Q3 2025 Alimentation Couche-Tard Inc Earnings Call
Good morning, my name is Joelle and I will be a conference operator today. Bonjour, je m'appelle Joelle et je sera votre opératerice pour la conférence aujourd'hui.
Speaker Change: I will now introduce Mr. Matthew Buonnet, Vice-President in Vasturulations and Treasury at Alim attração Couche-Tard. Je vais maintenant passer la parole à Mr. Matthew Buonnet, vise-présider relation, investissaire et présorerie pour Alim attração Couche-Tard.
Speaker Change: English will follow. Bonjour, j'aimerais d'abord vous souhaiter la bienvenue à la téléconférence qui porte sur la diffusion des résultats financiers du troisième trimestre de l'exercice 2025 d'alimentation couche-tard.
Speaker Change: Caveat sort of risks and uncertainties are outlined in our financial reporting therefore, our future results could differ from the information discussed today.
Alex Miller: Our financial results will be presented by Mr. Alex Miller, President and Chief Executive Officer, and Mr. Philippe de Silva Chief Financial Officer, Alex You May begin your conference.
Speaker Change: Thank you Matthew good morning, everyone and thank you for joining us for our presentation of our third quarter results.
Speaker Change: We are pleased to report positive improvements in the business this quarter, while consumers continue to be cautious in their spending we are seeing encouraging signs Brazilians.
Speaker Change: Same store sales were positive in both Canada, and Europe compared to the same quarter last year, and we had sequential improvement in the United States impacted by historic winter storms in our southern business units.
Speaker Change: Third continued to grow in the U S. As our meal deal promotions performed well and had been extended to Canada and.
Speaker Change: In our fuel business, we are maintaining market share in the United States and margins aligned with trends seen in recent quarters.
Speaker Change: As inflationary pressure persist our number one priority is winning our customers by being ready with the products and services they want at compelling value.
Speaker Change: Later in this presentation I will go into more detail on these initiatives as well as on our convenience and mobility results.
Speaker Change: However, before I do so I will touch on two notable areas of the quarter.
Speaker Change: Our global efforts to grow the network, both through M&A and organically as well as the impact of the devastating wildfires in Los Angeles and unparalleled winter storms in the southern parts of the U S.
Speaker Change: Yeah.
Speaker Change: I want to begin by briefly mentioning our ongoing commitment to acquire seven and I holdings.
Speaker Change: No doubt you've seen our most recent press releases, giving clarity to our proposal.
Speaker Change: For combination with seven and I as well as accounts of our visit to Japan last week.
Speaker Change: For many years, we are firmly believed that there is a unique strategic fit between Cusco in seven years and that we can achieve significantly more together than each of our companies can achieve individually.
Speaker Change: Including accelerating the global growth of the iconic 711 brand and strengthening the seven and I business in many parts of the world.
Speaker Change: We also firmly believe that a combination provides an opportunity for shareholders and stakeholders of both companies to realize significant value.
Speaker Change: We have reiterated several times over the past few months that we intend to be friendly and persistent in pursuing a transaction, which we believe is in the best interest of all stakeholders.
Speaker Change: We have done that in the face of significant frustration and distraction.
Speaker Change: We look forward to fulsome engagement with seven and I. So that we can reach definitive terms and move forward with the transaction that is in the best interest of all stakeholders.
Speaker Change: It is worth noting that while there has been extensive media coverage internally a very small team is involved in RF and efforts concerning seven and I as the vast majority of the business is laser focused on our global operations.
Speaker Change: Moving to Europe.
Speaker Change: This quarter, we reached our one year anniversary of acquiring certain assets from total energies and almost doubling our size in Europe by extent expanding to four new countries with.
Speaker Change: With the one year Mark I'm happy to report that we are now reporting synergies from the transaction, which are on track with our expectations Philippe.
Speaker Change: Philippe will cover in more details in his presentation.
Speaker Change: We are truly proud of how the new team members have embraced our culture values and customer focused approach to retail operations.
Speaker Change: We continue to see strong progress with store rebranding both on the physical store layout as well as with product assortment and EV charging dispensers.
Speaker Change: While discussing M&A, let me briefly mentioned the good progress we are making with get go which we expect to close in the first half of calendar 2025.
Speaker Change: As we have always done.
Speaker Change: With all of our acquisitions, we have identified local management to lead the business as they know best how to serve local customers.
Speaker Change: We also continue to be excited about our learning from get goes extremely popular food and loyalty programs and dedicated team members.
Speaker Change: And organic growth, we continue to make progress on our 500 new store effort.
Speaker Change: We've opened 39 stores in Q3 69 year to date and we are on track to open over 100 in North America This fiscal year.
Speaker Change: Our recent new stores include dozens of high speed diesel and rural locations.
Speaker Change: As of today, we have more than 56 stores currently under construction and about 1000 sites in our over overall real estate development pipeline.
Speaker Change: The second point I want to acknowledge the heroic work of our teams in our West Coast business unit to support and serve their communities during the catastrophic wildfires in Los Angeles in January.
Speaker Change: While we had a few stores impacted team members showed incredible courage and dedication by getting out to our locations to provide essential supplies to customers.
Speaker Change: Free beverages and replenishment to first responders we.
Speaker Change: We also had a successful fuel day from fundraiser from which with the support of our global franchise team. We donated 100000 U S dollars to the American Red Cross for their continued relief work in the region.
Also in January in the U S. Our southern business unit has endured a historic winter storm.
Speaker Change: That in a region completely unaccustomed to accumulation of snow and ice caused widespread power outage and left millions grappling with hazardous road conditions and freezing temperatures.
Speaker Change: As always our teams kept stores opened and offered the services and products needed by our customers.
Speaker Change: Now, let me get back to our quarterly results starting with convenience.
Speaker Change: Compared to the same quarter last year.
Speaker Change: Same store merchandise revenues decreased by 0.1% in the United States.
Speaker Change: Creased by zero, 2% in Europe and other regions.
Speaker Change: And by two 8% in Canada.
Speaker Change: While we had sequential improvement in the U S. Our same store sales performance was negatively negatively impacted by those winter storms.
Speaker Change: And Philippe will provide more details on this.
Speaker Change: Again this quarter as challenging inflationary can sit conditions persisted, we have been relentlessly focused on winning our customers by providing compelling value on products and services.
Speaker Change: Following our successful launch of meal deals in the U S. In January we expanded the line offer across Canada by bundling popular food items, a value pack price to create a satisfying and affordable meal option.
Speaker Change: Across North America, we are now at nearly 465000 meal deals being sold on a weekly basis and that number is growing materially every week.
Speaker Change: Our win in food strategy continues to progress with over 5890 fresh food fast stores opened globally.
Speaker Change: We recently appointed a new senior Vice President for global food and marketing.
Speaker Change: <unk> Berg, who is bringing her decades of experience in our popular European food program to our global operation.
Speaker Change: Under her leadership and listening closely to customer feedback and data, we are focusing now more than ever on value consistency and having the right products available at the right time.
Speaker Change: Okay.
Speaker Change: Turning to our loyalty membership programs.
Speaker Change: In the U S inner circle registrations in full enrollments are up 13% from the previous quarter and we are closing in on 10 million members.
Speaker Change: We continue doubling down on our personalization efforts and the team is working on implementing new capabilities to tailor our offers and content to different segments of customers.
Speaker Change: Easy pay an inner circle were successfully linked this quarter, allowing customers a more frictionless single card experience at both our pumps and in our stores.
Speaker Change: We are pleased with the large number of customers already taking advantage of this benefit unlocking increased personalized value.
Speaker Change: In Europe, the number of active extra members continues to grow with one out of every two fuel transactions and nearly one out of every three merchandising transactions coming from extra members.
Speaker Change: We successfully rolled out our new extra 2.0 loyalty concept in Sweden and are working to expand it to additional European business units later this calendar year.
Speaker Change: The new concept is designed to offer rewards across all products and services at our sites.
Speaker Change: Whether a customer is looking to fill up with fuel charge, an electric electric vehicle or.
Speaker Change: Port grab a snack.
Speaker Change: This is the first time, we have brought our entire offering under one loyalty value proposition and we are seeing a lift in both traffic and increased value per extra member.
Speaker Change: In our goal of owning <unk>, we are excited about our many exclusive product launches in the U S, including Celsius watermelon ice during the quarter and our first ghost brand exclusive this month.
Speaker Change: Looking towards the summer, we will have our second Gatorade exclusive cold and frozen dispense beverages in the U S continued impressive double digit unit growth with margins beginning to normalize following the completion of our summer traffic can play campaign.
Speaker Change: In the adult beverage category. It is worth calling out central Canada business units excellence performance in the beer space.
Speaker Change: Last quarter following a change in legislation in Ontario, Canada's largest market, we've been able to offer a selection of beer cider wine and ready to drink alcoholic beverages, and our nearly 600 eligible stores.
Speaker Change: The response has been overwhelming with customers thrilled about the added convenience wider selection and competitive pricing.
Speaker Change: Now close to 50% of beer sales both in dollars and unit share for the entire country comes from our Central Canada business unit.
Speaker Change: Which also has the highest percentage of sales coming from beer and our entire global network.
Speaker Change: In the U S. The overall nicotine performance was slightly negative as lower demand for cigarettes was partially offset by the growth in other nicotine products.
Speaker Change: However, we continue to outperform the market due to our efforts around price optimization assortment expansion and the continuation of personalization programs for our age verified customers.
Speaker Change: In Europe, we had a strong performance in nicotine products with growth of Ot piece, especially E cigarettes, and increased tobacco cigarette sales in the Netherlands, which has new legislations favorable to our industry.
Speaker Change: Moving to our fuel business.
Speaker Change: I'm Stuart Road transportation fuel volumes decreased by 3% in the United States by 0.9% in Europe and other regions, while it increased by three 6% in Canada.
Speaker Change: As I mentioned earlier, we are maintaining market share in the United States and margins aligned with the trends of recent quarters as we continue to work on building value from our fuel supply chain and serving our customers through lower cost sourcing options.
Speaker Change: Our Europe <unk> fuel business has demonstrated resilience this quarter delivering solid income despite experienced volume volatility across markets.
Speaker Change: Growing non fuel income remains a strategic priority for our European B to B and B to B transit charging volumes grew steadily up 70% year over year contributing approximately 50% of transit charging in our Nordic countries.
Speaker Change: <unk> share in the U S continues to grow quarter over quarter, as we develop customer relationships with fleets of all sizes and implement implement new strategic partnerships.
Speaker Change: Our U S b to B customers see great value in our ability to offer consistency across the entirety of our network to serve their businesses and provide a great experience for their drivers.
Speaker Change: As for our truck segment, we are seeing positive momentum, especially in the northern United States. We also have nearly 200000 <unk> customers as members of the inner circle loyalty program, receiving personal rewards for commercial fueling.
Speaker Change: Our EV fast charging network in Europe now consist of nearly 3300 charge points.
Speaker Change: And our new mid European business units, all EV Chargers have been rebranded.
Speaker Change: Perhaps our most exciting recent development in E mobility has been the opening of our biggest charging hub in Sweden.
Speaker Change: The site features 26 high power Chargers for both passenger cars and heavy vehicles. It has solar powered energy integrated into the stations design and a new four CT concept with drive thru layout for seamless inefficient charging.
Speaker Change: Before I turn the call over to Philippe I want to mention our positive development and employee retention and engagement.
Speaker Change: First I'm very proud of our continuous improvement and bringing down store turnover and increasing new Howard new higher retention across the network.
Speaker Change: We are now at levels that were once hard to imagine and significant significantly outperformed the industry.
Speaker Change: We were also just awarded for the fourth consecutive year, the Gallup exceptional workplace Award.
Speaker Change: For me there is nothing more important than protecting and promoting the strong one team culture, we have at Costar.
Speaker Change: We will continue to build on this momentum of engagement and retention, ensuring our workplace remains one where our team members can grow and thrive while living our values and embracing our mission to make our customers lives a little easier every day.
Speaker Change: With that let me turn it over to Philippe to dive deeper into our financial performance this quarter.
Philippe: Thank you Alex good morning, everyone.
Philippe: We delivered notable progress this quarter with our most important performance in over a year as we continue to navigate challenging consumer trends, particularly in the United States.
Philippe: Our results reflect a balanced mix of organic growth and acquisitions, demonstrating the strength of our globally diversified network. The success of our integration activities and our commitment to drive long term sustainable growth.
Philippe: This quarter also marks the one year anniversary of the acquisition of certain upset from total jump in Mg, which is on track for synergy realization and continues to deliver solid results. Thanks to the dedicated efforts of.
Philippe: All of our team members.
Philippe: It is important to note that for the overlapping periods during the quarter. This acquisition delivered strong mid single digit same store merchandise revenue growth while center toll road transportation.
Philippe: So positive.
Philippe: This further highlights our ability to integrate large acquisition.
Philippe: And then for local management to drive results.
Philippe: With regard with regard to synergies significant realization. So far we have delivered approximately 13 million euros on operating expenses as of February six 2025.
Philippe: The <unk> run rate is progressing according to plan and is still expected to reach the 120 million euros in fiscal 2027, and 170 million euros in fiscal 2029.
Philippe: These synergies should result in reductions in operating selling administrative and general expenses as well as sales uplift from the introduction of our industry, leading best practices in operations customer offerings and concepts.
Philippe: As Alex mentioned Oxfam stopped it for months in the U S was impacted by severe and unusual weather events.
Philippe: Actually in the Fulton <unk> business units.
Philippe: Excluding these disruptions.
Philippe: Same store sales in the U S would have been positive as we estimate its impact at nearly 30 basis points.
Philippe: Similarly, same store road transportation fuel volumes were estimated to have been impacted by approximately 70 basis points.
Philippe: Alex noted earlier that our European business saw positive performance across most categories. We same store sales increasing by one 3% excluding the contribution from the four new countries.
Philippe: I also want to highlight that excluding the tobacco category and Hong Kong. The default model for this business who need on same store sales would have been plus five 6%.
Philippe: By coalition actually <unk>, one Chinese urea.
Philippe: I will now go over some key figures for the quarter for more details. Please refer to our MD&A available on our website.
Philippe: For the third quarter of fiscal 2025 reported an adjusted net earnings attributable to shareholders of the corporation were approximately $641 million or 68 per share on a diluted basis, representing an increase of four 6% compared to corresponding quarter.
Philippe: Last year.
Philippe: Adjusted EBITDA for the third quarter of fiscal 2025 increased by just over $1 $57 million or 11, 3% compared with the corresponding quarter of fiscal 2024, mainly due to the higher award for competition to more spot Shimon the contribution from acquisitions.
Philippe: <unk> to approximate $104 million and organic growth in our convenience operations, partly offset by softness in pure demand.
Philippe: Now, let's review in detail on each of our business six months on that.
Philippe: FX adjusted basis during.
Philippe: During the third quarter merchandise and service revenues increased by approximately $295 million.
Philippe: Or five 9% primarily attributable to the contribution from acquisition, which amounted to approximately $248 million and organic growth.
Philippe: Merchandise and service.
Philippe: Gross profit increased by approximately $134 million of seven 8%.
Philippe: This is primarily attributable to the contribution from acquisitions, which amounted to approximately 880.
Philippe: $89 million and improve the merchandise and services gross margin in the United States.
Philippe: Our merchandise and services gross margin in the United States increased by 9% to 59.
Philippe: 34%, sorry from improved supply conditions, while <unk> decreased by 2% to 59% in Europe and other regions Andover regions.
Philippe: In Canada, our merchandise and services gross margin decreased by one 8% to 32, 4%, reflecting a different product mix.
Philippe: <unk> revenues at a lower margin rate than the overall nicotine products that are no longer in our stores.
Philippe: Moving on to the acute side of our business Our road transportation fuel gross margin was $44 28 per gallon in the United States, an increase of 1.09 together in Europe and over regions. It was.
Philippe: 929 U S cents per litre an increase of <unk> 73 U S cents.
Philippe: Editor in Canada. It was 15 13, sorry, $13 64 Canadian per litre an increase of 55 cents Canadian per meter.
Philippe: Fuel margins remained healthy who often at work due to the continued work on the optimization of our supply chain and strong execution in our stores.
Philippe: In addition to marches across Germany have normalized from the low levels, we experienced earlier this year.
Philippe: This trend to continue.
Philippe: Now looking at SG&A for the third quarter of fiscal 2025 normalized expenses increased by two 6% year over year.
Philippe: This is primarily due to inflationary pressure and incremental investments supporting our strategic initiatives more than offset by a continued at four until that fit to serve program.
Philippe: From a productivity standpoint, we continue to refine our cost structure and improved labor efficiency, reducing staff by over 2% across our regions. While U S store associate uptime remains below 3% outperforming preorder year prior year levels.
Philippe: We didn't seek to serve we are delivering additional savings by consolidating procurement for goods not for resale and expanding capabilities via our shared service center known as the global capability networks.
Philippe: This initially established through streamlined accounting and finance operation GCN is ramping up nicely supporting multiple business 50 calls by centralizing customer care facility management and back office HR services.
Philippe: Goal is to achieve over $70 million savings, although the next five years at the same time, we have been seeing technology ecosystem.
Philippe: <unk> partners, ensuring we have the right expertise and solution EBIT to accelerate our transformation and enhance service levels.
Philippe: Leveraging that kind of ethics and scale to continue to drive cost savings that enable reinvestment in key technologies.
Philippe: One such stick to <unk> and <unk>.
Philippe: Hi, Raven Sistema optimizing product placement ordering and Ripley replenishment fully following its success in Europe. We are now deeply and relax in North America Womens inventory management reduce stockout and minimize waste.
Philippe: By notes, we launched in August this year with a full scale.
Philippe: Rollout planned for early 2026.
Philippe: Although the past few years, we have nearly doubled our technology. This month modernizing infrastructure digitizing the customer experience and providing store associate with advanced tools, we have identified all the necessary cost reduction to achieve and potentially penetrating exceeded 800 million tuckett, allowing us to operate more effectively and faster.
Philippe: Pace, while maintaining the same level.
Philippe: All of these efforts align closely with about 10 for the REIT strategy reinforcing our ability to execute on.
Philippe: <unk> long term objectives.
Philippe: From a tax perspective, the income tax rate for the third quarter of fiscal 2025 was 21% compared with 22% for the corresponding quarter of fiscal 2024.
Philippe: The decrease in mainly stemming from the impact of a different mix of earnings across the company.
Philippe: <unk> shown in which we operate.
Philippe: As at February two.
Philippe: 2025, we recorded a return on equity at 18, 8% and our return on capital employed to 12, 3%.
Philippe: During the fiscal year, our leverage ratio remained at two point or seven we also had strong balance sheet liquidity with $1 $7 billion in cash and then additional $3 billion available through our revolving unsecured operating credit settings.
Philippe: Turning to the dividend the board of directors declared yesterday quantity GDN of 19 point $19.05 Canadian per share for the third quarter of fiscal 2025 to shareholders on record at that.
Philippe: 2007, 2025, and therefore its payment effective April 10 2025.
Philippe: Let me conclude by briefly highlighting a few key points our results reflect a balanced mix of organic growth and acquisition demonstrating the strength of our globally diversified network and proven operating model, we continue to deliver on synergies and our ability to integrate large acquisition, while empowering local management highlights of <unk>.
Philippe: <unk> of our team and the depth of our culture.
Philippe: We remain focused on disciplined growth leveraging our strong balance sheet and strategic investments to create long term sustainable value for shareholders.
Philippe: You all for your attention I will turn the call over again to our president and CEO Alex meter.
Speaker Change: Thank you Philippe and I'll be brief to leave time to answer your questions.
Speaker Change: No doubt we are living through uncertain times with many geopolitical and economic challenges across our global network. However.
Speaker Change: However, what is most important to me is that we stay relentlessly focused on winning our customers by providing compelling value and services and doing the right thing for them and our team members.
Speaker Change: As we have done for the last 45 years I remain confident that by.
Speaker Change: By relying on the values, we live by our long term strategy global scale and proven ability to successfully grow the network. We will continue to move forward in our vision to become the world's preferred destination for convenience and mobility.
Speaker Change: On that note, let's turn it over to the operator to answer analyst questions.
Speaker Change: Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by the one on your Touchtone phone.
Speaker Change: You will hear prompts that Johan has been raised Jewish did decline from the polling process. Please press star followed by the two.
Speaker Change: If you are using a speaker phone please lift the handset before pressing any keys, we request that our callers limit yourselves to one question.
Speaker Change: One moment. Please for your first question.
Speaker Change: Your first question comes from Irene <unk> with RBC capital markets. Your line is now open.
Irene: Thanks, and good morning, everyone.
Irene: You just said it we are living through uncertain times, so how should we be thinking about the evolution of the macro backdrop as we move through Q4, but also into <unk> and <unk>.
Irene: How are you positioned in your various geographies to continue to hopefully drive improving trends on a go forward basis.
Irene: Thanks, Irene I appreciate the question good to hear your voice.
Irene: Certainly Irene great deal of uncertainty out there for us right now.
Irene: For us we continue to see the consumer under pressure.
Irene: Perhaps specifically in the United States, but really everywhere in our geographies.
Irene: What that means for US is just a relentless focus on our core initiatives.
Focusing on food, we've reduced our SKU count focusing on execution our meal bundles.
Irene: <unk> on our digital platforms, we've got some really exciting things coming up.
Irene: This quarter, specifically in the nicotine space that we'll be launching.
Irene: Really controlling cost Irene.
Irene: Cost and Capex, we are going to be extraordinarily disciplined I think we have a pretty strong track record of doing that I think that's more important than ever in this environment. So I don't pretend to sit here and no.
Irene: What the future is going to hold.
Irene: There's a lot of uncertainty out there for us. So we are going to focus on the things. We can control continue to take market share and be very disciplined with our cost and capital.
Irene: That's great. Thank you and just as a follow up.
Irene: How should we be thinking about how are you trending Q4 to date with perhaps some of the weather distortions that we've seen in the U S and how confident are you that you can deliver positive.
Irene: Gallons and insights short metrics.
Irene: 26.
Irene: I think we've seen a similar kind of trend.
Irene: So far in this quarter that we've been seeing.
Irene: So kind of more of the same as what I would say.
Irene: Again.
Speaker Change: Without sounding like a broken record Irene is focused on our activities. The things that we think will help us increase our market share beat our competitors in the market and deliver that top side organic growth that we are looking to deliver and I know youre looking for from us.
Irene: And one thing.
Speaker Change: Yes Irina.
Speaker Change: Thank you guys.
Speaker Change: It is good to us.
Speaker Change: Diversified geographic presence and while it's true that we continue to see some challenging environment in U S. We are very pleased by what we've seen in Canada and Europe.
Speaker Change: Canada.
Speaker Change: This.
Speaker Change: Welcome a piece coming from the alcohol category in Europe is showing a very strong resilience and and we continue to see that Tina.
Speaker Change: It's partly also that so thats good and again.
Speaker Change: It help us to cover the surveillance portfolio actually.
Speaker Change: Thank you.
Speaker Change: Your next question comes from Michael that else with TD Cowen. Your line is now open.
Speaker Change: I have two.
Speaker Change: Focus more on the acquisition side right now I know there's headlines that.
Speaker Change: And I signed a non disclosure agreement this morning.
Speaker Change: Im curious on a few things one our reports accurate that it is just for the assets.
Speaker Change: Would be part of that divestiture to appease the FTC and then yes.
Speaker Change: In addition to that do you feel youre, making progress was seven 9% towards the deal.
Speaker Change: We have not signed a non disclosure agreement was 7%.
Speaker Change: Our focus remains.
Speaker Change: It remains on a friendly approach on engaging with seven and I highlighting the benefits that we see to both groups of shareholders and all stakeholders.
Speaker Change: Understanding and exposing Couche tard to the Japanese public who we are what we stand for how we take care of communities and take care of people.
Speaker Change: That's where our focus is.
Speaker Change: So so the reports of an NDA this morning.
Speaker Change: It seemed to have been confirmed by seven to nine.
Speaker Change: They were talking about I believe they were talking about just the stores that you would have to sell as the therapies. The FTC, but youre, saying that you haven't signed anything in to your knowledge they haven't either.
Speaker Change: We are working with Eni.
We have not disclosed, but we have not signed an NDA with 7%.
Speaker Change: We are working with seven and I together around marketing package of what a divestment would look like in the United States.
Speaker Change: That marketing program has begun and there our NDA is being signed by potential buyers in that process.
Speaker Change: Okay. That's helpful. Thank you.
Speaker Change: And then.
Speaker Change: On the M&A environment as a whole can you talk a little bit about what the what that environment looks like in your key geographies and <unk>.
Speaker Change: And how active you are in on files other than seven and I and then of course, what does that imply about your confidence in getting a deal done.
Speaker Change: <unk> was 7%.
Speaker Change: M&A remains active and our geographies we continue to look at a number of things. There is some some larger transactions in Europe that we continue to stay engaged on.
Speaker Change: We continue to see pretty heavy deal flow in the United States of all sizes small single sites 10 side 100 sites, we continue and gate to engage in that M&A activity as we always would our decentralized model enables us to look at a number of different opportunities with our local business teams.
Speaker Change: Our small centralized team here in Lasalle.
Speaker Change: And there is no change for us in activity, but activity remains robust and I think with the continued macro challenges that we're seeing I think we believe we can we will continue to see that.
Speaker Change: So doing those types of deals wouldn't preclude you from also pursuing 79.
Speaker Change: Okay.
Speaker Change: Today you.
Speaker Change: We.
Speaker Change: We cannot discuss any file.
Speaker Change: Corporately engaged on the on the Onvia seven and eye conversation as you know.
Speaker Change: But.
Speaker Change: We don't know what will be the key.
Speaker Change: Completion of this process so.
Speaker Change: I will tell you our duty is to make sure that you know we.
Speaker Change: We explore and you find that come to our table and if it makes sense for us.
Speaker Change: Within the financial framework.
Speaker Change: We will take the decision that is right for the company for the shareholders. So that so thats, so I would tell myself.
Speaker Change: Alright, Thank you very much.
Speaker Change: Ladies and gentlemen, we request that you limit yourself to one question. Your next question comes from Mark Petrie with CIBC capital markets. Your line is now open.
Mark Petrie: Hey, good morning, and thanks for the clarification on on where you stand with seven and I I wanted to ask about the U S merchant same store sales performance and specifically across categories, you called out the meal deal promotion and growth in food, but hoping you can give some more color on the performance across your big categories.
Mark Petrie: And also if you can quantify the impact of the regulatory changes in the Netherlands on that Europe.
Mark Petrie: 5% same store sales number that'd be helpful. Thank you.
Mark Petrie: How about I start with the Netherlands, the Netherlands enacted legislation that basically disallowed the sale of cigarettes at grocery stores.
Mark Petrie: That of course moved a lot of that demand, which was significant demand.
Mark Petrie: Other channels with our channel being a big beneficiary of that.
Mark Petrie: Really.
Mark Petrie: Really pleased with our results in mid Europe. I think this is the first time, we had a month of same store sales we were positive 5%.
Mark Petrie: The Netherlands is driving same store sales in the mid 20, percents, that's largely being driven by cigarettes and the basket that comes with that cigarettes.
Mark Petrie: In the U S.
Speaker Change: I referenced in my speaking notes that tobacco as a whole was negative for us.
Speaker Change: The cigarette declines so overall, we were down about 1% in the U S and overall tobacco.
Speaker Change: Down.
Speaker Change: Two and a half.
Speaker Change: Other tobacco or other nicotine up a little more than 3%, but net net down one food food continues to grow up about 3% for the quarter pack ban.
Speaker Change: Continues to grow and we do well impact as I referenced in my speaking notes that.
Speaker Change: We're really doing well in hot and Cold. This fact, we're growing those categories growing margin in those categories. So.
Speaker Change: They are certainly supporting us.
Speaker Change: I appreciate that color. Thanks, all the best.
Speaker Change: Thank you.
Speaker Change: Your next question comes from Martin Landry with Stifel. Your line is now open.
Speaker Change: Yeah.
Martin Landry: Hi, good morning.
Speaker Change: I was wondering if you could.
Speaker Change: Refresh us on what.
Speaker Change: What's the proportion of food as a total of your merchandise sales in the U S.
Speaker Change: And also if you could discuss your strategy using <unk> to supply your stores like how many commissaries do you have right now in the U S and how many do you expect to add in the coming years.
Speaker Change: Yes. Thanks.
Speaker Change: In North America, our fluids about 12% of our mix in Europe, It's 2020 plus.
Speaker Change: And again our goal our best business unit in the United States has been about 20% and our goal is to get for us as a company up to that 20% and higher.
Speaker Change: We have one commissary in the United States today.
Speaker Change: We are expanding both our warehouses our own warehouses, we have three under construction today.
Speaker Change: And we plan to add our commissaries in the future to supply our own products.
Speaker Change: Okay. Thank you.
Speaker Change: Your next question comes from Mark Carden with UBS. Your line is now open.
Mark Carden: Okay. Thanks, so much for taking my question. So wanted to get your early read on tariff impacts and the potential for cyclical tariffs that could come into play in early April and just how youre thinking about potential impact on your margin structure and.
Speaker Change: And potential plans to offset it thank you.
Speaker Change: Yes. Thank you for the question, it's certainly a moving feast as we look to.
Speaker Change: Continue to analyze tariffs I think we've done quite a bit of work and the core story I think we're pretty confident in is that tariffs are not going to have a big impact to our business. We we source most of our products in our countries in those local countries.
Speaker Change: The tariff application.
Speaker Change: If it was kind of it.
Speaker Change: It would be the same across all retailers for us to experience that so.
Speaker Change: So we do not see a big impact from tariffs on our underlying business I think the larger impact is what it means for inflation and what it means for consumers that are already stretched and really struggling with disposable income.
Speaker Change: That's kind of the big unknown that we will be watching very closely.
Speaker Change: Excellent.
Speaker Change: Yes, I just wanted to for US it's uncertain times and this is about bringing value being really laser focused on how we can provide value to customers. We are really pleased with our meal deals in our bundles and we will continue to lean into that to show value to our customers in this environment.
Speaker Change: And.
Yes.
Speaker Change: Over example is again the trend on the on the private brand program is accretive to diverse.
Speaker Change: In U S and North America on the Atlantic Central So that's until one of the driver for us to continue to to speak about baidu to a customer.
Speaker Change: I appreciate all the color. Thanks, so much.
Speaker Change: Your next question comes from Luke Hannan with Canaccord Genuity. Your line is now open.
Luke Hannan: Yeah. Thanks, Good morning, I wanted to ask about some of the changes to the beverage alcohol.
Luke Hannan: Retail environment within Ontario, you mentioned the positive impact that you had that it had on your results I just wanted a little bit of clarification. What are you seeing right now for the customer that is coming into the store for those those beverage alcohol products are they coming in just to buy them or are they typically include them as part of a larger basket and then maybe as a follow on to that what or what exactly are you.
Luke Hannan: You're doing as far as either offers bundle offers etcetera in order to make sure.
Luke Hannan: The net impact to you or to your merchandize margins isn't as dilutive as just selling.
Luke Hannan: The alcohol products itself. Thanks.
Luke Hannan: Yeah. Thanks for the question.
Luke Hannan: Our central Canadian business unit, just the execution around.
Luke Hannan: The regulatory change and allowing beer and alcohol sales in Ontario, I, just could not be more proud we were ready we execute it straight out of the gate, we literally within the first week at all but a handful of stores offering product and that enabled us to take huge share out of the gate.
Luke Hannan: Just a tremendous effort by Steven our team in Central Canada.
Luke Hannan: We are learning so we're learning around what mix to have how much alcohol to have how much Pac bev behalf.
Luke Hannan: So we will continue to optimize our set.
Luke Hannan: In the space and it's really exciting candidly for us what we're seeing and we're learning about the basket. We are seeing I think initially we saw a lot of solo alcohol purchases. We are seeing that basket start to grow as we put adjacencies to the products. The usual things you would expect to see with alcohol chip.
Speaker Change: Max take home chips snacks, some energy drinks.
Luke Hannan: Some nicotine with those purchases.
Luke Hannan: Obviously, our goal is to continue to realize and grow that basket with these increased customers coming into our stores for beer and alcohol.
Luke Hannan: Okay. Thank you very much.
Speaker Change: Your next question comes from Tami, Chen with BMO capital markets. Your line is now open.
Speaker Change: Hi, Good morning. Thanks for the question mine is RMB U S fuel business.
Speaker Change: I think firstly volume comps and I think even adjusted for your estimate of the weather impact.
Speaker Change: What is worse than your merchandise comp.
Speaker Change: I think it was a sequential softening as well so I'm just wondering if you can elaborate a bit more.
Speaker Change: I'm not seeing any change in the competitive dynamic there.
Speaker Change: What sort of factors that you'd call out that led to that result, thank you.
Speaker Change: Yes, thanks for the question.
Speaker Change: I mean, what's happening right now is our geographic mix mix in the U S is hurting us a bit.
Speaker Change: Our largest states are Florida, Texas and Arizona.
Speaker Change: I think throughout the quarter, we've seen really heavy inflation in cost of living increases in Florida, and Arizona as a result, we're seeing fewer snowbirds I think we're seeing fewer Canadians and to the United States I think we're seeing that in our Canadian volume.
Speaker Change: It's been a trend for a couple of years.
Speaker Change: To be Frank and then with the administration change we are seeing softness along the southern border in specifically, Texas and.
Speaker Change: And Arizona. So those are our three biggest states are three largest volume states they are suffering a bit due to those.
Speaker Change: The dynamics I just referenced if you look in the middle of the country, we're actually performing quite well. So I think these are near term challenges and where our mix is hurting us a little bit at the total level.
Speaker Change: We think this too shall pass and for US we are focused on execution of inner circle, bringing in additional customers getting more fills from those customers. We are focused on the deployment of our AI pricing tool that we will continue throughout throughout this quarter and the next fiscal year and we are.
Speaker Change: <unk> down on our growth in <unk> to be in North America, as we continued to add resource into those teams.
Speaker Change: Continue to grow that space of the business.
Speaker Change: Thank you.
Speaker Change: Your next question comes from Vishal <unk> with National Bank Financial Your line is now open.
Speaker Change: Hi, Thanks for taking my question with respect to the Canadian margin the year over year and merchandising year over year weakness can you help us understand to what extent that was due to the nicotine and to what extent that was due to the.
Speaker Change: The mix change associated with alcohol.
Speaker Change: Yes.
Speaker Change: Thank you Shannon for the question.
Speaker Change: I would say the vast majority of all the distribution that is explained by two components. The first one is the <unk>.
Speaker Change: The Colo.
Speaker Change: Category increasing in.
Speaker Change: In central in Ontario, and the second one either.
Speaker Change: The fact that.
Speaker Change: You know we have to stop the selling of it theres only product.
Speaker Change: In Canada.
Speaker Change: That was a high margin product so.
Speaker Change: If all between back to basically explain the dilution that you have seen in the <unk> in Canada.
Speaker Change: Gotcha.
Speaker Change: Could you help us understand the proportion of the impact from each.
Speaker Change: So.
Speaker Change: <unk>.
Speaker Change: The one component related to the I'll call it explain the 60% or roughly 60% of the division and after yes.
Speaker Change: 40% are coming from.
Speaker Change: And then.
Speaker Change: And then you could see one.
Speaker Change: Thank you.
Speaker Change: Yeah.
Speaker Change: Your next question comes from Anthony Bernardino with Wells Fargo. Your line is now open.
Anthony Bernardino: Yeah, Hey, good morning, guys. Thanks for taking my question. So I just wanted to ask about U S. Inside margins that 90 bps of expansion it looks like a pretty significant step change in the year over year trend from what you guys saw last quarter.
Anthony Bernardino: You mentioned improved supply conditions, but can you just talk a little bit more about what drove that inflection and then how youre thinking about the durability of that into Q4.
Yes. Thank you.
Anthony Bernardino: Kind of signal that I thought there was opportunity for us to expand margins and I'm really pleased to see us kind of execute and deliver on that this quarter.
Anthony Bernardino: We think there continues to be opportunity there I think similar to our cost line is it going to be vertical.
Anthony Bernardino: Trend up and down to a degree, but we believe that the overall trend should continue to improve that is due to as we continue to get better at our food program.
Anthony Bernardino: I referenced the rationalization of Skus.
Anthony Bernardino: We're focused on driving down spoilage and increasing our margin rates across our food areas I think I talked last time about our data and analytics capability and how we're analyzing promotions, reducing the number of promotions.
Anthony Bernardino: We're running I think we will continue to do that and we will continue to improve and in that analytical capability.
Anthony Bernardino: And we will continue to use our global scale.
Anthony Bernardino: And.
Anthony Bernardino: Apply our procurement teams with our vendors.
Anthony Bernardino: To try and improve our buying conditions and I think when you consider all of these factors coming together I think we remain pretty bullish on the forward look to improve our merch margins.
Anthony Bernardino: Thanks, guys.
Anthony Bernardino: Yes.
Speaker Change: Your next question comes from Bobby Griffin with Raymond James Your line is now open.
Speaker Change: Your line is open.
Speaker Change: I'm, sorry, we can't hear you.
Speaker Change: Ladies and gentlemen, as a reminder.
Bobby Griffin: Yes, Hey, Bobby.
Bobby Griffin: Oh, yes, I can hear you, yes. Thank you sorry about that I just wanted to dive into the promotional environment here in the U S. As we head into <unk>.
Bobby Griffin: Spring and summer how do you look at that competitively and kind of what are your plans around promotions.
Speaker Change: Given some of the consumer dynamics that we're debating here in the U S.
Bobby Griffin: Yes, thanks, Bobby for Us it's about.
Speaker Change: Showing value.
Speaker Change: It's it.
Speaker Change: It's not more promotions, it's about reflecting value and value that customers perceive and that they recognize and.
Speaker Change: And thats going to drive them to come into our stores. So that certainly is on our food products in our meal bundles, where I think I've shared previously that we.
Speaker Change: We're really hearing from customers were watching their behavior. They are seeing the value in what we're offering them for that meal occasion, we continue to grow those sequentially materially kind of week over week, and we will stay laser focused on that.
Speaker Change: We will again the goal is not to run more promotions, it's to run effective promotions, where consumers see real value and we will use our data and analytics to determine what those things are I think lastly, I referenced nicotine in digital.
Speaker Change: It's really about using our data to personalize really understand customers.
Speaker Change: What are they purchasing from us what is their purchasing behavior, giving them offers that matter to them.
Speaker Change: Get them to come into our stores more and appreciate what we are doing for them and we want to increase the amount of personalization and offers we're making both in the nicotine stake space, but across our inner circle in all of our categories.
Speaker Change: Thank you for the detail and best of luck here.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen, as a reminder, should you have a question. Please press star one.
Speaker Change: Your next question comes from John Royall with Jpmorgan. Your line is now open.
John Royall: Hi, good morning, Thanks for taking my question.
Speaker Change: So could you talk a little bit about private label and how that's been trending in the rollout of new products, there, what's working and what isn't working and what are you seeing in terms of the customer behavior are they still do they still have the propensity to trade down into that lower price point with private label or is that type of behavior starting to reverse at all.
John Royall: Yes.
John Royall: Well as I mentioned, yeah, we will continue to see.
John Royall: Because some of them looking for.
John Royall: This category.
John Royall: We can talk about <unk>, all which have done in the past few months on the <unk> side.
John Royall: We have a really great story, there so in nice growth there.
John Royall: It's true.
John Royall: <unk> full year across categories. The ADT for us is that in open interest.
John Royall: Penetration is still low and we have still a lot of opportunities. There. So we recently appointed a new leader on this.
John Royall: Do you know to take care of it so obvious category and to make sure that we.
John Royall: We continue to expand it not only in terms of its ku, but making sure that we are presenting the relevant categories. So.
John Royall: Because.
Alex Miller: As Alex mentioned.
John Royall: The customer is looking at and we continue to look for value. So.
John Royall: Yes, we see we've seen opportunities across across the across it.
John Royall: Do geographic and across the categories for the next coming more fund will make sure that <unk> in terms of.
Brown: Brown, Yeah, we continue to expand.
Brown: It skews, we have some visibility of at least adding mobile one on Dolby Skus in the next coming more so.
Brown: Feeling pretty pretty well about the program there.
Brown: Making sure that you will continue to interest rate picture.
Brown: Thank you.
Speaker Change: Your next question comes from Cory <unk> with Jefferies. Your line is now open.
Speaker Change: Great. Thanks, it's really nice to see the momentum in the U S.
Speaker Change: Merchandize business, specifically around the meal deals and I know you've expanded into Canada.
Speaker Change: I just wanted to ask how you think about.
Speaker Change: Further building upon this and where you think the opportunity could be.
Speaker Change: Just specifically as it relates to really driving value.
Speaker Change: With food and fresh foods specifically.
Speaker Change: In the U S and Canada and globally.
Speaker Change: It really does seem like a great opportunity for the business as we look ahead.
Speaker Change: Thank you we agree with you we think it's a tremendous opportunity and we under SKU as we've shared with you around our percentages.
Speaker Change: Our focus today is in north Americas.
Speaker Change: We have validated that we have.
Speaker Change: Specific number of Skus that our customers want to purchase from US our focus right now is executing on that program and those skus and really targeting our existing customers. We have we have hundreds and in many stores, we have more than 1000 customers visiting us every day all of those customers E and <unk>.
Speaker Change: Focus is on execution of these core products that we have proven our customers want and demand.
Speaker Change: Thank you.
Speaker Change: We will execute that.
Speaker Change: We will see execution of that and then we will localize.
Speaker Change: Different taste profiles in different geographies, that's true here in Canada. It is also true in the United States I think we've got to earn the right of execution of the core then we will localize products to continue to grow our share.
Speaker Change: It's our plan, we're going to start with our existing customers. Once we feel like we're good at that we will expand and start to look to attract new customers.
Speaker Change: Great. Thank you very much and then just curious on as you think about your your sourcing abilities in Europe or the <unk>.
Speaker Change: Opportunity to continue to lower costs.
Speaker Change: What inning would you say.
Speaker Change: You are in as you think about the.
Speaker Change: The opportunity to continue to lower costs for for the business around.
Speaker Change: Sourcing capability that continues to be an opportunity and obviously we saw some upside.
Speaker Change: Versus consensus on on some of the fuel margin numbers I'm curious how you think about the continued opportunity in that regard as well as we continue to look ahead.
Speaker Change: Yes, I think in <unk>.
Speaker Change: Our global field team is certainly more than a decade on their journey I think we feel really strong about that that team their capabilities. We continue to expand our capability of our Geneva team and our team with musket down in Houston I think we will continue to make investments in those relationships.
Speaker Change: We will continue to advance our ability to arbitrage using our own trucking fleet about half of our gallons in the U S are provided by our own trucking fleet that fleet enables us to capture arbitrage when it exist. So I think the fuel journey, we feel great about I think we outperformed opus by about <unk>.
Speaker Change: Again, this quarter and Theyre still lacks volatility we will continue to invest in that on the merch side, Yes, we've had a central globalized procurement team again for more than a decade.
Speaker Change: I think we're making investments into that team I think there's quite a bit of capability.
Speaker Change: We're really focused on kind of stepping up our activity in goods not for resale right now based kind of owns that has a team of people we.
Speaker Change: We see a lot of opportunity there that's part of our fit to serve in and some of the cost savings, we referenced I think than more on the merch Cogs side.
Speaker Change: So in fuel I would say we're in inning seven.
Speaker Change: If youre talking baseball, which I assume you are.
Speaker Change: I'd say on the procurement side, we're in inning, five or six and we will continue to advance, especially GFR I think on the merchant.
Speaker Change: Supply chain, we are going to go deeper into the supply chain here in North America, and I would say we're in inning, one or two.
Speaker Change: We own.
Speaker Change: We own three of our own warehouses today, we have one in Texas, one in Arizona and one here in Montreal.
Speaker Change: I referenced where we have three more under construction right now we have a plan to really be able to serve is call. It roughly 75% of our own sites through our own warehouses, we like what this does for US both from a Cogs perspective, as well as an assortment perspective per the question earlier, we will be at.
Speaker Change: Adding additional commissaries. Besides some of these warehouses to improve our cost of goods in our assortment as we continue to grow food.
Speaker Change: Thank you very much very helpful Best of luck.
Speaker Change: There are no further questions at this time I will now turn the call over to Matt <unk> for closing remarks.
Speaker Change: Thank you Alex and Philippe that's covers all the questions for today's call. Thank you all for joining us and wish you a great day and look forward to discussing our fourth quarter 2025 results in June so some F&I profit answer.
Speaker Change: I missed one of them already swept through negative average only <unk> wouldn't notice is it does it kept him. Thank you Mr. <unk>.
Speaker Change: Great. Thank you very <unk>.
Speaker Change: The MSR asset.
Speaker Change: Ladies and gentlemen, this concludes your conference call for today, we thank you for participating and ask that you. Please disconnect your lines.
Speaker Change: Yes.
Speaker Change: Yeah.
Speaker Change: No.