July 15, 2008 / 5:21 PM / 9 years ago

UPDATE 2-Couche-Tard profit drops 54 pct on high gasoline

(Adds details from conference call, analyst comment; in U.S. dollars unless noted)

By Jennifer Kwan

TORONTO, July 15 (Reuters) - Alimentation Couche-Tard Inc ATDb.TO on Tuesday said quarterly profit fell nearly 54 percent as profit margins narrowed at its gasoline pumps and consumers had less to spend in its convenience stores.

Shares of North America’s second-biggest operator of convenience stores fell more than 8 percent after it posted a profit of $15.5 million, or 8 cents a share, for its fourth quarter ended April 27, down from $33.4 million, or 16 cents, in the same period last year.

The latest results fell short of the average analyst estimate of 13 cents a share, according to Reuters Estimates.

The Laval, Quebec-based company said the economic downturn in the United States, where it operates convenience stores under the Circle K name, was magnified by a big rise in retail gasoline prices, cutting disposal income for in-store purchases. In Canada, it operates stores under Couche-Tard and Mac‘s.

Couche-Tard’s revenue grew 24.7 percent to $3.7 billion but higher gasoline prices represented $475.5 million of the $733.2 million sales increase. Acquisitions and an appreciating value of the Canadian dollar also helped.

“The current macroeconomic environment and high gasoline prices are having a negative impact on sales growth, which may be sustained over the coming two quarters,” David Hartley, analyst at BMO Capital Markets, wrote in a note.

Fuel margins in the United States fell to 10.02 cents a gallon from 13.12 cents, due to increases in product costs that the company could not immediately pass on to consumers because of competitive market conditions.

Couche-Tarde said its merchandise margin dipped to 33.7 percent from 33.9 percent in the comparable period last year. Merchandise sales at U.S stores open for at least a year inched 0.1 percent higher, and rose 2.2 percent in Canada.

Chief Executive Alain Bouchard said during a conference call that the company will focus on maintaining its market share and keep a close eye on acquisition opportunities.

In fiscal 2009, Couche-Tard expects to add 200-300 company operated stores, Bouchard said.

Couche-Tard currently operates 5,119 convenience stores, in North American, 3,273 of which sell gasoline.

Shares of Couche-Tard, which have lost more than 30 percent so far this year, closed down 97 Canadian cents, or 8.22 percent, at C$10.83 on the Toronto Stock Exchange. ($1=$1 Canadian) (Reporting by Jennifer Kwan and Susan Taylor; Editing by Frank McGurty)

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