Yahoo Finance Couche-Tard stock falls as CEO warns of 'belt-tightening' shoppers
Alimentation Couche-Tard (ATD.TO) shares fell on Wednesday as the gas station and convenience store giant warned that cash-strapped consumers are tightening their belts.
The Toronto-listed stock lost 2.65 per cent to $76.66 as at 10:50 a.m. ET on Wednesday, after falling more than five per cent earlier in the session.
The Quebec-based company behind retail brands like Circle K and Couche-Tard stores reported second-quarter financial results after the closing bell on Tuesday.
Strong fuel margins helped the company top analyst expectations. Meanwhile, Couche-Tard blames “lower consumer disposable income, as well as the continued softness of our cigarette revenues” partly for weaker in-store sales.
The company says total merchandise and service revenues climbed one per cent year-over-year to US$4.1 billion for the three months ended Oct. 15. Second-quarter same-store merchandise sales slipped 0.1 per cent in the U.S. and 0.2 per cent in Europe, but rose 1.6 per cent in Canada.
“We never said we’re recession proof, but recession resistant,” CEO Brian Hannasch told analysts on a conference call Wednesday morning. “I think we’ve got to admit there’s been some belt-tightening.”
With more than 14,000 stores in 25 countries and territories, Couche-Tard is on the front line of consumer behaviour when it comes to food and fuel. Hannasch says shoppers have been “trading down” to less expensive brands of tobacco and beer, while gravitating to more budget-friendly private label food products.
“We’re seeing pressure on the premium cigarette category,” he said. “Private label continues to grow. Canada was up 30 per cent for the quarter year-over-year.”
RBC Capital Markets analyst Irene Nattel says Couche-Tard's second-quarter results are a "good start" towards its goal of boosting earnings before interest, taxes, depreciation and amortization to US$10 billion by fiscal 2028, up from US$5.8 billion this year.
"[Second-quarter] results were strong and better than expected, with forecourt and backcourt margins solid," she wrote in a note to clients on Wednesday. "But same-store sales [were] mixed across regions as consumer spending slows."
Nattel maintains an "outperform" rating on Toronto-listed Couche-Tard shares with a $94 price target.
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.
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