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SAN ANTONIO — With its pending merger with Alimentation Couche-Tard Inc. moving along, CST Brands Inc. is seeing strong results from its growth activities.
"We performed well during the quarter despite the comparison with a very strong fuel margin in the third quarter 2015. Our U.S. business grew merchandise and services gross profit 19 percent on increased sales and margins, while our Canadian stores grew merchandise and services gross profits 5 percent with a 3 percent improvement in same store sales," said Kim Lubel, chairman and CEO of CST Brands.
CST also continued to execute on its organic growth plans with the addition of 13 new-to-industry stores during the quarter and 29 stores year-to-date. The expanding footprint comes as the retailer prepares to vote on the merger with Alimentation Couche-Tard Inc. on Nov. 16, as CSNews Online previously reported.
"We continue to work toward completing our merger with Circle K and we currently anticipate closing on the transaction in early 2017," she added.
Looking at the numbers, company reported net income of $260 million for the third quarter of 2016, compared to net income of $85 million for the same period in 2015. The uptick was driven by a gain on the sale of assets and an increase in both the U.S. and Canadian merchandise and services gross profit during the quarter, according to the company.
In addition, EBITDA was $461 million for the three-month period ended Sept. 30 compared to $174 million for the same period last year, or a 165-percent increase. The increase in EBITDA was due primarily to a $347-million gain on the sale of the company's California and Wyoming convenience stores during the quarter, according to CST.
CST also saw U.S. merchandise and services gross profit increase 19 percent when compared to the third quarter of 2015, primarily driven by an overall increase in merchandise and services sales and gross profits in the company's U.S. core and new-to-industry store sales, aided by acquisition and organic growth, including its acquisition of the Flash Foods stores.
Same-store merchandise and services sales per store per day declined 3 percent during the third quarter, primarily due to softness in parts of South Texas caused by a decrease in economic activity in the energy related sector, the company added.
On the fuel side, motor fuel gross profit in the U.S. for the third quarter of 2016 was $95 million vs. $150 million in the same quarter of 2015. The decline in motor fuel gross profit was primarily attributable to a decline in motor fuel gross profit, net per gallon, which was partially offset by a 13-percent increase in motor fuel gallons sold — a result of the company's expanded core network, which includes Flash Foods.
In Canada, motor fuel gross profit increased 3 percent and merchandise and services gross profit increased 5 percent when compared to the third quarter of 2015, primarily driven by an increase in volume of motor fuel sold along with an improvement in merchandise and services sales driven by an increase in the average number of retail sites, according to CST.
On a same-store basis, merchandise and services sales per site per day increased 3 percent in Canada when compared to the third quarter of 2015, primarily due to growth in the grocery and packaged beverage business.
San Antonio-based CST Brands is one of the largest independent retailers of motor fuels and convenience merchandise in North America with more than 2,000 locations throughout the Southwestern U.S., Georgia, Florida, New York and Eastern Canada. Its U.S. banners include Corner Stores, Nice N Easy Grocery Shoppes, and Flash Foods.
In Canada, CST Brands is the exclusive provider of Ultramar fuel. Its banners include Dépanneur du Coin and Corner Stores. CST also owns the general partner of CrossAmerica Partners LP, a master limited partnership and wholesale distributor of fuels, based in Allentown, Pa.