Q3 2025 Alimentation Couche-Tard Inc Earnings Call
Joelle: Good morning, my name is Joelle and I will be your conference operator today. Bonjour, je m'appelle Joelle et je serai votre péretre gris pour la conférence aujourd'hui.
Joelle: I will now introduce Mr. Mathieu Buonnet, Vice-President in Vassal Relations and Treasury at Alimentation Cochetteur. Je vais maintenant passer la parole à Mr. Mathieu Buonnet, vice-president de relation Investors and Preserveries for Alimentation Cochetteur.
Speaker Change: All lines will be placed in silent mode to avoid any unnecessary noise. Following the presentation, we will answer analysts' questions live. We would like to remind you that this webcast will be available on our website for a period of 90 days.
Speaker Change: Furthermore, please note that some of the topics discussed during this webcast may consist of forward-looking statements that are provided by the company with the usual disclaimers.
Speaker Change: These risk warnings and uncertainties are described in our financial reports. Therefore, it is possible that our future results may differ from the information presented today.
Speaker Change: The financial results will be presented by Mr. Alex Miller, President and CEO , and Mr. Philippe Da Silva, Chief Financial Officer.
Speaker Change: Good morning. I would like to welcome everyone to this web conference, presenting Edimatt Estimal Quistal's financial results for the third quarter of fiscal year 2025.
Speaker Change: All lines will be kept on mute to prevent any background notes. After the presentation, we will answer questions from analysts ascribed during the web conference. We would like to remind everyone that this webcast presentations will be available on our website for a 90-day period.
Speaker Change: Also, please remember that some of the issues discussed during this broadcast might be forward-looking statements which are provided by the corporation with its usual caveats.
Speaker Change: These caveats are risks and uncertainties are outlined in our financial reporting. Therefore, our future results could differ from the information discussed today.
Speaker Change: 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 of resilience.
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: Food continued to grow in the US as our meal-deal promotions performed well and have been extended to Canada. 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 persists, 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: I want to begin by briefly mentioning our ongoing commitment to acquires seven and eye holdings. No doubt you have 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 affirmly believe that there is a unique strategic fit between Kuchta and 7 and up 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 7-11 brand and strengthening the 7-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. We look forward to full swing 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 has involved in our efforts concerning seven and I, as the vast majority of the business is laser focused on our global operations.
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 expanding to four new countries.
Speaker Change: With the one-year mark, I'm happy to report that we are now reporting synergies from the transactions, which are on track with our expectations. Believe they will cover more details in his presentation.
Philippe: We are truly proud of how the new team members have embraced our culture, values, and customer-focused approach to retail operations.
Philippe: 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 mention 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 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 enthusiastic about our learning from the extremely popular GetGo food and loyalty program and the members of a dedicated team.
Speaker Change: In organic growth, we continue to make progress on our 500 new store effort. 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: A recent new stores include dozens of high-speed diesel and rural locations. As of today, we have more than 56 stores currently under construction and about a thousand sites in our overall real estate development pipeline.
Speaker Change: The second point I want to acknowledge is 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, free beverages, and replenishment to first responders.
Speaker Change: We also had a successful fuel day front fundraiser from which, with the support of our global franchise team, we donated $100,000 US dollars to the American Red Cross for their continued relief work in the region.
Speaker Change: Also in January in the United States, our southern business units suffer from a winter story.
Speaker Change: that in a region completely inhospitable to the accumulation of snow and church, caused numerous power outages and left millions of people to recall disastrous road conditions and cold temperatures.
Speaker Change: As always, our team kept the stores open and offered the necessary services and products to our customers.
Speaker Change: Now let me get back to our quarterly results, starting with convenience. Compared to the same quarter last year, same-store merchandise revenues decreased by 0.1% in the United States, increased by 0.2% in Europe and other regions.
and 2.8% in Canada.
Speaker Change: While we have had sequential improvements in the United States, the performance of our same-store sales has been negatively affected by these winter storms. Philippe will give you more details on this subject.
Philippe: Once again this quarantine, as inflation conditions persisted, we have been slowly focused on winning our customers by bringing competitive value to our products and services.
Philippe: In January, we expanded the line offerings across Canada following the success of our food business launch in the United States in January, by bundling popular products at a valuable price to create a satisfying and affordable food option.
Philippe: Beyond North America, there are now nearly 465,000 food sales per week. And this number is materially increasing each week.
Philippe: Our food sales strategy continues to progress, with more than 5,890 fresh food stores opened worldwide.
Philippe: We have recently brought on a new Vice President of Global Marketing and Food, Mette Oegleberg, who brings her decades of experience in our popular European food program to our global operation.
Philippe: under his leadership and by deeply listening to customer feedback and data, we are now focusing, more than ever, on value, consistency, and having the right products available at the right time.
Back to our loyalty memory programs.
Philippe: In the United States, cross-training registrations and full enrollments are over 13% higher than they were the previous year, and we are closing in on 10 million members.
Philippe: We continue to increase our personalization efforts and the team is working on implementing new capabilities to tailor our offerings and content to different segments of our customers.
Philippe: EasyPay and InnerCircle have successfully linked this quarantine, allowing customers a unique, more frictionless card experience at our pumps and in our stores.
Philippe: We are satisfied with the enormous number of customers who have already taken advantage of this benefit, by expanding the personalized value.
Philippe: In Europe, the number of extra active members continues to grow, with twice a day two energy transactions and almost once a day three transactions from sellers coming from extra members.
Philippe: We have successfully developed our new loyalty concept Extra 2.0 in Sweden and we are working to expand it to additional European business units later in the year.
Philippe: The new concept is designed to offer rewards across all the products and services on our site.
Speaker Change: Whether a customer is looking to fill up with fuel, charge an electric vehicle, or grab a snack.
Speaker Change: This is the first time we have put our entire offer under a loyalty value proposition, and we are seeing an increase in traffic and an increase in value per additional member.
Speaker Change: In our goal to acquire Thirst, we are excited about our many exclusive equipment launches in the United States, including the Ice Watermelon from Celsius during the quarantine and our first exclusive Ghost Brand launch this month.
Speaker Change: During the summer, we will have our second exclusive Gatorade, cold and chilled drinks in the United States, a continuation of impressive double-digit unit growth, with margins that are beginning to normalize at the end of our summer traffic campaign.
Speaker Change: In the category of adult beer, it is valid to call the excellence of the performance of central Canadian business units in the field of beer.
Speaker Change: Last year, following a change in law in Ontario, Canada's largest market, we were able to offer a selection of beers, ciders, wines, and ready-to-drink alcoholic beverages to our nine million affiliates.
Speaker Change: The response has been amazing, with customers enthusiastic about the added convenience, wider selection, and competitive pricing.
Speaker Change: Today, nearly 50% of beer sales, in dollars and units, for the entire country, come from our central business unit in Canada, which also has the highest number of beer sales in our entire global network.
Speaker Change: In the United States, the performance of nicotine was slightly negative, as the demand for cigarettes was partially offset by the growth of other nicotine products.
Speaker Change: However, we continue to outperform the market thanks to our efforts in 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 terms of nicotine products, with growth in OTPs, notably cigarettes, and an increase in tobacco cigarette sales in the Netherlands, which means we have new legislation favorable to our industry.
Moving to our fuel business.
Speaker Change: Fuel volumes at the same roadside store decreased by 3% in the United States, by 0.9% in Europe and other regions, while they increased by 3.6% in Canada.
Speaker Change: As I mentioned earlier, we are maintaining market share in the United States and margins are in line with trends from recent quarters, continuing to work to build value in our energy application chain and serve our customers through low-cost sourcing options.
Speaker Change: Our B2B fuel company in Europe has demonstrated its resilience during this quarantine, providing solid revenue despite experiencing volatility across the markets.
Speaker Change: The increase in the non-fuel energy tax remains a strategic priority for our European B2B, and B2B transport loading volumes have gradually increased, up to 70% year on year, contributing to about 50% of the transport loading in our Nordic countries.
Speaker Change: B2B FuelShare in South America continues to grow from district to district by developing customer relationships with fleets of all sizes and implementing new strategic partnerships.
Speaker Change: Our U.S. B2B clients greatly value our ability to provide consistency across our entire network, to serve their businesses and offer an excellent experience for their operators.
Speaker Change: Regarding our car sector, we see a positive movement, particularly in the northern United States. We also have nearly 200,000 B2B customers as members of the InterCircle Loyalty program, who receive personal rewards for commercial fuel.
Speaker Change: Our fast EV charging network in Europe now consists of approximately 3300 charging points. In 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 largest charging hub in Sweden.
Speaker Change: The site has 26 high-power chargers for passenger cars and heavy vehicles. It has solar electric energy integrated into the station's design and a new concept of 4 lanes with a driving layout for a seamless and efficient charging experience.
Speaker Change: Before handing over the phone to Philippe, I would like to mention our positive development in terms of employee attention and engagement.
Philippe: First of all, I am very proud of our continuous improvement in enhancing market return and improving retention on the network.
Philippe: We are now at levels that were initially difficult to imagine and that have significantly surpassed the industry.
Philippe: We have also received, for the fourth consecutive year, the Gallup Exceptional Workplace Award. For me, there is nothing more important than protecting and promoting the strong culture of a single team that we have at Kushtar.
Philippe: We will continue to build on this momentum of engagement and retention, ensuring that our workplace remains a place where our team members can grow and thrive by living our values and embracing our mission to make our customers' lives a little easier every day.
Philippe: With that, I will hand over to Philippe to delve deeper into our financial performance this quarter.
Thank you, Alex. Good morning, everyone.
Philippe: We delivered notable progress this quarter, with our most improved 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 a certain asset from Total Energy, which is on the path to synergistic realization and continues to deliver solid results, thanks to the dedicated efforts of all our team members.
Philippe: It is important to note that for the overlapping period during the quarter, this acquisition delivered strong mid-single-digit same-store merchandise revenue growth, while same-store road transportation fuel volumes were also positive.
Philippe: This further highlights our ability to integrate large acquisitions and empower local management to drive results.
Philippe: With regards to synergy realization, so far we have delivered approximately 13 million euros on operating expenses as of February 2nd, 2025.
Speaker Change: The circulation rate of CNGs is progressing according to plan and is still expected to reach 1.20 million euros in fiscal 2027 and 1.70 million euros in fiscal 2029.
Speaker Change: 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.
Speaker Change: As Alex mentioned, our current performance in the United States has been impacted by severe and unusual weather events, particularly in our supported business units.
Speaker Change: Excluding these disruptions, our same-store sales in the US would have been positive, as we estimate its impact at nearly 30 basis points.
Speaker Change: In the same way, the volume of road transportation fuel sold in the same stores was estimated to have been affected by about 0.7%.
Speaker Change: Alex noted earlier that our European business saw positive performance across most categories, with same stock sales increasing by 1.3%, excluding the contribution from the four new countries.
Speaker Change: I also want to highlight that excluding the tobacco category in Hong Kong, the performance of this business unit on same-store sales would have been plus 5.6%, driven by promotional activities around Chinese New Year.
Speaker Change: I will now go over some key figures for the plotter. For more details, please reach out to our Indiana Available on our website.
Speaker Change: For the third quarter of fiscal 2025, reported and adjusted net earnings attributable to shareholders of the corporation were approximately $641 million or 68 cents per share on the day 19 basis.
Speaker Change: Representing an increase of 4.6% compared to the corresponding quarter of last year.
Speaker Change: I just did a BDA for the third quarter of fiscal 2025, increased by just over $1.67 million for 11.5%
Compared with the corresponding quarter of fiscal 2024.
Speaker Change: Now let's review in detail each of our business segments on an ethics-adjusted basis.
Speaker Change: During the third quarter, merchandise and sales revenues increased by approximately $295 million or 5.9 percent, primarily attuned to the contribution from acquisition which amounted to approximately $248 million and organic growth.
Speaker Change: Match on the ice and service goes profit increased by approximately 134 million dollars of 7.8%.
Speaker Change: This is primarily attuned to the contribution from acquisitions which amounted to approximately $89 million and improved the merchandise and service growth margin in the United States.
Speaker Change: A merchandise and service growth matching in the United States increased by 0.9% to 34% sorry, from improved supply conditions, 1, it decreased by 0.2% to 39% in Europe and over regions.
Speaker Change: In Canada, our merchandise and service growth margin decreased by 1.8% to 32.4% reflecting a different product mix and new alcohol-wrapped news at a lower margin rate than the other nicotine products that are no longer sold in our stores.
[inaudible]
Speaker Change: Moving on to the fuel side of our business, a road transportation fuel rough margin was 44.28 cents per gallon in the United States, an increase of 1.09 cents per gallon. In Europe and over regions it was
Speaker Change: 9.29 U.S. cents per liter, an increase of 0.73 U.S. cents per liter, and in Canada it was a 13.54 cents Canadian per liter, an increase of 0.55 cents Canadian per liter.
Speaker Change: Fuel margins remain healthy throughout our network due to the continued work on the optimization of our supply chain and strong executive execution in our stores.
Speaker Change: In addition, fuel margins across Germany have normalized from the lower level we experienced earlier this year, and we expect this trend to continue.
Speaker Change: Now looking at SGNA for the third quarter of fiscal 2025, normalize expenses increased by 2.6% year-over-year.
Speaker Change: This is primarily due to inflationary pressure and incremental investment supporting our strategic initiatives more than upset by a continued effort under the speed to solve program.
Speaker Change: From a prositivity standpoint we coated to refine our cost structure and improve labor efficiency, reducing stores hour by over 2% across our regions, while U.S. store associates all the time remains below 3% outperforming prior year, prior year levels.
Speaker Change: We are delivering additional savings by consolidating procurements for good, non-for sale and expanding capabilities via our shared service center known as the Global Capability Networks.
Speaker Change: If initially established to streamline accounting and finance operation, GCM is rumping up nicely, supporting multiple business verticals by centralizing customer care, facility management and back-office HR services.
Speaker Change: Our goal is to achieve over $70 million savings over the next five years.
Speaker Change: At the same time, we are advancing technology ecosystem through strategic partners ensuring we have the right expertise and solution needed to accelerate our transformation and enhance service levels.
Speaker Change: By leveraging data analytics and scale, fit to subcontinue to drive cost savings that enable investment in key technologies.
Speaker Change: One such technology is RELEX, an AI-driven system optimizing product placement, ordering and replenishment. Following its success in Europe , we are now deploying RELEX in North America to enhance inventory management, reduce the cost and minimize waste.
Speaker Change: By lots we launch in August this year with a full scale rollout planned for early 2026.
Speaker Change: Over the past few years, we have nearly doubled our technology investment, modernizing infrastructure, digitizing the customer experience, and providing to associate with advanced tools.
Speaker Change: We are identified all the necessary cost reduction to achieve and potentially exceed our 800 million target, allowing us to operate more effectively and at a faster pace, while maintaining the same level of output.
Speaker Change: All these efforts align closely with our 10-for-the-me strategy, reinforcing our ability to execute our own long-term objectives.
Speaker Change: 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. The decrease is mainly stemming from the impact of a different mix in our earnings across the various jurisdictions in which we operate.
Speaker Change: As of February 2, 2025, we recorded a return on equity at 18.8% and a return of on capital employed to the 12.3%
Speaker Change: During the fiscal year, our leverage ratio remained at 2.0.7. We also had strong balanced sheet liquidity with 1.7 billion dollars in cash and an additional 3 billion dollars available through our revolving and secured operating credit strategies.
Speaker Change: Turning to the median, the Board of Directors declared yesterday a quarter of the median of 19.5 cents Canadian per share for the third quarter of fiscal 2025 to shareholders on record as at March 27, 2025, and approved the explainment effective April 10, 2025.
Let me conclude by briefly highlighting a few key points.
Speaker Change: Our results reflect the balance mix of organic growth and acquisition, demonstrating the strength of our globally diversified network and proven operating model.
Speaker Change: We continue to deliver on synergies and our ability to integrate large acquisition while empowering local management highlights the dedication of our team and the depth of our culture.
Speaker Change: We remain focused on discipling growth, leveraging our strong balance sheet and strategic investments to create a long-term, sustainable, value-for-shoulders. I thank you all for your attention. I will turn the call over again to our president and CEO , Alex Miller.
Speaker Change: Thank you, Felipe. 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.
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.
As we have done for the last 45 years.
Speaker Change: I remain confident that by relying on the values we live by.
Speaker Change: 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. You will hear a prompt that your hand has been raised. Should you wish to be climbed from the polling process, please press star followed by the two.
Speaker Change: If you are using a speaker phone, please let the hands up before pressing any keys.
Speaker Change: We request that our callers limit yourselves to one question. One moment please for your first question.
Speaker Change: Your first question comes from Irene Netel with RBC Capital Markets. Your line is now open.
Speaker Change: Thanks and good morning, everyone. You know, Alex, you just said that we are living through to uncertain times. So how should we be thinking about the evolution of a macro backdrop, you know, as we move through Q4, but also into F-26? And how are you positioned in your various geographies to continue to, hopefully, drive improving trends on a go-forward basis?
Thanks Irene. I appreciate the questions. Good to hear your voice.
Speaker Change: Certainly Irene, great deal of uncertainty out there for us right now. For us, we continue to see the consumer under pressure, perhaps specifically in the United States, but really everywhere in our geographies.
Speaker Change: And you know what that means for us is just a relentless focus on our core initiatives.
Speaker Change: focusing on food we've reduced our skew count focusing on execution our meal bundles focusing on our digital platforms we've got some really exciting things coming up this quarter specifically in the nicotine space that will be launching
Really controlling cost.
Irene, Cost and CapEx.
Speaker Change: 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 know what the future is going to hold. There's a lot of uncertainty out there for us.
Speaker Change: We will therefore focus on the things we can control, continue to gain market share, and be very disciplined with our costs and capital.
Speaker Change: That's great. Thank you. And just as a follow-up, you know, 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, you know, gallons and inside-store metrics in F-26?
I think we've seen a similar kind of trend.
Speaker Change: So far in this quarter that we've been seeing, so kind of more of the same is what I would say.
Speaker Change: Again, you know, without sounding like a broken record, Irene, it is focused on our activities, the things that we think will help us.
Speaker Change: Increase our market share, beat our competitors in the market and deliver that topside organic growth that we are looking to deliver and I know you're looking for from us.
Speaker Change: And one thing I could add here, Irene, I think here is...
Speaker Change: It's good to have a diversify in object geographic presence and while it's true that we continue to see some challenging environment in the US. We are very pleased by what we see in Canada and Europe .
Speaker Change: Canada, with this welcome, please coming from the alcohol category, and Europe is showing very strong resilience. And we continue to see that in this quarter, so that's good and again, it helps us to have this balanced portfolio actually.
Thank you.
Speaker Change: Your next question comes from Michael Van Elf with TD Cowan. Your line is now open.
Speaker Change: I'm trying to focus more on the acquisition side right now. I know there's headlines that Seven Eyes signed a non-disclosure agreement this morning and I'm curious on a few things. There's one R report's accurate that is just for the assets.
Speaker Change: that would be part of a divested chair to appease the FTC and then, you know, in addition to that, do you feel you're making progress with 7i towards a deal?
Speaker Change: We have not signed a non-disclosed agreement with seven and I.
are focused.
Speaker Change: 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, understanding and exposing Kuchitar to the Japanese public, who we are, what we stand for, how we take care of communities and take care of people.
That's where our focus is.
So
Speaker Change: So the reports of an NDA this morning that seem to have been confirmed by seven and I that's they were talking about I believe they're talking about just the the stores that you would have to sell it to a PCFTC but you're saying that you haven't signed anything and to your knowledge they haven't either.
you're working with tonight
Speaker Change: We have not disclosed, but we have not signed an NDA with 7 and I. We are working with 7 and I together around a marketing package of what a divestment would look like in the United States. That marketing program has begun and there are NDAs being signed by potential buyers in that process.
Speaker Change: Okay, that's helpful. Thank you. And then 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
Speaker Change: And, you know, how active you are on files other than seven and I and then, of course, you know, what does that imply about your confidence in getting a deal done with seven and I.
Speaker Change: M&A remains active in our geographies. We continue to look at a number of things. There are some larger transactions in Europe that we continue to stay engaged on. We continue to see pretty heavy deal flow in the United States of all sizes, small, single sides.
Speaker Change: 10 sides, 100 sides, we continue 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 and our small centralized team here in La Valle and there's no change for us in activity, but activity remains robust and I think, you know, with the continued macro challenges that we're seeing, I think we believe we can, we'll continue to see that.
Speaker Change: So, doing those types of deals wouldn't preclude you from also pursuing a seven eye.
Speaker Change: Today, we cannot discuss any file. We are completely engaged on this 7-9 conversation, as you know.
Speaker Change: But we don't know what will be the conclusion of this process, so for our duty is to make sure that we explore and find that come to our table and if it makes sense for us and within our financial framework.
Speaker Change: We'll take the decision, you know, that is the right for the company for the shareholders, so that's how it's our message.
All right. 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.
Speaker Change: Good morning, and thanks for the clarification on where you stand with Seven and I. I wanted to ask about the U.S. Merch Stamster Sales Performance, and specifically across categories. You called out the Meal Deal promotion and growth in food.
Speaker Change: But hoping you can give some more color on the performance across your big categories. And also, if you can quantify the impact of the regulatory changes in the Netherlands on that Europe 5 percent, same-store sales number, that would be helpful. Thank you.
Speaker Change: How about I start with the Netherlands? So the Netherlands enacted legislation that basically disallowed the sale of cigarettes at grocery stores.
Speaker Change: That, of course, moved a lot of that demand, which was significant demand to other channels with our channel being a big beneficiary of that.
Speaker Change: really, you know, 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%. The Netherlands is driving same-store sales in the mid-20% that's largely being driven by cigarettes and the basket that comes with that cigarette.
in the U.S.
I referenced in my speech notes that...
Speaker Change: tobacco is a whole was negative for us. The cigarette declines so overall we were down about 1% in the US in overall tobacco.
Six down to two and a half.
Speaker Change: other tobacco or other nicotine up a little more than 3% but net net down 1. Food continues to grow up about 3% for the quarter. Packbed of continues to grow and we do well in Packbed of. I referenced in my speaking notes that
Speaker Change: We're really doing well in hot and cold dispensed. We're growing those categories, growing margin in those categories. So they are certainly supporting us.
I appreciate the color. Thank you. Goodbye.
Speaker Change: Thank you. Your next your next question comes from Martin Landry with Your line is now open.
Hi, good morning. I was wondering if you could
Martin Landry: Refresh us on 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 commissaries to supply your stores like how many commissaries do you have right now in the US and how many do you expect to add in the coming years.
Thank you.
Speaker Change: In North America, our food is about 12% of our mix in Europe . It's 20, 20 plus. And again, our goal, our best business unit in the United States is 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. We are expanding both our warehouses, our own warehouses. We have three under construction today. And we plan to add commissaries in the future to supply our own products.
OK, thank you.
Speaker Change: Your next question comes from Mark Carden of UBS. Your line is now open.
Speaker Change: Thank you very much for asking the question. I would like to have your first book on the impact of tariffs and the potential for reciprocal tariffs that could come into play in April. And how do you think about the potential impacts on your margin structure and potential plans for offsetting. Thank you.
Speaker Change: Yes, thank you for the question. It's certainly a moving feast as we look to continue to analyze tariffs. I think we've done quite a bit of work.
Speaker Change: And the core story that I think we're pretty confident in is that tariffs are not going to have a big impact on our business. We resource most of our products.
In our countries, in those local countries.
Speaker Change: on any tariff application, if it was kind of...
Speaker Change: It would be the same across all retailers for us to experience that so we do not see a big impact from tariffs on our underlying business i think the larger impact.
Speaker Change: Is what it means for inflation and what it means for consumers that are already stretched and really struggling with disposable income and that's kind of the big unknown we'll be watching very closely.
Thank you very much.
Yeah, I just want to, you know, for us.
Speaker Change: These are uncertain times, and it's about providing value, being really focused on how we can offer value to customers. We are really happy with our food business and our packages, and we will continue to focus on that, to show value to our customers in this environment.
Speaker Change: Yeah, and yeah, one one over example is again the trend on the on the pride brand pride brand is actually deep to the box in US in North America on the large extent so so that's also one of the drivers for for us to continue to to to speak about value to our customers.
Appreciate all the color. Thanks so much.
Speaker Change: Your next question comes from Luke Hannon of Canaccord Genuity. Your line is now open.
Luke Hannon: Yes, thank you. Good evening. I would like to ask a few questions about the changes in the environment of alcohol sales within Ontario. You mentioned the positive impact you received on your results. I would just like to have a bit of clarification. What are you currently seeing for the customer who comes to the store for these alcohol products? Are they coming just to buy them, or are they typically included as part of a larger package? And then, maybe to follow up on that. What exactly are you doing regarding your offers, your bundle offers, etc.?
Speaker Change: in order to make sure the net impact to your merchandise margins isn't as diluted as just selling.
The alcohol products itself. Thanks.
Speaker Change: Thanks for the question the I just our central Canadian business unit just the execution around
Speaker Change: The regulatory change in allowing beer and alcohol sales in Ontario I just could not be more proud we were ready we executed 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
Speaker Change: huge share out of the gate. So just a tremendous effort by Steven our team in Central Canada. We are learning so we're learning around what makes to have how much alcohol to have how much pack bed to have. And so we will continue to optimize our set.
– Subtitling by The Ear of the Sea Pencil –
in the space and it's really exciting candidly for us.
Speaker Change: 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 chips
Knacks, take home, cheers. Knacks.
some energy drinks
Speaker Change: Some nicotine with those purchases, but obviously our goal is to continue to realize and grow that basket with these increased customers coming into our stores for beer and alcohol.
Okay, thank you very much.
Speaker Change: Your next question comes from Tammy Chen with BMO Capital Market. Your line is now open.
Speaker Change: Hi, good morning. Thanks for the question. Mine is on the U.S. fuel business. The things for say volumes, the comp, I think even adjusted for your estimate of the weather impact. It was worse than your merchandise comp and I think it was a sequential softening as well. So I'm just wondering if you can elaborate a bit more on that. Are you seeing any change in the competitive dynamics there? What sort of factors which you call out that let's it out?
Resolve. Thank you.
Yeah, thanks for the question.
Speaker Change: I mean, what's happening right now is our geographic mix in the U.S. is hurting us a bit. Our largest states are Florida, Texas, and Arizona.
Speaker Change: I think throughout the quarter, we've seen really heavy inflation and 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. That's been a trend for a couple years 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, our three largest volume states. They are suffering a bit due to those 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. We think this too shall pass for us.
Speaker Change: 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 this quarter in the next fiscal year. And we are doubling down on our growth in B2B in North America as we continue to add resource into those teams and continue to grow that space of the business.
Thank you.
Speaker Change: Your next question comes from Bishal Shridhar 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 in 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...
And the mixed change associated with our car.
Thank you. Goodbye.
Thank you very much for the question.
Speaker Change: I would say the vast majority of all the deductions that AI is explained by two components. The first one is the...
You know, the alcohol.
the category increase in in central in Ontario.
Speaker Change: And the second one is, you know, the fact that, you know, we have to stop the setting off for the zoning product in Canada.
Speaker Change: That was a high margin, you know, product. So those two impacts basically explain the delusion that you have seen in the margin in in in Canada compared to the article.
Speaker Change: Could you help us understand the portion of the impacts from each?
Speaker Change: So, basically, the one component related to the alcohol explains 60%, you know, roughly 60% of the division, and after the other 40% are coming from, you know, the deni-cutting
Thank you.
Speaker Change: Your next question comes from Anthony Bonadino with Wells Fargo. Your line is now open.
Speaker Change: Yeah, hey, good morning guys. Thanks for taking our question. So I just wanted to ask about us inside margins that 90 bits of expansion looks like a pretty significant step change in the year over your trend from what you guys saw less quarter.
Speaker Change: I think you mentioned improved supply conditions, but can you just talk a little bit more about what drove that inflection and then how you're thinking about the durability of that into q4.
Yeah, thank you.
Speaker Change: I think I kind of signaled 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. We think there continues to be opportunity there. I think similar to our cost line, is it going to be vertical? You know, it's going to 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, I referenced the rationalization [inaudible]
Speaker Change: We are 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 that we're running. I think we will continue to do that and we will continue to improve in that analytical capability. We will continue to use our global scale and apply our procurement teams with our
Speaker Change: 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 March margins.
Thanks, guys.
Speaker Change: Your next question comes from Bobby Griffith with Raymond James. Your line is now open.
Your line is open.
I'm sorry, we can't hear you.
Ladies and gentlemen, that's your reminder.
Yes. Hey, Bobby.
Speaker Change: Oh yes, I can hear you. Thank you. Sorry about that. I just want to dive into the promotional environment here in the US as we head into spring and summer. How do you look at that competitively and kind of what are your plans around promotions? Giving some of the consumer dynamics that were debating here in the US.
Speaker Change: Yeah, thanks, Bobby. For us, it's about showing value. It's
Speaker Change: It's not more promotions, it's about collecting value and value that customers perceive and that they recognize and that's going to drive them to come into our stores. So that certainly is on our food products and on our meal bundles where I think I've shared previously that, you know, we are really hearing from customers, we're 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
Speaker Change: focused on that. We will, again, the goal is not to run more promotions. It's to run effective promotions where consumers see real value. We will use our data and analytics to determine what those things are. I think, lastly, our reference.
Speaker Change: nicotine and digital you know it's it's really about using our data to personalize really understand customers where what are they purchasing from us what is their purchasing behavior giving them offers that matter to them that get them to come into our stores more and appreciate what we are doing for them and we will increase the amount of personalization and offers we're making both in the nicotine state space but across our inner circle and all of our categories.
Thank you for the detail and best of luck here.
Thank you.
Speaker Change: Ladies and Gentlemen, to remind you, if you have a question, press button 1.
Speaker Change: Your next question comes from John Royale with JP Morgan. Your line is now open.
John Royal: Hi, good morning. Thanks for taking my question. So could you talk a little bit about private label and how that's been trending and 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 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 Royal: Yeah, on the private level, as I mentioned, yeah, we will continue to see customer looking for, you know, this category.
John Royal: We can talk about, you know, all what we've done, you know, in the past few months on the cigarette side. We have a really great story there, so a nice draw there. But it's true and remains true across categories. Reality for us is that, you know, penetration is still low.
John Royal: And we have still a lot of opportunities there so we recently appointed a new leader on this to know to to take care of his of his category.
John Royal: And to make sure that we will continue to expand not only in terms of SKU but making sure that we are present in the relevant category.
Speaker Change: Because, you know, as the next mentioned, you know, the customer is looking and we continue to look for value. So, yeah, we see, we see an opportunity across across across the, I would say, the geography and across the categories for the next coming month. And we'll make sure that, you know, in terms of pride around, yeah, we'll continue to expand the SKUs. We have a visibility of at least adding more of our one under the SKUs and the next coming month.
Speaker Change: So yes, feeling pretty well about the program there and making sure that you will continue to increase penetration.
Thank you.
Speaker Change: Your next question comes from Corey Tallah with Jeffries. Your line is now open.
Great, thanks. It's really nice to see the momentum in the U.S.
Merchandise business specifically around the the meal deals and I know you've expanded into Canada.
I just wanted to ask how you think about
and where do you think the opportunity could be.
Speaker Change: Just specifically as it relates to really driving value with food and fresh food specifically in the U.S. and Canada and globally because that really does seem like a great opportunity for the business we look at.
Speaker Change: Thank you. We agree with you. We think it's a tremendous opportunity and we underscue as we've shared with you around our percentages.
Our focus today is in North America.
Speaker Change: You know, we have validated that we have a 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.
Speaker Change: We have, you know, we have hundreds and many stores. We have more than a thousand customers visiting us every day. All of those customers eat, and our focus is on execution of these core products that we have proven our customers want and demand. I think we will actually check that out.
Speaker Change: We will see execution of that and then we will localize you know different taste profiles and different geographies that's true here in Canada it's 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: That'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.
and
Speaker Change: Great. Thank you very much. And then just curious as you think about your your sourcing abilities and your your the opportunity to continue to lower cost.
Speaker Change: What inning would you say that you're in as you think about the opportunity to continue to?
The lower costs for for the business around.
Speaker Change: source and capability because that continues to be an opportunity and obviously we saw some upside versus consensus 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.
Yeah, I think
Speaker Change: In our global fuel 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 must get down in Houston. I think we will continue to make investments.
in those relationships.
Speaker Change: We will continue to advance our ability to realize 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 exists. So I think the fuel journey we feel great about. I think we outperformed Opus 5.3 cents. Again, this quarter and there's still a lack of volatility. We will continue to invest in that.
Speaker Change: On the merge side, you know, we've had a central globalized procurement team, again, for more than a decade. I think we're making investments into that team. I think there's quite a bit of capability. We're really focused and kind of stepping up our activity and goods not for resale right now. We base to kind of owns that and has a team of people. We see a lot of opportunity there. That's part of our fit to serve and some of the cost savings we reference. I think then more on the merge cog.
Speaker Change: So in fuel, I would say we're in ining seven if you're talking baseball, which I assume you are.
Speaker Change: I'd say on the procurement side we're in ining five or six and we'll continue to advance especially GNFR. I think on the merchant supply chain we are going to go deeper into the supply chain here in North America and I would say we're in ining one or two.
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 reference where we have three more under construction right now. We have a plan to really be able to serve us call it roughly 75% of our own sites through our own warehouses. We like what this does for us both from a cox perspective as well as an assortment perspective. And per the question earlier, we will be adding additional commissaries besides some of these warehouses to improve our cost of goods and our assortment as we continue to grow further.
Speaker Change: There are no further questions that this time I will now turn the call over to [inaudible]
Mathieu Brunet: Thank you, Alex and Felipe. That covers all the questions for today's call.
Mathieu Brunet: Thank you all for joining us. We wish you a great day and look forward to discussing our 4th quarter 2025 results in June. This concludes today's conference. We thank you for being with us. We wish you a pleasant day and look forward to discussing our 4th quarter 2025 results with you next June. You are now invited to end this call.
Mathieu Brunet: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.
Thank you for watching this video!