Alimentation Couche-Tard Inc T.ATD

Alternate Symbol(s): ANCTF

Consumer Defensive Grocery Stores

Alimentation Couche-Tard Inc. is engaged in convenience and mobility, operating in about 29 countries and territories, with more than 16,700 stores, of which almost 13,100 offer road transportation fuel. With its Couche-Tard and Circle K banners, the Company is an independent convenience store operator in the United States, and it is engaged in the convenience store industry and road transportation fuel retail in Canada, Scandinavia, the Baltics, as well as in Ireland. It also has a presence in Poland, Hong Kong Special Administrative Region of the People's Republic of China, Belgium, Germany, Luxembourg, and the Netherlands. Its North American network consists of about 17 business units, including 14 in the United States covering 47 states and three in Canada covering all 10 provinces. In Europe, it operates a broad retail network across Scandinavia, Ireland, Poland, and the Baltics through seven business units. Its operating brands include Circle K, Couche-Tard, and Ingo.

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Alimentation Couche-Tard Inc

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Post by retiredcfon Jun 30, 2022 8:41am

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Post# 34793211

TD 2

No change to their $62.00 target. GLTA

Alimentation Couche-Tard Inc.

(ATD-T) C$52.64

Most of Our Earnings Revisions are Below the EBITDA Line Event

Adjusting our forecasts following Q4/F22 results and conference call, mostly reflecting our assumptions that European fuel margins recover only partially in Q1/ F23 (fully in Q2/F23), as well higher depreciation and interest expense. We also add the extra week ($0.07) to our Q4/F23 forecasts.

Impact: NEUTRAL

Higher fuel prices are cutting into miles driven and reducing customers' average fill — to 8 gal/visit from 10-12 gal/visit normally — although this is partially offset by more frequent visits. Without a significant volume recovery, and considering the rising opex inflation, we expect F2023 U.S. fuel margins to be only slightly below F2022 record levels (assuming lower volatility), leaving U.S. fuel GP 5% below F2022, but 28% above pre-pandemic levels, on a same-week basis.
SSS remain solid in the U.S. and Europe, although Asia was pressured by Hong Kong's temporary COVID-19 restrictions. Canada SSS are under pressure from tobacco as inflation pushes some customers to trade down to value brands and others to revert to the black market (likely to remain the case in the coming quarters). Higher fuel prices are affecting all in-store activities. Traffic is flat to slightly down and basket up 3-4%; with inflation even higher, this implies tonnage is declining. Rising GM% points to success in passing on higher costs and a little help covering rapid opex inflation.
Q4/F22 normalized opex growth (ex-CEWS) of 12.2% was high, but discretionary spend should normalize by Q2/F23, while greater labour availability should slash overtime requirements and reduce employee retention payments over the coming quarters. We see normalized same-week opex growth declining to 5.3% in F2023 (from 9.2% in F2022), despite Q1 growth in the low double-digits.

TD Investment Conclusion

Following the share-price pullback, valuation looks more attractive (15.5x NTM EPS versus its long-term average of ~17.0x-17.5x). That said, near-term catalysts may be lacking as earnings comps get more difficult and M&A activity has slowed (ATD has >$10bln of acquisition capacity); in the interim, ATD is planning to buyback ~1.5mm of its own shares/week.