Alimentation Couche-Tard (ATDBCN: Baa1/BBB+) 1Q (to 21st July) Results

Earnings were in-line, margins missed a tad on both merchandise and fuel. It's still facing volume falls in both segments on falling road traffic alongside low income consumers struggling to spend in merchandise. BS is fine but still it has done $630m in equity pay-outs over the last last 4-months while staring down a company nearly its own size. ATD stock is -0.8% in pre-market.

Bloomberg is leaking this morning that Seven and i board will send a letter tomorrow saying price offered (not public) is not enough for its "growth strategy" - we are not sure what growth its referring to - both historical and analyst consensus has little to show. It will also reportedly point out a deal could breach US antitrust laws - that continues the (leaked) theme on co attempting to hide behind regulation.

• Revenues were $18.3b (all reported in USD) up +17% on acquisitions, with merchandise and service at $4.5b (+5.1%) and fuel $13.7b (22%).
• As we said gross profit will be half and half; both ~$1.6b this qtr at +5% and +10% growth respectively. Group EBIT was $1.3b (-0.4%yoy).
• Ex. acquisitions, same store sales in merchandise and service was down -1.1% in US, -2.1% in EU and -3.9% in Canada due to challenging conditions from US consumer. Same store road transportation fuel volumes were -0.8% in US, -1.4% in EU and -2.1% in Canada.
• On LFL margins; merchandise was gross 33.7% in US down 60bps, EU -10bps to 39.8% and +90bps to 34.8% for Canada. Fuel gross margins were down in US and Canada while rising in Europe; net it says healthy levels.
• BS was net 2.1x levered (incl. leases) vs. 2.2x last year. $1.6b of cash on hand leaves over $37b cash shortfall to acquire {3382 JT Equity} (ex. the debt it will take on as well).
• Qtrly dividend unch at CAD 17.5c/share (~$120m), no buyback done in the 1Q but since it has done $509m.

Earnings call ongoing and should be more interesting, headlines thus far below, none of concern. Join here.

• "COUCHE-TARD CAN GO TO 3.75X LEVERAGE, CFO SAYS
• COUCHE-TARD SAYS IT'S CONFIDENT IT CAN FINANCE 7&I DEAL
• WE WANT TO ENGAGE WITH 7&I CONSTRUCTIVELY: COUCHE-TARD'S MILLER"