it sold less gasoline south of the border.

U.S. gasoline sales provided 60 per cent of Couche-Tard's revenues.(Canadian Press)

"Once again, numerous obstacles stood before us, the most important being the economic slowdown and the sharp increase of motor fuel retail prices. They negatively affected our volumes, as well as our margins," said Alain Bouchard, Couche-Tard's chairman and CEO.

The slumping profit picture negated a nice 21 per cent jump in quarterly revenues. The Laval, Que.-based company posted sales of $4.3 billion for the three months, up $745 million compared with the same time last year.

Although Couche-Tard operates more than 5,000 convenience stores, it derived 60 per cent of its total revenue in the period from gasoline sales south of the border.

Overall gas sales topped $3 billion in the period, a jump of 30 per cent compared with last year. Much of that sales increase, however, came from higher prices or new sales outlets. On a same-store basis, fuel sales slipped 4.5 per cent.

Three-month TSX chart for Alimentation Couche-Tard

As a result, Couche-Tard's gross motor fuel profit fell by almost four per cent to $122.7 million.

On the merchandising side of its business, Couche-Tard had revenue of $1.3 billion, up three per cent, compared to the same fiscal quarter in 2008.

Couche-Tard also faced higher costs in the period, up 7.4 per cent, deriving mainly from rising prices for its goods and the implementation of an electronic payments system within the chain.

Besides weaker gasoline sales, Couche-Tard also absorbed an $8-million one-time tax charge related to an earlier merger, the equivalent of four cents a share.

In the past four months, the company added 85 new stores in the U.S. Midwest and plans to buy another 200-300 throughout North America in the remainder of the fiscal year.

Interestingly, Couche-Tard did not appear to find donuts and Canadians a winning combination. The company said it was terminating a master franchise agreement in Quebec with U.S.-based baker Dunkin Donuts over the next 12 to 18 months.

Couche-Tard said the move will not affect its profitability and the company will continue to operate 22 Dunkin Donuts stores in the province.

In related news, Couche-Tard said it is reshuffling the chairs in its executive suite.

Richard Fortin will step down as chief financial officer to become company chairman in October.

Bouchard relinquishes his chairman role but will stay on as president and CEO.

In addition, company executive Raymond Paré will become Couche-Tard's new CFO.

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