Couche Tard optimistic about loyalty program despite drop in same store sales
The Quebec-based convenience store and gas station operator said the switch between Aeroplan and PC Optimum left a two month gap that affected sales
TORONTO—Alimentation Couche-Tard Inc. says it’s too early to tell what long-term impact dumping the embattled Aeroplan loyalty program at its Esso branded convenience stores will have, but the time it took for the brand to switch to the PC Optimum program has already hampered sales.
The Quebec-based retailer behind Circle K stores said in an earnings call on Thursday that it only ended the Aeroplan program on May 31 and PC Optimum wasn’t implemented until August, so the company has had little time to see how the gap will change consumer habits.
“We are pretty optimistic,” said the company’s chief financial officer Claude Tessier. “We know generally that loyalty programs have a positive impact on sales.”
However, the company’s earnings show the two-month gap between switching to PC Optimum hurt the brand, at least a little.
Couche-Tard said the gap contributed to a 3.3 per cent decrease in same-store road transportation fuel volumes in its first quarter, which ended July 22.
Still, overall fuel volumes in Canada were up 10.5 per cent, while global volumes increased 32 per cent, as fuel revenues rose to US$10.9 billion from $6.8 billion a year earlier.
During the quarter, Couche-Tard, which reports in U.S. dollars, saw a 25 per cent spike in net income attributable to shareholders to $455.5 million from $364.7 million a year earlier.
Revenues grew to $14.8 billion from $9.84 billion the year before.
The company said its adjusted profit excluding one-time items was $498 million or 88 cents per diluted share, compared with $381 million or 67 per cents per share in the first quarter of 2018.
Couche-Tard was expected to earn 82 cents per share in adjusted profits on $13.9 billion in revenues according to analysts polled by Thomson Reuters Eikon.
Executives attributed the quarter’s strength to a 6.6 per cent increase in same-store merchandise revenue in Canada, a strong performance of its CST Canada sites acquired a year ago, higher taxes on cigarettes and other tobacco products, and an expansion of its coffee pilot loyalty program.
Couche-Tard President Brian Hannasch said the company also saw “significant” growth in tobacco products in the quarter in the U.S., especially in-house tobacco brands, vapour, powdered tobacco placed inside the upper lip and cigars.
“Some of this is attributable to manufacturing innovation…but it’s also reflective of our merchandising, the speed at which we’ve been activating new offers and emerging brands, and how we are presenting these offers to our consumers at our stores,” he told analysts.
He said the company’s earnings were also lifted by the brand’s food offerings in Canada, which include its baked-on-site products and hot dogs.
In Europe, the company’s ice coffee offering that is being tested in multiple locations was seeing “good customer acceptance so far” and was being aided by a hot summer, he said.
Keith Howlett of Desjardins Capital Markets said the results beat analyst expectations largely because of higher U.S. fuel margins.
“Couche-Tard’s same-store sales performance was substantially superior to that of U.S. peers,” he wrote in a report.
On the Toronto Stock Exchange, Couche-Tard’s shares gained 5.26 per cent or $3.32 at C$66.47 in midday trading.