While merchandise sales are up, the tobacco category remains a challenge, says chief executive of Couche-Tard. 
Canadian convenience store operator Alimentation Couche-Tard Inc.’s adjusted quarterly profit is up, boosted in part by recent acquisitions, stronger merchandise sales and higher fuel margins, Reuters reported.
Net earnings for the company fell, however, due to one-time costs associated with Couche-Tard’s recent $2.58 billion acquisition of Norway’s Statoil Fuel & Retail. The Statoil deal marks the company’s first foray into Europe, bringing in 2,307 locations in Scandinavia, Poland, the Baltics and Russia.
Laval, Quebec-based Couche-Tard operates more than 6,000 convenience stores in North America under banners that include Mac’s and Circle K, the majority of which sell motor fuel.
Same-store merchandise sales rose 2.8% in the U.S.—6.6% excluding tobacco products—and 5% in Canada.
Couche-Tard reported in July that one cigarette manufacturer’s new supply terms and price structure was hurting its tobacco results. “In light of the changing conditions in supply terms and of the persistent competitive landscape, the tobacco products category remains a challenge,” said Chief Executive Alain Bouchard.
He added Couche-Tard is evaluating options on tobacco, “with the goal of maximizing the marginal contribution of this product category.”
Meanwhile, Couche-Tard’s road transportation fuel profit margin rose to 23.20 cents a gallon from 19.95 cents in the same quarter last year, Reuters noted. First-quarter earnings fell to $102.9 million, or 57 cents a share, from $139.5 million, or 75 cents, a year earlier.
Excluding one-time items associated with the Statoil deal, including a $113.5 million loss on foreign exchange contracts, earnings climbed to $173.0 million, or 95 cents a share. Revenue rose 16.3% to $6.02 billion.
