(Bloomberg) — Alimentation Couche-Tard Inc., owner of the Circle K chain of convenience stores and gas stations, fell in early trading after reporting earnings that missed analysts’ estimates as consumers cut back on spending.
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The Canadian company posted a 2.2% decline in sales for the third-quarter ended Feb. 4, while adjusted profit fell to 65 cents a share, well below the 84 cents expected by analysts, according to data compiled by Bloomberg. Couche-Tard declined as much as 8% Thursday, the most in almost two years.
The retailer is dealing with “near-term headwinds,” especially in the US market, Chief Executive Officer Brian Hannasch said in a conference call with analysts.
“Diesel demand continues to be weak, and to me that’s a leading indicator of some softness in some sectors of the economy,” he said.
The company, which earns the majority of its revenue from fuel sales, said volume fell 0.8% in the US on a same-store basis, and declined 1.9% in Europe and other regions, excluding Canada.
Merchandise revenue per store, such as food and cigarettes, dropped in all three of the company’s geographic segments for the first time in more than 10 years, Stifel Financial analyst Martin Landry said in a note. But 7-Eleven Inc.’s decline was even worse, “which is reassuring and suggests industry-wide weakness,” wrote Landry.
“On the convenience side specifically, it’s really that lower income consumer that we’re seeing strain today,” said Hannasch, noting the slowdown is transitory.
Consumers everywhere are feeling the squeeze of higher prices and elevated borrowing costs. In the US, the annual interest bill on mortgages, credit cards and other debt has climbed by almost $420 billion since the Federal Reserve started tightening policy in March 2022, according to the latest numbers from the Bureau of Economic Analysis.
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Couche-Tard, which had $19.6 billion in revenue during the quarter, operates about 16,700 sites, mostly in the US and Europe. The company closed the acquisition of 2,175 European outlets for $3.8 billion from TotalEnergies SE during the quarter. More than half of those are in Germany.
Hannasch said the company still has “appetite” for more acquisitions and is “actively looking at some things.”
“We’d love to do more in the US, which is probably our best market for synergies,” he said. “The deal flow has been good, probably the best I’ve seen in four or five years in terms of number of opportunities.”
–With assistance from Ben Holland.
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