Canadian convenience-store operator Alimentation Couche-Tard Inc. says it’s actively examining more acquisitions as potential targets get cheaper.
(Bloomberg) — Canadian convenience-store operator Alimentation Couche-Tard Inc. says it’s actively examining more acquisitions as potential targets get cheaper.
The owner of the Circle K chain recently announced the purchase of almost 2,200 gasoline stations in Europe from TotalEnergies SE for €3.1 billion ($3.4 billion). It also bought a car-wash business and a package of 112 fuel and convenience stores in the southeastern US. But the company still has plenty of financial strength, and management believes it can put together a number of new deals, Chief Executive Officer Brian Hannasch said.
“We’re excited in recent months by the progress in a more positive environment for M&A after many years of inflated multiples,” he told analysts Wednesday. “Our hypothesis is that the competition has to be less than it was a year ago. High-yield money is largely on the sideline. Private equity should be largely on the sideline. And we’re in great shape.”
The company, based in the Montreal suburb of Laval, Quebec, reported profit of $698 million on an adjusted basis in the fourth quarter ended April 30, up 22% from the previous year and beating analysts’ estimates compiled by Bloomberg. On a per-share basis, earnings were up 29%.
What Bloomberg Intelligence Says
Adjusted Ebitda margin expanded 120 bps during the quarter on a resiliently strong fuel gross margin across the regions and a favorable product mix. With spending trends normalizing, we calculate that a slight deceleration in fuel gross margin could weigh on profitability and narrow the metric by as much as 30 bps for the year.
-Bloomberg Intelligence consumer staples analysts Diana Rosero-Pena and Jennifer Bartashus
Shares of Alimentation Couche-Tard rose 2.9% to C$67.26 at 12:22 p.m. Toronto time, and are up 13% this year, giving the company a market value of C$66 billion.
Many retailers have been left out of this year’s technology-led stock market rally, with the S&P 500 Food & Staples Retailing index up about 4% this year. About half of Couche-Tard’s gross profit comes from food and in-store items, and the other half from fuel, and it even considered buying a supermarket chain.
During the quarter, the company saw a 0.8% increase in fuel volumes in the US and 6% in Canada on a same-store basis, helped by lower prices and pent-up demand for travel. That was in contrast to Europe and other regions, where the company had a 2.4% decrease.
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