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Monday, March 29, 2021

Couche-Tard sale of 355-plus stores creates ‘opportunities’ for marketers

Source: Oil Express
By Donna Harris

Alimentation Couche-Tard said it is divesting more than 355 convenience stores in the United States and Canada, most of them with gas islands, hinting that in many cases the store footprint and lot size are too small to accommodate the larger stores it is building today.

The divestiture also is consistent with Couche-Tard's strategy to streamline the gas brands in its portfolio and convert stores to its own Circle K Fuel brand.

While the sites no longer fit Circle K’s retail strategy, the sale creates opportunities for small to mid-sized marketers, Evan Gladstone, executive managing director of NRC Realty & Capital Advisors LLC, said in an interview. NRC has been tapped to sell 306 of the stores.

With the sale to Casey’s, Circle K Stores will exit Oklahoma, according to Couche-Tard’s store locator and the count of Oklahoma Circle K stores in the

OPIS database.

Separately, Couche-Tard said it is selling 306 sites across North America: 269 stores in 25 U.S. states and 37 stores in six Canadian provinces. Of the total, 122 are fee-owned and 184 are leased.

The average store size is about 2,600 square feet, roughly half the size of the 5,000-square-foot stores Couche-Tard is said to be building as new- to-industry stores. The average lot size is 29,500 square feet, or .67 acre, which is less than the acre or more typically sought by large consolidators. M&A sources have said these larger stores and lots are necessary to accommodate kitchens and extra parking for food service operations.

During the company’s recent fiscal third-quarter 2021 earnings call, President and CEO Brian Hannasch emphasized food service. He said the company was "happy" with the progress of its North American food program and is preparing for the second stage of implementation.

The company completed the first stage of development opening 1,500 fresh food stores and will expand to an additional 3,000 stores in coming months, Hannasch said. Because stores with Fresh Food, Fast outperformed control stores in the same markets, the company intends to add the program throughout North America during fiscal 2022, he told analysts.

Concerning new-to-industry stores, "We continue to believe this is a great investment, and we're investing in this organic growth lever and plan to ramp up further our capacity, considering it a solid return on investment," Hannasch said during the earnings call.

"This goes hand in hand with our network optimization initiatives to upgrade the size and scale of our locations, allowing for the best utilization of our food programs, improve store layouts and also identifying stores that no longer fit our strategic objectives and being proactive and getting them out."

Wide Range of Fuel Brands

NRC said 238 of the properties sell fuel and 68 are convenience only. Because Couche-Tard has been converting branded fuel sites to its own Circle K Fuel brand, OPIS asked if any major brands were overrepresented in the stores up for sale. Couche-Tard has said it is reducing the number of gas brands it sells.

The fuel brands sold "run the gamut of major brands and they are offered with or without supply," Gladstone told OPIS.

During Couche-Tard's recent earnings call, Hannasch said the company has converted additional locations to the Circle K Fuel brand, bringing the total to more than 2,700 sites in North America.

That represents a 100-unit increase from the second quarter of fiscal 2021. During its earnings call three months ago, Couche-Tard said it had 2,600 Circle K Fuel outlets in North America, with 500 more planned for fiscal 2021, OPIS reported.

Currently, at more than 850 of these sites the company is piloting strategies to build awareness of the Circle K Fuel brand as well as premium gasoline sales. The brand is “exceeding projections” and it also is pleased with the results of those pilots, Hannasch said.

Procurement and Transportation

“In addition to growing the Circle K brand, we continue to further our capabilities in fuel procurement and transportation,” he added. “We've now fully launched a trading operation out of Houston, Texas and are rapidly growing our proprietary fleet to maximize sourcing flexibility.

We have a newly formed partnership with Loves supply and trading arm Musket that creates a very unique entity in the industry with tremendous scale, both on gasoline and diesel, that we believe will continue to improve our competitiveness and margins over time.”

In the United States, OPIS data show that during the pandemic, the Circle K brand overtook Shell, seizing the top-rated market share by store brand nationwide. OPIS MarketSharePro indicates for full-year 2020, Circle K held a 7.6% national market share versus Shell’s 7.5% share. Circle K solidified its lead in 2021 year to date, retaining the top market share of 7.8%, versus Shell’s 7.2% share.

To see a list of convenience stores and gas stations for sale, click here.