Q2 2023 Alimentation Couche-Tard Inc Earnings Call
Good morning, My name is Sylvia and I will be your conference operator today bushel, which in my personal view is that some people thought they had to split coffeehouse do jewelry.
I will now introduce Mr. Xiao Philip Nationals, Vice President financial planning and analysis Investor Relations and Treasury of unlimited shelf Cusco, So they might not see the loophole I missed you shall see D plus shops. This plenty of course, you'll see nausea and abuse, but what else you'll ever saw it gives a reboot Ali my personal Gustaf.
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Good morning, I would like to welcome everyone to this web conference presenting element that is all pushed out financial results for the second quarter of fiscal year 2023.
All lines will be kept on mute to prevent any background noise. After the presentation. We will answer questions from analyst asked life during the web conference.
We would like to remind everyone that this webcast presentation will be available on our website for a 90 day period.
Please remember that some of the issues discussed during this webcast might be forward looking statements, which are provided by the corporation with its usual caveat the schedule, yet or risks and uncertainties are outlined in our financial reporting.
Therefore, our future results could differ from the information discussed today.
Our financial results will be presented by Mr. Brian <unk>, President and Chief Executive Officer, and Mr. Claude Desi Chief Financial Officer, Brian You May begin your conference.
Thank you John Philip and good morning, everyone. Thank you for joining us for this presentation of our second quarter 2023 results.
We're pleased to report strong results this quarter, especially in the face of the continued challenges of inflation energy and fuel prices around the growth around the globe.
We had strong performance in convenience with solid same store sales, particularly in the U S market, which had very strong growth in food.
Solid growth in all of our categories with the exception of traditional combustible nicotine.
We also continue to generate robust fuel margins across all of our platforms with depression or consumers, we remain committed to delivering consistent value both inside our stores and on our core courts to help make our customers' lives a little bit easier.
Well for a return to the results during this quarter several of our U S business units experienced superior Hurricane Ian It was a massive category for storm and one of the largest hurricanes ever to hit the U S.
Slammed into our southwest, Florida market moved up to the state and impacting our business across Florida, The Atlantic States in the Carolinas.
No team members were exited however at the peak of the Hurricane we had over 500 stores closed due to power outages wind damage or flooding.
Once again in the worst of times, our team members pulled together and did a great job getting the majority of our stores reopened to service our customers and our communities in their time of need.
For customers, who initiated Red cross round up store campaign, and as well as a companywide fund to help our team members that have been impacted by Hurricane Dorian.
Now turning to our results beginning with convenience compared to same quarter last year same store merchandise revenues increased five 6% in the U S. 2.9% Europe decreased one, 5% and Canada outright I would note that Canada is up strong single digits, when you exclude tobacco, which continues.
Pressured by the illicit trade throughout the country.
No doubt the consumer continues to be pressured from rising prices and we're focused on balancing providing good value to them, while recovering inflationary impacts on our business.
Across the network, our fresh food fast program was up over 20% same store sales.
Continues to grow across 4200 stores globally.
This quarter, we launched $5 pizza Fridays across many of our markets, where consumers can purchase bolt ought to go or taken bake pizzas for only $5 on Fridays.
This as well as our focus on the sale of fresh baked cookies are becoming popular items to our customers seeking value, bringing new and returning customers to our stores more frequently and driving overall growth.
For dispense beverage will continue to see good growth in cold and frozen as well as continued success with our proprietary do purple Thunder with over 8 million Cups sold by the end of the quarter.
Our Sip and save beverage subscription program continues to drive trips enhanced basket and attract new users, while providing great value.
With the ongoing inflationary pressures more than 420000 subscribers are seeking deals you see the good value offer in Sip and safe.
We've also continued to work to improve the online enrollment experience and we're seeing a larger percentage of our customers automatically renewing signing up online.
Packaged beverage growth was driven by strong dollar and unit growth across the media consumption carbonated soft drinks energy drinks.
Private brand, including private brand beverages also continues to see strong growth as consumers are looking for value.
And we meet that need with high quality products at a lower price point that some of the main brands.
And age restricted beverages beer sales continued to lead the category in the U S and in Europe alcohol also performed particularly well.
With wind leading the way.
Across the network supply chain issues are improving compared to previous quarters in.
In North America, and Europe were seeing in stock positions approaching back towards 95%. So more normal although we certainly have pockets where it continues to be difficult.
A significant challenge to our European operations has been rising energy costs, which are clearly impacting customers team members and businesses.
We are executing many energy saving initiatives across all of our European businesses business units, including energy consumption and lighting.
Justin temperatures.
<unk> unneeded equipment.
These best practices are being shared across all of our countries and work will continue to further accelerate this in the months ahead.
While we see energy situation and associated costs as transitory.
Just having returned from our visiting our European stores or for two weeks I can tell you that noticeably changing behavior crossing societies inner.
In our operations, we have reduced demand between 10 and 20% in each of our European countries.
This quarter, we expanded our data driven assortment optimization work throughout the rollout to all categories in North America.
The current focus is on expanding the distribution of products that are high performing within the business unit and across other markets.
Additionally, we're leveraging external data to pick up on trends that are not currently visible within our network.
With the variability of our European network.
We're in the planning phases of assortment work with a plan to have tests in our markets over the coming weeks.
On the pricing front, we continue to tailor our approach given that fluid inflationary dynamics in most of our markets.
Moving to the fuel business same store road transportation fuel volume decreased one 9% in the U S six 3% in Europe , and six 5% and Canada.
Higher prices and challenging market conditions continue to impact our volumes.
To alleviate some of the pressures the pompe working actively to help our customers find value in different ways. As we did with our very successful circle K fueled day promotion in the U S. This quarter.
And we have significant capital co activities planned for the rest of the fiscal year throughout our markets.
As I mentioned earlier, we continue to benefit from robust fuel margins offsetting the pressures on volume across the network.
And our circle K fuel rebrand work, we completed more rebrand during the quarter and are now at over 3500 circle K fuel brand sites in the U S with many business units, where the fuel rebranding work has now been completed.
Would you expect an acceleration during the second half of the fiscal 2023 named to be close to 4000 sites by the end of the fiscal year.
In the U S. We broadened our relationship with our field trading partner musket in order to enhance our competitive positioning investments in the areas, where we have significant volumes and customer base. A recent example, we took ownership of four U S terminals.
In combination in a 50 50 joint venture with basket.
With Jacksonville, Florida, being an example of a market where we both had very very strong demand and can optimize that asset to our advantage.
This quarter, we've also established a supply and trading operation in Geneva, Switzerland, one of Europe's largest commodity hubs.
Through a more active market participation the expectations to bring incremental value to the European organization as well as diversify our sources of supply.
Also in Europe , our EV fast charging network had a significant milestone with the opening in Sweden of our first speed Chargers for heavy trucks.
Okay.
<unk> the first company in the Nordic countries to open publicly available speed charging for the brand new electrical heavy truck segment.
We kicked it off with six 360 kilowatt Chargers with plans to expand this to 22 sites 90 truck charges in Sweden.
Yeah.
Capacity will soon increase to 1000 kilowatt.
At the high end charters.
We are making incremental progress and recently launched EV charging network in North America as part of our announced plans to bring 200 EV charging units to our stores across North America over the next two years.
So far it's been a positive customer reaction to our integrated offer to the <unk> provided by our in store offerings.
While we are starting from a low level of glad to see customer acceptance and.
I would expect that continued to continue those density increases in new and existing markets.
We're also proud of our recent innovation milestones. We now have over 1000 units deployed in the rollout of our easy to use smart checkout technology I was out in stores. This week and the acceptance has been great. We're seeing penetration of eligible transactions exceeding 50% in many of our stores.
So we're looking to scale to 10000 used across the network over the next three years and we also on the fuel side of past 1 million pay by plate Youll transactions on circle K Forecourts in Europe .
This pioneering license plate recognition system available in Sweden, Norway, Denmark, and now Estonia.
We will continue to expand in the coming months across the Baltics in Poland.
Finally, we've also pilot our new loyalty program in the U S and tiered concept in Europe . We continue to remain very pleased with the results in these pilots and we're preparing for expansion in the coming quarters in both Europe and North America.
We continue to expand the network with the opening of 23, new to industry sites this quarter and 53 year to date across the network.
In addition to having 73 sites under construction.
While new store performance is exceeding expectations in both merchandise sales and fuel volumes and remains a core part of our strategy.
Combination of rising costs and supply chain constraints that we've experienced will likely continue to slow our near term ambitions.
But we expect these issues to mitigate in the coming quarters.
Now before I turn it over to Claude I wanted to cover our ongoing progress in staffing.
It's been an unprecedented challenge the prior you know really 12 to 18 months, particularly in North America.
We are seeing candidate flow improved through the quarter, we focus on new technologies to make the interview process easier and bring our time to hire down from days to hours.
<unk> become more active on social media campaigns platform excuse me driving working at star sites.
<unk> more early career talent, so again, well know that out of the woods, our staffing levels have improved significantly and are very very close to normal levels.
I'm going to pause there and let Paul take you through more of the second quarter financial results.
Thank you Ryan ladies and gentlemen, good morning for.
For the second quarter of fiscal 2020.
We are a pizza reported net earnings.
810, $4 million or 79 cents per share on a diluted basis.
<unk> certain items described in more details in our MD&A adjusted net earnings were approximately $838 million or <unk> 83 cents per share on a diluted basis for the second quarter of fiscal 2023.
Bear with $693 million.
Or 65 cents per share on a diluted basis for the second quarter of fiscal 2022, an increase of approximately 29%.
Adjusted net earnings.
We delivered once again, a solid quarter with impressive bottom line growth, notwithstanding a challenging and century and brand mix.
Adjusted diluted net earnings per share increased by 26, 2% compare to the second quarter of fiscal 2022, driven by the strong gross profit growth as well as by our cost optimization initiative, which helped mitigate the impact from higher inflation.
These strong results have contributed to noticeable increases in our key return metrics is return on equity return on capital employed reached 22, 7% and 64%, respectively up 30 basis points and 50 basis points compared to the first quarter of fiscal 2023.
Even with the with another active quarter in share repurchases, our financial position remains very strong highlighted by our leverage ratio of one two times.
Abiding us potency corp's future and resulting spent today of a dividend increase of 27, 3% to 14 cents Canadian per share.
I will now go over some key figures for the quarter for more details. Please refer to our MD&A available on our website.
During the second quarter, excluding the net impact from foreign currency translation merchandise and service revenues increased by approximately $188 million or four 7%.
This increase is primarily attributable to organic growth and to the contribution from acquisitions, which amounted to approximately $40 million, while being partly offset by the disposal of stores. Following the strategic review of our network.
Same store merchandise revenues increased by five 6% in the United States by two 9% in Europe , and other regions and decreased by one 5% in Canada.
Same store merchandise revenues in Canada were strongly impacted by increased competition the illicit market in the cigarette category compared with the corresponding quarter of fiscal 2022.
Excluding the net impact from foreign currency translation merchandise and service gross profit increased by approximately $78 million or five 7%.
This is primarily due to organic growth.
Gross margins increased by 0.2% in the United States to 34%, while they decreased by 0.1% in Europe and other regions to 38, 3%.
0.9% didn't care about to 32, 2%.
Yeah.
Moving on to the visual side of our business in the second quarter of fiscal 2023, Our road transportation fuel gross margin was $49.60 per gallon in United States, an increase of $12 seven seven cents per gallon.
In Canada, It was $12.85 Canadian per litre an increase of one point 52 cents Canadian earlier.
In Europe and other regions are road transportation fuel margin was nine six cents per litre a decrease of 81 cents per litre U S driven by the impact of the translation of our foreign crude into the operation into U S dollars.
Fuel margins remained healthy throughout our network due to the favorable market conditions and our continued efforts to optimize our supply chain.
Now looking at the SG&A.
For the second quarter of fiscal 'twenty 'twenty normalized operating expenses increased by eight 1% year over year.
This is mainly driven by the inflationary pressures, most notably higher energy costs in our European operations are your costs.
Costs from rising minimum wages as well as well as incremental investments in our stores to support our strategic initiatives, partly offset by a labor market.
Despite the challenging market conditions, we have continued to deploy strategic efforts in order to mitigate the impact of a higher inflation level and continued pressure on wages, which is demonstrated by our normalized growth of expenses that was slightly below inflation.
Excluding significant impact items, sorry described in a more details on our end.
The adjusted EBITDA for the second quarter of fiscal 2023 increased by 177 $9 million or 13, 9% compared with the corresponding quarter of fiscal 2022, mainly due to higher road transportation fuel gross profit throughout our network and organic growth of our convenience store operations.
Partially upset by or your operating expense.
The translation of our foreign currency operation into U S dollars had a net negative impact of approximately $47 million this quarter and this negative impact translate into a negative impact of close to <unk> on our EPS.
From a cash tax perspective, the income tax rate for the second quarter of fiscal 2023 was 21, 9% compared with 21, 3% for the corresponding quarter of fiscal 2022.
Increased mean, mainly stems from the impact of different mix in our earnings across the various jurisdictions.
Jurisdictions in which we operate.
As that October night, Twenty-twenty to our return on equity remained strong at 27, 7% and our return on capital employed stood at 16, 4% both figures are highly.
Higher sequentially compared to the first quarter.
During the quarter, we continued to generate strong free cash flows and our leverage ratio stood at one two times 11 basis points lower than Q1, despite having repurchased $205 million during the quarter under our NCI.
Subsequent to the end of the quarter shares were repurchased for an amount of $396 $2 million.
We also had strong balance sheet liquidity with $2 $5 billion in cash and an additional $2 $5 billion available to our main revolving credit facility.
Turning to the dividend.
Board of directors declared yesterday, a quarterly dividend of 14 cents Canadian per share up 27, 3% for the second quarter of 2023 to shareholders on record as of December 20th.
So when it went to.
And approve its payment.
December 15th.
Yes.
With that I. Thank you all for your attention and turn the call back over to Brian .
Alright, Thank you Claude.
As we reached the middle of our fiscal year, it's worth noting that we're well on track to meet and surpass your organic objective of a five year double again strategy given our strong last four quarter EBIT performance at almost five $6 billion.
I want to thank all of our team members across the network for remaining committed to the strategy and leading the business forward even in the face of monumental challenges.
The pandemic wars Hurricanes.
Tough global economic conditions.
As we continue to be low is laser focused on our strategy, we have more tools to engage their customers than we've ever had before and we're focusing on both existing initiatives and launching new opportunities to drive our organic growth now.
And with that we'll take questions from analysts operator over to you. Thank you Sir.
Ladies and gentlemen, if you would like to ask a question at this time. Please slowly press star followed by one of your Touchtone phone you will then hear a suite on prompt acknowledging your request and if you would like to withdraw from the question queue. Please press star followed by two.
Using a speaker phone, we do ask that you. Please lift the handset before pressing any keys. Please go ahead and press Star one now if you have a question.
And your first question will be from Michael Van <unk> at TD Securities. Please go ahead.
Hi, good morning.
I wanted to talk about the the volumes actually.
And yes, the considering the fuel prices fell dramatically over the start to finish in the quarter can you give us some idea as to how the demand changed as the quarter progressed did he get meaningfully better heading into Q3, and then how much of that.
Same store volume decline do you think is attributable both to the rebranding activities.
And how long does it take for the stores to to.
It recovered to normal volumes or prior volumes once they've been rebranded if ever.
Yes, Michael.
I'll take that so I'll break down the pieces. So for Europe . There is no doubt the extreme.
Pressures that we're seeing from energy crisis has changed consumer behavior.
We see it both in kilometers driven but also the speed. We are looking at a phone study from Denmark and people are actually increase their average speed on the roads by over five kilometers an hour. So we think we're winning share in Europe bolt on <unk>.
We've got a transitory.
Negative impact on demand just with the impact of the war and the energy prices.
Look at the U S. Our largest market a couple of dynamics I think we did see softening.
Dolphin improvement through the quarter as prices came down a bit and we also saw a reversal of an erosion in premium penetration, which typically is impacted negatively by the higher prices. So as prices came down.
We saw premium penetration go up which is very good for us that's a very profitable.
SKU for us.
Overall demand I would say we've continued to focus on providing good value consistent value.
The industry remains very disciplined there is no doubt that as prices are higher there is a certain segment of the consumer base out there that's looking for the cheapest price on the street.
But if you think about who those players are they can only.
Well, so much and there are only so many locations and again, we think that's transitory.
So as we.
You think about fuel prices coming down we think we're getting our fair share.
Of the volume and our focus is on just being consistent.
As the market continues on the rebrand Michael.
It's really depends on the brand we're switching from where we have.
Supplier brands, where they've had very strong loyalty programs, we have seen some volume erosion with the rebrand.
Also in the context of just a really strong economic equation, our ability to source fuel today.
We think is best in class and so the pay off despite some volume erosion.
It was really a no brainer, it's been very very good for us.
And we don't see the same erosion inside the store I think the bridge to that is getting our loyalty program. We successfully piloted both in the U S and in Europe .
Ramped up to scale and we're certainly hoping we can get that out in the market towards the end of the fiscal year.
But the other brands that maybe you didn't have a strong loyalty.
Not seeing that same impact and actually we have some.
Rebrand, where we've just got positive results from switching from a.
Partner brands as circle K, so a little bit of a mixed story, depending on where you're at.
Alright, Thank you ill, let someone else jump in.
Sure.
Thank you next question will be from Chris Lee at <unk>.
Please go ahead.
Oh, good morning, everyone pulled out Claude I was wondering if you can maybe similar to the previous quarters can you maybe break out break down for us sort of the major drivers or buckets of a year over year increase in SG&A expenses and then secondly, do you expect a more meaningful step down in normal high school in the second half of the year.
As you start to lap against a higher comparison. Thank you.
Yes, Thank you Chris so.
Yes.
So.
Come back to a what drove our eight 1% increase in normalized operating expenses.
We see the same thing three buckets it too.
Talked about the last quarter. So the first one.
Wages, so and I would say that the wages the impact of wages as a bit.
The lighter this quarter.
Because of the retention measure are moving and so what we see in terms of our labor and how we structure our wages.
Instead, the retention programs that we had last year and now we are more back to normalize our hours. So a lot of the regular type of hours more regular time hours.
We always we have salaries.
Salaries increase also been instilled Oh, we're talking to our stores, but overall, we're covering all hours and where we're good with the with that bucket I think we're seeing improving improving yeah.
Performance.
This a third of the equation.
Where are where they are the second and third is inflation.
So again this time, it's electricity in Europe that are that is really a strong in terms of increased.
You've seen the inflation figures in Europe , and they're mostly driven by energy prices. So there's a lot of.
The.
In our equation from electricity and energy prices.
Europe .
I need to say that third bucket.
All of our our.
The strategic initiatives that were put in place so.
We really see an impact probably yet though.
Probably so the buckets are probably a bit more like a 330.
37, 37, and a 25% so the waitress it'd be a little bit.
Less of an impact in this quarter as far as and we're putting all the initiatives in place also to mitigate those those costs. There's a lot of the activities that we're putting together then we have the cost initiatives that we have.
A couple of example of death or did we're taking.
Outside the store manager offices, and there are a lot of our stores to help to reduce the administrative work we were also.
Lot of the initiatives on labor scheduling and you can't imagine also that.
A big focus in Europe , and then in the rest of the network is to look at all of the energy saving initiatives, which we could put it in place to make sure that we're reducing that debt expense as much as possible in our stores in Europe .
So finally, our or our vision for the second half are.
We are as we said before that we have easier comps.
Are coming our way so that's what we're going to start to meet those easier comps in the next two quarters.
And with the a.
The pick up our initiatives that we put in place that are opening.
Got it.
To put some better numbers.
Early for us and you're going to be crude oil can be quite calling a number with the with the inflation.
Yes.
Okay. Thank you I'll get back into queue. Thanks.
Thank you Chris.
You next question will be from Vishal Shah.
At National Bank financial Please go ahead.
Hi, Thanks for taking my questions I just to circle back on Europe , I was hoping you could elaborate on on.
On the the results there. So if we look at Europe is it fair to say that in local currency. The fuel margins were flattish and how should I interpret the comment that you made about 10% to 20% lower demand is that did you say that this quarter or is that something that we should see in the future.
Just on the back of that how should we think Europe unfolds in general.
Hey, Michelle <unk>.
Margin, it's a good observation actually our CPL in Europe would have been.
11, five cents in the quarter ex currency, so actually up one center leader. So again very strong performance very pleased with that on demand. It was really around electricity I think that we are referring to.
We've got markets, where electricity costs are up $5, 600%.
I spent two weeks there during the quarter and.
Just the the efforts that we're making that society is making at.
Getting the impact of the rising costs and kind of doing their part for Ukrainian War is astounding I literally got up one morning to go to the gym and had to use a flashlight to go through the hotel lobby.
My phone so yes.
We've got markets, where we've reduced our demand between 10% and 21% and Thats just doing a lot of little things at our sites you know, it's lowering the heat it's unplugging cooler.
Coolers that we don't think are key it's raising the temperature of our walk in coolers and so yes.
Again will that mitigate everything I think it depends how the winter plays out there and again, we view that as very transitory, it's going to be temporary, but it's having a material impact.
Both of them are European P&L, but also just on our team members here so.
More to do there and again sharing that globally, we're not seeing the same pressures are feeling the same pressures in North America, but certainly very real in our European markets.
Okay. Thank you and just on U S fuel margins the delta versus Opus seem.
It seems to be a bit lower than we've seen over the last few years I know opus isn't necessarily the benchmark that you use.
But I also know that you have many initiatives in place to kind of expand your fuel margin advantage versus the industry. So I was wondering if theres anything noteworthy that you'd like to point out on the fuel margin this quarter, which may have caused that.
That lower deviation.
Yes, not really again that does cycle and it's so geographically specific.
I look at our our western markets I think we had a really strong quarter, we should meet the market.
It just depends on how you know how liquid are the racks versus the spot market and again that picture just varies dramatically geographically. So we just remain focused on continuing to develop capabilities allow us to widen that gap we've set.
Set up over 1000 trucks during COVID-19.
Which allows us to capture geographic and time arbitrage as an example.
Trading group.
And Houston and now setting up in Geneva. So yeah. We just remain focused on doing the things that we can control and I don't think theres anything particular in the quarter be Charlotte.
Indicate any erosion on that advantage that we're establishing versus the market.
Thank you.
Yeah.
Thank you next question will be from Irene Mattel.
Please go ahead.
Thanks, and good morning, everyone I'm, Brian just following up on the last commentary around the trading grid can you walk us through.
How having that training expertise.
Hence as your ability to deliver on the fuel margins.
And how it differs from let's say the way you used to do things in a way others do thanks, because I think that's something that.
We really need to understand.
Yes, its a longer conversation and I can probably do justice to on a call but high level.
And our focus on the U S. We would typically have bought either from the rack. So prices established by refiners locally or on a term basis and turned up 100% of our demand.
With the large shorts that we have we've got consistent ratable demand.
That's very concentrated in some markets.
We're able to act more opportunistically at times and that May be.
When one spot market is significantly advantaged versus another you know being able to deploy trucks.
Hundreds of miles to take advantage of very different cost cost cost arbitrage is.
Not being turned up on all of our volume and being opportunistic.
Where we think the markets will be long and there'll be people that are incentivized to.
Cut prices to place barrels in our refinery system as an example.
In Europe .
It's very much word waterborne markets, we have all import terminals and so the ability to take advantage of cargos.
It may not have a home as an example, I read and can be significantly cost advantage needs to be just a term relationship with a local refiner. So again, a very long conversation.
We've got an Investor day, I think we're trying to schedule for the fall and I think that'd be a great time to go a little deeper there if we get the opportunity.
That's great. Thank you.
Just a question that we haven't really.
God empty, yet which is the inside store.
In the U S and what Youre, seeing and particularly what you're seeing around adoption of the food and halo impact in other categories.
I think we've been pleased with the consumer.
Both in Canada, and the U S. Again, if you take Canada, if you take out tobacco, it's been very strong. So despite inflationary pressures I think we we've been fortunate that unemployment rates remain at historic low.
Consumers.
Certainly feeling pressure.
Between the economic stimulus during Covid and the high employment rates remain relatively in decent shape. So as we look to last quarter and what we're seeing in this quarter. We continued to see very very solid demand.
Inside the store.
With regard to what was your second question was.
The food.
Yes, again I'd say, we're in the very early innings of that game very pleased with the platform. We deployed I think we're pleased with the decision to continue the rollout during Covid. We've now got 4200 stores deployed.
And I think we said in the commentary that same store sales are up well into the 20 plus percent range.
And again that was even better than last quarter. So I.
I think we've got a good formula to work on if we got it completely figured out in terms of the food culture.
Managing the spoilage, making food at the right time all of those things that you know aren't.
So important in food I would say that's a journey that will continue but.
Again very pleased we're ahead of our projections ahead of our plan for the year.
And we are seeing benefit across the store. It's one of those things that if we get right and we have some other people in the industry have shown us.
You get it right you can influence the current consumer to turn left instead of right and that's the journey we're on.
Again sitting here today, very pleased with where we're at.
That's great. Thank you.
Thank you next question will be from Mark Petrie of CIBC. Please go ahead.
Yeah. Thanks, good morning.
Called out promotional activity as a tailwind for your business and I know thats been an ongoing journey for you, but was there something new that you're doing or is it more of a continuation and obviously, it's not a project with a specific end date, but how far how.
How far along are you in those efforts, maybe perhaps relative to the targets that you shared at your Investor day last year.
And Mark on promotional activity I would say is the journey, we've been on to let data drive our decisions continues.
And I would say generally on track with where we communicated from the Investor Day, I'd say the one maybe.
So maybe headwind we've had is just retaining data scientists.
Been a hot commodity hot field and so the turnover we've experienced in that group, particularly domestically.
It's been a little bit more difficult, we've set up an office in.
India and we've been very pleased with the talent, we've been able to source there and so we think that will in the coming quarters stabilized that would warrant.
That team and continue to allow us down that journey.
And really that's just it's really using data to drive our discipline to what promotions really make a difference and which ones are noise and so you are seeing and should see fewer promotions.
But more effective promotions, which should result in both higher sales and higher margin over time I'd say the other piece. That's happening is it's just with the inflation and we know the consumers.
Sensitivity to price has been high and so we're doing I.
I think a few things out there that hopefully convey strong value whether that's.
Take home soda packages and some of the things we've done around fuel that wouldn't have been our norm, so fewer bigger to create that value perception, not just perception, but deliver value back to our loyal customers.
[laughter].
Okay I appreciate that.
Oh go ahead, maybe a logical part of your court, yeah or maybe on the second part of your question, we put a range out for you at the 150 and $210 million.
The achievement on that initiative, and where we're really where we're well.
Well into the range and closer to the high point.
Part of that target.
But if it is for that program.
Yeah.
Okay perfect. Thank you.
Switching gears I wanted to ask about the M&A landscape, you've spoken about more deal flow and multiples being sort of closer to your target range any update on that and I know you've said that you see the energy challenges in Europe is transitory, but does that affect your thinking at all.
So on the Europe plus no.
Again, I view that as transitory and quite honestly, it's probably apply some pressure to some businesses.
And historically good for us.
<unk> sheets as Claude said is very strong appetite, there and I guess I'd just reiterate the comments that I've had in prior quarters.
Until there is a deal there is not a deal but.
We continue to be pleased with the deal flow, we're seeing and.
It's a question of timing.
I'm cautiously optimistic that this environment.
With tighter credit little higher interest rates will be better for crew start in than it has been the last three or four years, where there's been a lot more competition.
Okay. That's great I appreciate the comments thanks sure.
Thank you.
As a reminder, ladies and gentlemen.
Star one to queue up and also out of consideration for other callers on the line. We do ask that you. Please limit yourself to one question.
Next question will be from George.
Which bank.
Hey, good morning, guys, just a follow up on the store can you maybe give us a sense of how U S. Same store sales performed through the quarter and can you also give us a little bit of a sense in terms of basket versus traffic and within the basket.
How much price do we take in the quarter.
Yeah, I'd say that the results were pretty consistent in the quarter, the exception being Florida, Florida is a large market for us 800 stores.
It was clicking along at mid nice mid single digit and ended the quarter really zero and that's purely.
The effects of two hurricanes during the quarter.
I'd say pretty consistent traffic relatively flat, maybe down just a bit.
So basket being very strong.
Just our continued push to make sure that we're pushing price appropriately and recovering the.
Placing any pressures that we see whether that'd be on wages or energy or three.
The three buckets of Claude went through so again trying to be surgical they're not drive the customer way.
Communicate value where appropriate but also recover costs.
As of right now I feel we're doing a good job with that what we're seeing again strong demand continue.
Into the next quarter so far.
Yeah.
George maybe just to add also the success of our fresh food fast program also is starting to show up in our same store sales. So that's what's driving also the basket. So.
Very pleased with the results we've seen Chris food.
Thanks, guys.
Thank you next question will be from Martin Landry at Stifel. Please go ahead.
Hi, Good morning, I, just wanted to touch on your volumes your fuel volumes in Canada.
It looks like they worsened versus <unk>.
Q1, despite a gasoline prices.
Declining and if we look at the U S.
You had a bigger decline in Q1 and a smaller decline in Q2. So I'm just trying to understand what's happened in Canada is there something specific that you can point to to explain that the larger decline in there and the lack of correlation with the U S.
Yeah, we were minus $6 five in the quarter. So that is soft. So we're taking some efforts like we have in the U S to I think be a little more tactical a little more guerrilla warfare.
In delivering value to the customer without changing the pricing might be in risky depressing the market. So you'll see more activity in coming quarters in Canada.
Look at our weakness, it's really concentrated in the east So I'd say, Quebec in the Maritimes.
We've got some work to do on harmonizing our brand position there that's a little bit of a longer term.
Opportunity for us, but that's where we're going to focus our efforts when I look at Ontario and west.
I think we performed very well when you look at parkland or other public comparator. So.
It is fairly isolated to a small part of the country and again I'll remind that our candidates.
13% of our total global volumes relatively small but that aside we are we're focusing more on on that customer and that value proposition in the eastern part of the country in the coming quarters.
Yeah.
Okay. Thank you.
Sure.
Next question will be from Peter Sklar BMO. Please go ahead.
Thanks, Brian can you elaborate on the new loyalty program, you're piloting the U S. Just talk a little bit about it and.
Explain the new tiered concepts that you're experimenting with as well.
Yes.
Yeah. So we've.
Had loyalty products.
Across the network are varying.
Degrees.
One that in Europe has had very deep penetration, but quite honestly, we've challenged ourselves to say hey can we go beyond just having another key pop in your pocket or another another number.
Another buying club and so you know there's a lot of research with partners and selected.
<unk>.
As our partner developed the current program and really focusing on the fact that.
Our industry.
So much driven by the heavy users there's different segments different names for these customers, but we've got a very very strong group of consumers in our industry that just drive a tremendous percentage of the volume and so without getting into the details of how I think the why is it going.
To make sure that the customers that can deliver the most value to us.
Get the most value from us and where we've launched that and piloted that now in three countries in Europe and.
A small market and the Carolinas, we've seen very strong net promoter scores scores and very strong penetration of enrollment both on fuel and merchandise I think my frustration is that wish we wish we had it deployed more broadly and that's really just been a technical issue getting the engine to work.
With our various Pos platforms that we've got a particularly the United States. So.
We're excited.
I think the benefit of being delayed a bit is I think we've really optimized at store level, what the consumer message. He is how do we get people to sign up how to motivate our staff to drive enrollment so we're ready and.
Again cautiously optimistic that we've got something that will differentiate in future.
Okay. Thank you.
Thank you next question will be from Bonnie Herzog of Goldman Sachs. Please go ahead.
Alright, Thank you and good morning.
I actually wanted to circle back to Europe real quick.
I guess I was hoping for maybe a little more color on that consumer behavior.
And really you know some of the initiatives you've implemented in light of this for instance are you.
You're seeing more down trading and you know a pullback on spending if so are you increasing your promotional spend to help mitigate that and then also curious to hear the behavior at the pump you know our consumers, possibly not filling up but yeah, possibly coming more frequently.
And then finally, what are you seeing in terms of.
You know the shift in channels with in Europe , you know, our other channels, possibly benefiting Todd.
These kind of similar pressures.
Yeah. Thanks Bonnie.
I'll start with the fuel side. So there has been a marked change in behavior and again I want to repeat repeat repeat we view this as transitory or temporary.
We're seeing both lower penetration of premium sales and lower leaders per Phil about 15% lower.
But we're seeing more and more visits.
So net net volume down mid single digits.
This is up two 3%, but the average fill down 15% or so and that's pretty consistent across the countries.
Those visits are actually translate into the store are holding up pretty well you will see us I think we were plus two nine or something close to that for the quarter and that's with a pretty solid traffic underlying that so.
When I look at inside the box the behavior hasnt been as noticeable.
Turning to trade down as you asked.
Our food continues to perform very well beverages continued to perform very well.
Don't have the same just because of lack of scale in some of these smaller countries. We don't have the same penetration of private label. So we've seen the brands continue to hold very well.
I've asked the question how are we doing vis vis other channels and when they look at the three big.
Scandinavian countries, where I would get the best data that I'd actually say the channels fared very well BCD grocery which is our main comparator in those countries. So.
Yeah, I'm pleased with our results all of the data it says where we're taking share but theres no doubt and again it was on a recent visit it's pretty stark difference from what we're experiencing here in North America, I mean societies really buckled down to.
Get through the winter and everybody is doing their part too.
To just minimize their energy demand and that includes driving.
Okay. Thanks for that color I appreciate it.
Sure. Thank you next question will be from Anthony Bonadio at Wells Fargo. Please go ahead.
Hey, good morning, guys.
Wanted to ask about the new to industry stores I know you mentioned rising costs.
My chain constraints sort of slowing your ambitions. There. So can you just talk a little bit.
About what growth might look like given a more favorable environment and then.
You also mentioned strong merch sales and volumes in those new stores can you just talk about what you might be doing in those newer unit that's driving the outperformance there.
Hey, Anthony.
I'll take the last part first we've got a store model that we've deployed really the last year that you know.
<unk> is a big part of what we learned in holiday that really flows to customers through our store you enter youre in the food area. So.
The coffee dispensed beverage bakery sandwiches.
Rotate through you that takes you into.
The cobalt both beer and other and then you end up in the impulse section as you approach the checkout.
Yes.
Had extraordinary good good luck with this.
We retrofitted a few stores just to see the impact of that as we played with design and it just drives really really strong.
Basket improvement. So that's the model we have been deploying very pleased as I said in the commentary with both our results and volume.
And inside the box.
Look at the mix, yes, food just does better.
And we've got significantly more cold doors, and we would've had in our traditional builds and we just think that's an industry differentiator.
We can continue to provide and really excel at meeting that first occasion DCP other industries, so pleased with that.
Frustrated just in getting them out.
Love to build 200 a year.
We're not going to build 200 this year.
Just a big part of it has just been supply chain and rising cost you know it's been hard to find electricians plumbers cause you to try and get work at your house.
Does that I mean, that's going to be transitory as well and our ambition.
Is to continue to ramp up the growth of our Ntis, we think it's great.
Great consumer response, great ROI for us and our ambitious to do more but.
Coming through the current environment, it's just been difficult to ramp up the trades get the permitting and all the things necessary to hit the numbers. We want so continued focus there.
And again the ambitions there to do more.
Okay. That's helpful. Thanks, so much.
Thank you next question will be from Derek delay of Canaccord. Please go ahead.
Alright, Thank you and good morning. This is publicly that on behalf of Derek just a quick question from our side.
Just on the fuel volume side circling back to that what drove the softness there was more of a function of the higher oil prices or is that a failure to remote working conditions and the general less movement to and from work.
Is your question U S specific or Europe .
Across the territory with yet.
Yeah, I think I've covered Europe pretty well I mean, it's tight energy prices.
Again, transitory and I think.
Covered Canada fairly well thats in eastern.
The phenomenon I'd say in the U S I feel good about our performance.
You know Theres a couple of value players that are I think are getting a disproportionate share on a temporary basis.
But when I look at our results versus what we see out of Opus outer EIA.
One company data on movement I.
I think we're performing well I think demand is still not think demand is still not where it was pre COVID-19. We still got a certain segment of society, that's not gone back to the office five days a week.
But that just continues to slowly recover.
I think as we continue to work on building the circle, K brand and making that more valued by our customers and innovating with pay by plate in our loyalty platform.
Our goal is to slowly take share when the fuel space, we feel good about the journey, we're on to do that.
Okay, Great. That's very helpful. Thank you.
Thank you. This concludes the Q&A portion of the conference Ms. Sheila House back over to you.
Thank you operator, thank you Brian . Thank you Claude Thank you all for joining US we wish you a great day and look forward to discussing our third quarter 2023 results in March So CMS Anik gone digital Z Nouvel Diebold. It Department news with almost a 90 day average you'll need your plays <unk> Dutch towards him.
During the event.
Pushing was that entity and that sort of thing I said that.
For America, that's great.
Yeah.
Great. Thanks, Richard Thanks, a lot.
Goodbye.
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