The rising cost of living is stifling smokers who shop at Alimentation Couche-Tard convenience stores. The difficulties of the tobacco industry are eating into the sales of its convenience stores in the United States.
Comparable sales at its U.S. convenience stores fell 0.1% in the second quarter ended Oct. 15. “The brake really came from tobacco,” said President and CEO Brian Hannasch during a conference call on Wednesday. If you take out that segment, our sales would have been in positive territory for the quarter. »
Tobacco consumption is declining in the United States. The cost of living crisis is increasing pressure on the income generated by this segment, as smokers adjust their consumption accordingly by choosing entry-level products or turning to illicit trade.
Tobacco products helped Couche-Tard generate sales of US$6.39 billion across all regions where the company operates, during the 2023 financial year ended April 25. Last year, this figure was US6.48 billion.
The retailer also reported that fuel volumes sold fell slightly in Europe and the United States, but increased 3% in Canada while fuel margins improved in all three regions.
Mr. Hannasch pointed out that fuel prices have fallen in recent weeks. “We have seen an improvement in volumes. The context has been more favorable in recent weeks. »
RBC Capital Markets analyst Irene Nattel points out that normalized operating expenses rose only 1.5%, well below inflation. “Their exceptional ability to control costs is part of their DNA and is on full display this quarter. »
Despite these headwinds, Couche-Tard increased its net profit from US810.4 million to US819.2 million. Adjusted diluted earnings per share were 82 US cents. Revenues, for their part, fell by 2.7% to US16.4 billion.
Before the results were released, analysts expected earnings per share of 79 US cents and revenue of 16.4 billion US dollars, according to financial data firm Refinitiv.
Chris Li, of Desjardins Capital Markets, is not surprised to see the company’s stock decline on the stock market, even if the results are better than analysts’ expectations. He says investors’ attention is focused on declining comparable sales at convenience stores.
“We believe this weakness will persist over the medium term, but we believe the headwinds are temporary. We maintain our optimistic long-term view due to the numerous growth opportunities over the next five years. »
Couche-Tard shares were down $3.06, or 3.89%, at $75.69 on the Toronto Stock Exchange around midday.
