Circle K Owner Blames Challenging Economic Conditions for Steep Profit Drop

The owner of the Circle K chain of convenience stores and gas stations, Alimentation Couche-Tard, missed the estimated profits since the consumers are spending less, Bloomberg reported following the last quarter that ended on February 4. 

Drop in sales and shares 

Circle K, a Canada-owned business, recorded a 2.2% sales drop in the last quarter, which concluded on February 4. Additionally, shares went below the predicted 84 cents to 65 cents. 

People are spending less

Chief Executive Officer Brian Hannasch said the drop in profit is due to obstacles that delay growth, especially in the US. He added that many customers still face challenging economic conditions. The company operates almost 7,000 Circle K convenience stores, Holiday Stationstores, and Mac’s Convenience Stores. 

Third-quarter financials

Couche-Tard reported net earnings of $623.4 million for the third quarter of fiscal 2024, compared with $737.4 million for the third quarter of fiscal 2023. Earnings before interest, taxes, depreciation, and amortization (EBITDA) were at $1.5 billion, a decline of $21.4 million, or 1.4%, compared with the same quarter of fiscal 2023.

The first drop in over a decade 

Stifel Financial analyst Martin Landry told Bloomberg that the company hasn’t suffered such losses in a decade, adding that 7-Eleven’s was far worse. This leads to the conclusion that there are weaknesses all across the industry. 

February reversed progress 

The Bureau of Labor Statistics confirmed that consumer prices rose 3.2% in February compared to last year. This was higher than predicted, though a dramatic drop from 9%, the inflation peak. Food prices were up 2.2% compared to February 2023, though many prices dropped while others significantly increased.

Confusing food prices 

The price of beef has risen 7.4% over the past year, and the cost of crackers has jumped 4.9%. For example, rice, bacon, chicken, and fish are now cheaper. Biscuit and muffin prices have risen just 1.1% over the past year, while bread prices have risen 1.5%.

Couche-Tard is ready for more mergers and acquisitions in the US 

Despite the latest quarter, the company will continue working in the US because it is likely the best market for its synergies, Brian Hannasch, president, and CEO of Alimentation Couche-Tard, said in March. He added that the company is already looking into future potential operations. 

Making progress is on the five-year plan 

Hannasch noted that the company is progressing on its five-year goal, with 27 company-operated stores purchased through various transactions since the beginning of fiscal 2024. He added that the company is on track to open about 100 in North America this fiscal year.

Four new countries entered Couche-Tard

Hannasch says that in January, the company closed on acquiring certain European retail assets from TotalEnergies, bringing four new countries into Couche-Tard’s network with 2,175 additional stores.

Uncertain outlook 

Fed Chair Jerome Powell told Congress members that an inflation rate of 2% is not assured while adding that the economic outlook is uncertain. The Fed’s next meeting is scheduled from April 30 to May 1. 

Overall price increase 

Prices increased nearly 0.4% last month, primarily due to indexes for shelter and gasoline, which contributed more than 60% of the advance. The national average for a gallon of standard gas is $3.53, up from the month-ago average of $3.27.

Positive news 

However, the S&P 500, the index that most people’s 401(k) track, reached a record in the first week of March. The S&P 500 has skyrocketed 27% in the last five months.

+ posts

Leave a Comment