ATD.TO: Couche-Tard reports solid but slowing sales growth in U.S. as it pushes ahead with takeover of Poland’s Zabka Group

Canadian convenience store operator Alimentation Couche-Tard Inc. ATD-T +0.97%increase tallied a fifth straight quarter of same-store sales growth in the United States over the summer, maintaining positive momentum in its biggest market as it works to expand its footprint in Europe with an US$8.7-billion deal for Polish retailer Zabka Group SA.

The Laval, Que.-based company, which owns the Circle K chain, on Tuesday published results for the first quarter of the company’s fiscal 2027, ended July 19. It included a 1.7-per-cent year-over-year increase in merchandise sales at comparable U.S. stores. Energy drinks and nicotine products performed particularly well, and the company is taking market share from rivals, it said.

Couche-Tard grows U.S. gas station profits during Middle East war

“We are encouraged by the start to fiscal 2027 and the continued progress we are making” with our strategy, Couche-Tard chief executive officer Alex Miller said in the release.

However, the sales increase isn’t as strong as in previous quarters. And analysts had warned that a sequential slowdown was coming based on the recent performance of some competitors, such as ARKO and Murphy USA.

Overall, net profit came in at US$828.5-million or US$0.90 per diluted share on total revenue of US$21.7-billion for the period, improving on the US$782.5-million during the same quarter last year, Couche-Tard said in a release after market close. The company reports in U.S. dollars.

On an adjusted basis, net earnings were US$827-million or US$0.90 per share. That’s roughly in line with the US$0.89 analysts were expecting. The company sold less gasoline overall but boosted its fuel gross margin in the U.S. and Canada.

After a solid trajectory of profit growth over the past two decades, Couche-Tard’s business has come under pressure more recently as consumers slash their spending to deal with higher levels of debt as well as inflation. Global conflict in the Middle East and elsewhere has added to those worries and industry observers are analyzing whether it will lead to any lasting change in consumer behaviour.

Mr. Miller and his team are trying to make Circle K’s offerings more attractive in response, launching meal deals priced from US$3 to US$6 in the United States and offering rebates on gasoline on certain days in a bid to build customer loyalty. The company has said it expects it can generate year-over-year adjusted earnings-per-share growth of 10 per cent or more from fiscal 2026 through 2030.

While the 15-per-cent EPS growth for the latest quarter is higher than that, “these results may raise questions,” Stifel analyst Martin Landry said in a research note published late Tuesday. “We believe that investors will focus on the deceleration of merchandise same-store-sales growth and the health of the U.S. consumer.”

Couche-Tard launches tender offer for all shares of Polish retailer Zabka

Couche-Tard announced in late July that it is making a multibillion-dollar takeover play for Poland’s Zabka, widening its footprint in Europe with a major push in one of the continent’s fastest-growing economies. Owners of about 57 per cent of Zabka stock are backing the deal and have signed agreements to tender their shares, Couche-Tard said.

The purchase still needs approval by European, Polish, and Romanian regulators, including clearance by the European Commission under the European Union’s Foreign Subsidies Regulation.

It’s the Canadian company’s biggest acquisition to date, further cementing its position in a key part of the world against global rival 7-Eleven. It’s also one of its most unique acquisitions as it takes control of a dominant, technology-powered retailer that could transform the way Circle K operates in other countries.

Couche-Tard has since launched a voluntary tender offer for Zabka at a price of 32 Polish zloty or about US$8.48 a share. That’s a premium of about 9.4 per cent from Zabka’s closing stock price the day before the offer was announced.

Analyst Janusz Pieta at mBank is among those who have argued that Couche-Tard’s offer is too low, raising the possibility that there could be shareholder pressure for better terms. But Couche-Tard’s chief financial officer Filipe Da Silva told The Globe and Mail it’s “already very attractive.”