ATD divesting 109 locations in "one, some or all" format sale as part of its ongoing network optimization strategy that was originally announced in March 2021; Proceeds likely in excess of $85MM. While not overly material from a financial perspective, the ongoing network optimization is consistent with our positive views around management’s focus on optimizing returns, and outside the box thinking in its pursuit of surfacing value for shareholders, including monetizing “the highest and best use of real estate”.
• Part of a previously announced network optimization initiative whereby ATD will divest 355 sub-optimal and non-core locations (<4% of N.A. network). i) First tranche was sold to CASY (49 locations for $39MM); ii) Balance of dispositions consists of 306 locations including the 109 locations currently for sale. Assuming similar per location value as the first tranche, incremental value of future dispositions would hover in the $245MM range, with tranche 2 representing ~$85MM; bias to the upside given the real estate value associated with the sites to be divested vs almost exclusively leased sites divested to CASY.
• Tranche 2 details: i) Footprint: 78 sites across 19 US states, 31 locations across 3 CDN Provinces; ii) Avg size: 2,209 sq. ft. on 28,214 sq. ft. lot; iii) Real estate ownership: 42/109 owned; iv) 61 sell fuel, 48 merch-only; v) Conditions: No associated fuel supply or c-store brand.
ATD officially started its US EV charger rollout with plans to deploy charging infrastructure across 200 sites in North America by 2024. This is consistent with our view that ATD is well-positioned in the highly fragmented c-stores industry and will be a key part of the evolution in consumer mobility needs. ATD's retail leadership in Norway, where 90% of car sales are EVs, is providing insights into the future of energy consumption patterns. In addition, the Company’s procurement and experiential retail capabilities are being enhanced by data/analytics/ technology, the benefits from the scale, and varied realities of its global store base, which taken together would be extremely difficult to replicate.
RBCCM notes relevant to the c-stores space
i) Health of the Canadian Consumer pt 1: RBCCM-hosted Marketing with Canadian Tire executives; pt 2: Bank Earnings; our colleague Darko Mihelic's thoughts here; ii) RBC Digital Intelligence Strategy: Quantifying the Nature of Rising Food Prices - Food Series Deep Dive, Part 1; iii) RBC Imagine: Re-imagining the CPG Company of the Future - What are the key themes that will define the future of CPG companies.