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LAVAL, Quebec -- Despite acquiring 47 U.S. convenience stores in its 2014 fiscal second quarter, Alimentation Couche-Tard Inc.'s balance sheet is in an excellent position and the convenience store retailer will aggressively pursue more acquisitions, President and CEO Alain Bouchard said during today's earnings conference call.
However, the CEO seemingly refuted recent Canadian media reports that the parent company to Circle K stores is heavily considering buying Hess Corp.'s 1,700-plus convenience store and gas station network, which is currently for sale.
"There is a moderate acquisition environment, driven by low interest rates," reported Bouchard. "But we are not looking at anything big. We are looking at smaller acquisitions."
Bouchard noted that he could not talk about any specific opportunities and hence, never discussed Hess during the call. He did, however, add that Couche-Tard is talking to major oil companies regarding acquisitions, but these talks are focused on c-stores in countries adjacent to nations in which it already operates.
As for its U.S. convenience store operations, Couche-Tard reported strong results across the board. Same-store merchandise revenues rose 4.5 percent for the 12-week period ended Oct. 13. Merchandise and service gross margin stood, year over year, at 32.8 percent.
Company management was especially pleased with its gross margin percentage, as Couche-Tard implemented an aggressive pricing strategy during its fiscal second quarter in an effort to increase in-store traffic.
"The pricing strategy helped us gain momentum in terms of transaction count," said Chief Financial Officer Raymond Paré, who noted that foodservice was also a major boon to in-store sales.
On the fuel side, U.S. same-store transportation volume increased 1.7 percent in Couche-Tard's latest quarter. Fuel gross margins stood at 21.56 cents per gallon.
Companywide, Couche-Tard posted a net profit of $229.8 million in its 2014 second quarter, a 26.8 percent year-over-year increase. The Statoil Fuel & Retail ASA c-store chain the company previously acquired in Europe has been performing up to expectations, which helped Couche-Tard's latest quarter, said Bouchard. In fact, the company achieved synergies of $13 million in its latest quarter regarding the European acquisition.
"I am happy about our organic growth and European margins are improving," said Bouchard. "The results for the second quarter were very strong."
Looking ahead, Couche-Tard will continue to monitor the competitive landscape, particularly dollar stores. Thus far, dollar stores have had little impact on the convenience store chain, Bouchard stated on the call.
Laval, Quebec-based Alimentation Couche-Tard had 6,215 company-operated convenience stores and gas stations as of Oct. 13. When including franchised and affiliated sites, Couche-Tard has 8,483 stores in its network.