Couche-Tard Q3: five platforms for growth

Stewart Samuel
Program Director - Canada

Date : 19 March 2020

We review Couche-Tard’s third quarter performance and the range of growth initiatives which underpinned its strong set of results.

Key numbers

  • Total merchandise and service revenues up 2.6% to $4.3bn
  • Same-store sales up 4.2% in Canada, 3.0% in the US and 2.1% in Europe
  • Operating income up 4.0% to $868.5m
  • Net earnings up 7.8% to $659.9m

Optimising the Circle K brand

This was another strong quarter from Couche-Tard as it continued to benefit from a range of strategic growth initiatives. Combined, these are enabling the retailer to drive sales and profit growth as it builds a unified, global presence. These include the roll-out of the Circle K brand, with more than 6,250 stores converted. The retailer has also extended the Circle K fuel brand to more than 2,300 sites in North America, reached a milestone with 400 fast EV chargers in Norway and the launch of the first Circle K branded EV chargers in Sweden and Ireland.

Expanding hot and cold beverages

Earlier this year, Couche Tard launched a national media campaign in the US to support the roll-out of its bean-to-cup coffee programme, with around 13,500 machines installed across the network. The focus has been to drive incremental trial. In cold beverages, its Froster programme has been successfully introduced into Europe, mainly Ireland. Plans are in place to expand it to most of the region by the end of the fiscal year.

Loyalty and up-selling

The retailer is also making progress with the roll-out of its Easy Pay fuel discount initiative in the US, the expansion of its Lift up-sell tool across the Holiday Stationstores network and the roll-out of the Smart Value basket-building promotional programme. This is another programme that has been taken from the Holiday business, highlighting how valuable this acquisition has been to the wider company.

Source: IGD Research

Food at scale

Following several tests, the retailer is rolling-out its food at scale pilot. It has been introduced to around 100 stores, comprised of different format types to help the retailer understand how it can be made to work across the network. It plans to extend the programme to 1,500 stores by the fall, adding almost 12 stores per week.

Caltex acquisition

Last November, the retailer made a bid to acquire Caltex, a leading operator of gas stations in Australia, as part of its focus on developing its Asia-Pacific presence. In mid-February, Couche Tard made a revised bid for the company. Although a competing bid has emerged, Couche Tard is actively engaged in due diligence work.

Cost optimisation effort

Alongside the growth initiatives, several work streams are up and running focused on cost optimisation. These include looking at global procurement opportunities, construction, IT and marketing services synergies. It has also deployed a new labour model and scheduling tool across its US network. The retailer is also examining automation opportunities and how AI could be used to reduce the number of tasks undertaken at store level.

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