Closing out the retailer’s fiscal year, Couche-Tard reported a 3.7% decline in revenue, amounting to $13.11 billion, compared to the same period prior year. Couche-Tard’s net income has decreased 25% to $293.1 million and is attributed to investment in strategic initiatives as well as decreased fuel sales in the U.S., Europe and Canada. Fuel revenue for the retailer dropped by 4.3% to $9.58 billion. In America, Couche-Tard witnessed stagnant fuel volume growth due to supplier shortages in Texas and Arizona. In Europe, same-store fuel volume was down by 1.8% due to increased competition in Baltics and unfavorable weather in Scandinavia. In Canada, fuel volume decreased by 1.8% with the retailer looking to recoup sales by volume through its new loyalty program at its Esso banner locations.
Merchandise and service revenue however, saw an increase of 2.4%, to $3.32 billion, as the convenience player continues to invest in its store base beyond the pump through its global rebanner efforts. In the U.S. same-store merchandise sales were up 3.4%, in Canada up by 4.2%, and in Europe up by 4.7%. Positive gains in categories such as tobacco, food and beverage as well as the retailer’s loyalty program and use of promotional mechanics, are believed to be key drivers in boosting traffic in-store. Couche-Tard continues to leverage its global rebanner by transitioning its stores to the Circle-K banner.
Couche-Tard continues to invest four key strategic initiatives to foster growth in its global convenience network:
Global Rebanner: With its European business units nearing rebanner completion under the unified Circle-K banner, Couche-Tard is aggressively working on its stores in North America. The retailer has completed 98% of acquired store rebanners in the Rocky Mountains and 550 of acquired store rebanners in Texas. The Texas business unit is expected to complete store rebanner efforts by 2020. Couche-Tard looks to leverage a single retail banner to expand branded promotional campaigns as well as strengthen the distribution of its private label inventory at an international scale.
CST and Holiday Brands Acquisition: Since its acquisition in 2017, same-store growth of CST brand stores has remained strong. Acquired CST stores reached a three-year same-store sales target of $215 million in just two years. As for Holiday, Couche-Tard is integrating popular Holiday branded products like private label jerky and crispy treats across its other U.S. convenience stores working to drive synergy across its larger convenience network. The company is also experimenting with Holiday’s food-only and grab-and-go concepts in its other U.S. convenience store locations.
New Category Development: Couche-Tard continues to look at the integration of low-investment, high-return in-store categories, including a fresh coffee initiative called Simply Great Coffee that has seen a strong trajectory of success. The retailer’s Coffee on Demand Program has experienced double digit growth and is in now over 2,600 stores in the U.S. Cold brew selections offered through the program have proved to be a strong performing and are popular in Canadian markets. The energy category has also seen sustained sales growth due to its inclusion in national advertising campaigns and innovative merchandising strategies across the store base. Couche-Tard is investing in its prepared food offerings, having successfully implemented a unique roller grill offering that is exceeding sales targets in its U.S. convenience stores. Newly designed convenience stores in Europe, have introduced freshly prepared sandwiches which are the retailer’s fastest growing food category in European markets. Couche-Tard is also working towards the go-live of a six-market fresh food test across it’s U.S. store base.
Loyalty Programs: Couche-Tard is counting on its loyalty programs to drive repeat business and offer personalized savings for customers. Tobacco, including alternative tobacco (e.g., smokeless and vapor products) is another major category that is boosting basket size and customer engagement for the retailer. In addition to its tobacco club, the retailer has introduced loyalty clubs that include beverage and snacking categories. Couche-Tard notes that tobacco sales positively drive traffic and sales in adjacent categories. With the convenience player looking to capture these impulse purchase sales through its loyalty and upsell platforms. In the U.S. Couche-Tard currently has loyalty programs live in over 5,700 locations with over 7 million unique loyalty program members. The retailer is also working to mitigate decreasing fuel sales through a fuel loyalty program at its Esso locations in Canada.
For more information, please contact:
Catherine Lang, Analyst