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spk10: Good morning. My name is Julie, and I will be your conference operator today. Bonjour. Je m'appelle Julie, et je serai votre opératrice pour la conférence d'aujourd'hui. I will now introduce Mr. Mathieu Brunet, Vice President, Investor Relations and Treasury at Alimentation Couchetard. Je vais maintenant passer la parole à M. Mathieu Brunet, Vice President, Relations Investisseurs et Trésorerie pour Alimentation Couchetard.
spk17: Good morning. English will follow. Bonjour. J'aimerais d'abord vous souhaiter la bienvenue à la téléconférence qui porte sur la diffusion des résultats financiers du quatrième trimestre et l'exercice 2024 d'alimentation couche-tard. Toutes les lignes seront placées en mode discrétion afin d'éviter tout bruit inutile. À la suite de la présentation, nous répondrons en direct aux questions des analystes. Nous souhaitons vous rappeler que cette webdiffusion sera disponible sur notre site Internet pour une période de 90 jours. In addition, note that some of the topics discussed during this webcast could consist of prospective statements provided by the Society with usual warnings. These warnings or risks, as well as these uncertainties, are described in our financial reports. It is therefore possible that our future results may differ from the information presented today. Les résultats financiers seront présentés par M. Brian Hanisch, Président et Chef de la Direction, M. Felipe Da Silva, Chef de la Direction Financière, et M. Alex Miller, Chef de l'Exploitation et Prochain, Président et Chef de la Direction. Good morning. I would like to welcome everyone to this web conference presenting Alimentation Cristal's financial results for the fourth quarter and fiscal year 2024. All lines will be kept on mute to prevent any background noise. After the presentation, we will answer questions from analysts asked live during the conference. We would like to remind everyone that this webcast presentation will be available on our website for a 90-day period. Also, please remember that some of the issues discussed during this webcast may be forward-looking statements, which are provided by the corporation with its usual caveats. These caveats are risks and uncertainties are outlined in our financial reporting. Therefore, our future results could differ from the information discussed today. Our financial results will be presented by Mr. Brian Anish, President and Chief Executive Officer, Mr. Felipe Da Silva, Chief Financial Officer, and Mr. Alex Miller, Chief Operating Officer and CEO-elect. Brian, you may begin your conference.
spk20: Thank you, Matthew, and good morning, everyone, and thank you for joining us for our presentation of our fourth quarter results. Before I get started, I wanted to say a few brief remarks about the press release we issued earlier this morning, announcing my decision to retire as Kushtar's president and CEO, and the appointment of Alex Miller as our next president and CEO, effective September 6th. I'll remain with the organization as a special advisor for the next couple of years with the focus on M&A. As I come to the end of my 10th year as Kushtar's president and CEO and 25th year as a part of this management team, I must say it's been a true honor of a lifetime to lead this amazing company. I'm so proud of the value that we've created together, as well as the commitment and passion of our team members to serving our customers. I know Kushtar will be in strong hands with Alex, as he's been one of my closest business partners at Kushtar for the last 13 years, and we've worked together in the industry for nearly 30 years. Alex knows the business inside and out. He deeply cares about our culture, and he'll have a great leadership team supporting him. I also want to thank Elaine Bouchard, our founders, our board of directors, customers, team members, shareholders, and all of you for your continued support in trusting me to lead this great business. For that and much more, you have my lasting gratitude. We'll have time to answer your questions later in the call as well as in the coming weeks. Now let me get back to our Q4 results. No doubt this was another challenging quarter with persistent inflation and continued pressure on consumers who are carefully watching their spending. However, we believe this is transitory, and we remain very optimistic about our business. Even with recent softness in same-store sales, overall, they've been steadily growing globally over the last two years, particularly in the U.S., which saw a 2.8% growth on a two-year stack for the quarter. On the fuel side of our business, we continue to strengthen our leadership position across most of our markets, and our margins remain healthy. We're also pleased that our focus has consistently remained on providing everyday value and ease for our customers and leveraging the competitive advantages of our global scale and diversified business to take market share and drive long-term growth. Turning to convenience, compared to the same quarter last year, same-store merchandise revenues decreased by 0.5% in the U.S., 2% in Europe and other regions, and by 3.4% in Canada. As I mentioned earlier, these results were impacted by near-term headwinds in the economy and continued inflation and are being compared with an exceptionally strong quarter last year. It's also worth noting that Europe has had a positive performance for the quarter with a plus 0.7% same-store growth. However, the overall Europe and other region results were impacted by weak results in our Hong Kong market, driven by large cigarette tax increase and weak tourism from mainland China. To help our customers look for value, we continue to focus on improving and expanding our loyalty programs both in the U.S. and in Europe. In the U.S., inner circle registrations and enrollments continue to grow, and we ended the year with over 6.3 million customers fully enrolled in the program. Across the 30 states with the membership program, we're seeing visit frequency and spends per member growing consistently month over month. Florida, which is our first business unit on the program, finished its inaugural year with about 20% of customer transactions linked to our Inner Circle program. In Europe, the updated Extra Loyalty program ended the year with strong key metrics across the board also. Nearly half of all fuel volume is coming through Extra, and merchandise penetration is also seeing year-over-year growth, with close to 30% of our merchandise sales attributed to Extra members. The program has just launched in Ireland, and we're exploring ways to expand it into our new European countries. Both programs enable us to offer personalized value to our most important customers. Shifting to food, Fresh Food Fast is now in nearly 5,800 locations globally. Operations teams continue to focus on improving profitability and reducing spoilage, including introduction of new production planning tool that improves the accuracy of forecasting. thereby allowing our store teams to better identify what products are needed and at what times of the day we're seeing strong sales and satisfaction with our freshly prepared cookie program and we've introduced some great lto's including our kong breakfast slam which with triple meat and double cheese this quarter we've also completed the rollout of our global digital food safety program which earned a food service innovator of the year industry award recently As we strive to be the number one thirst stop across the network, we've launched exciting summer campaigns to drive traffic and provide value for our customers. In the U.S., at participating locations, we're offering Polar Pop and Froster at any size for just 79 cents, and for our Inner Circle members, the same offer starts at 69 cents. We've also added exclusive Gayberry flavors called Lightning Blast, which has contributed to overall growth in sports drinks. In Europe, packaged beverage sales are also performing well, and we're growing market share. While we continue to see pressure on cigarette sips globally, in the U.S., we're starting to see some positive results with our tobacco customers. This is partly due to the initiatives we've had underway with our supply partners, including brand-focused contests and personalization programs for our age-verified customers. In other nicotine products, we continue to see strong growth across the network, with exclusive vaping opportunities coming to Europe by the end of the summer. For both, we believe we are outperforming the overall market. Moving to our fuel business, same-store road transportation fuel volumes decreased 1.6% in the U.S., 1.7% in Europe, and 3.5% in Canada. As I mentioned earlier, our fuel business, we have a strong leadership position across most of our markets, and our margins remain healthy. We also continue to build value for our customers and businesses through the optimization of our supply chain globally. In this quarter, low market volatility persisted, which is not optimal for our results, but our supply trading logistics teams are working to find new opportunities to improve supply optionality and increase arbitrage capture. Turning to our B2B business, in Europe, card volumes remain very robust across both fleet and truck segments, with small fleet remaining the main growth driver. In the U.S., the B2B share continues to grow double digit as we expanded our sales teams across our business units. Our Circle K Pro proprietary card platform also realized the overgrowth with both volume and transactions, bringing in new fueling B2B customers and outperforming our benchmark competitors. Our EV fast charging network now consists of more than 2,600 charge points, including about 55 charging points for heavy trucks. In North America, our EV rollout plan is progressing toward our deployment target of 200 locations. Network growth, we're making good progress in the integration of our four new European countries. Earlier this month, I visited all four countries and the team members. I was very impressed with their engagement and commitment to growing our business. It was also exciting to see and visit our newly rebranded Circle K stores. We now have 11, which I would call technical pilots in the four countries where we're exploring new ways to grow sales under the new brand. In organic growth, we continue to ramp up development and currently have a record number of projects under construction, primarily in the U.S., including a focus on rural and high-speed diesel locations. And finally, we're seeing more M&A opportunities than we have for quite some time, and so we're cautiously optimistic that we're going to find some new growth opportunities in the coming quarters. Before I conclude, I want to mention the work we're also doing to improve operational excellence, which is the foundation for everything we do. We continue to implement enhancements and programs that simplify administrative tasks required by our store teams and managers. We're also truly humbled and pleased this quarter to have been recognized as Gallup's exceptional workplace for the third year in a row. We are one of the very few businesses of our size to receive this honor. This is truly a testament to our highly engaged, customer-focused teams that are working hard to make it a little bit easier for our customers during these challenging times. Looking ahead, while we ride out these near-term economic headwinds, we're seeing our first quarter of the new fiscal year that the performance in same-store sales has sequentially improved to the last quarter. This is particularly due to our investment in bringing value to our customers. In addition, while road transportation fuel volumes remain a bit soft, we're also seeing fuel margins improve versus prior quarters. And with that, I'll pause and turn it over to Felipe. Felipe?
spk18: Thank you, Brian. Ladies and gentlemen, good morning. This past year has underscored our dedication to financial discipline, evidenced by a remarkable 1.1% normalized reduction in operating expenses compared to last year. Even accounting for fiscal 2023 additional week, our operating expenses remain below the weighted average inflation observed in our network. These savings were achieved through targeting enhancement in labor efficiency and cost management, which have effectively protected us from the impact of inflation, rising minimum wages, and costs associated with our strategic investments. Furthermore, we have expanded the scope of our centralized back office operations to encompass additional functions. This expansion is strategically tailored to streamline our cost structure, leverage our scale, and improve service quality. Looking ahead, Our focus would be on refining our operating model to eliminate redundant efforts, unlock additional value, and expedite processes for better utilization of our global scale. It is also important to highlight that part of the savings generated are used to fund the enhancement of our digital capabilities, both at store and back office levels. Following the close of the fiscal year, we renewed our share repurchase program, now authorized to buy back more than 78.1 million common shares, representing 10% of our public flows. These tactical actions highlight our firm's commitment to returning capital to our shareholders. I will now go over some key figures for the quarter. For more details, please refer to our MD&A available on our website. For the fourth quarter of fiscal 2024, net earnings attributable to shareholders of the corporation were $453 million or $0.47 per share on the diluted basis fee. Excluding certain items described in more detail in RMDNA, adjusted net earnings attributable to shareholders of the corporation were approximately $461 million, compared with $698 million for the fourth quarter of fiscal 2023. Adjusted deleted net earnings per share were 48 cents, representing a decrease of 32.4% from 71 cents from the corresponding quarter of last year. Excluding the impact of last year's additional week, the decrease is approximately in the low 20s. For fiscal 2024, net earnings attributable to shareholders of the corporation stood at $2.7 billion. a decrease of $361.2 million, or 11.7% compared with fiscal 2023. Diluted net earnings per share stood at $2.82, compared with $3.06 for the previous fiscal year. Adjusted net earnings attributable to shareholders of the corporation stood at $2.7 billion, a decrease of $436 million, or 13.8% compared with fiscal 2023. Adjusted diluted net earnings per share were $2.81, compared with $3.12 for fiscal 2023, a decrease of 9.9%. During the fourth quarter, merchandise and service revenues decreased by approximately $71.2 million, or 1.7%, primarily attributed the world to one less week in the fourth quarter of fiscal 2024 compared with the fourth quarter of fiscal 2023 and softness in traffic partly offset by the contribution from acquisition which amounted to approximately 302 million dollars and the contribution from net growth in stock out including the impact of last year additional week the merchandise and service revenue would have been positive in the mid single digits During fiscal 2024, excluding the net impact from foreign currency translation, merchandise and service revenue increased by approximately $255 million, or 1.5%. Excluding the net impact from foreign currency translation, merchandise and service growth profit decreased by approximately $20 million or 1.4%. This is primarily attributable to one less week in the fourth quarter of fiscal 2024 compared with the fourth quarter of fiscal 2023 and softness in traffic while being partly offset by the contribution from acquisition, which amounted to approximately $106 million. Our growth margin remains stable in the United States at 34.1% and increased by 0.8% in Canada to 34.9%, mainly due to a change in product mix. Our merchandise and service growth margin decreased by 1.7% in Europe and other regions to 39.2%, mainly due to the integration of certain retail assets from Total Energy, which have a different product mix. our legacy European operations exceeding this impact, our growth margin in Europe and operation would have been stable. For fiscal 2024, excluding the net impact from current currency translation, merchandise and sales growth profits increased by approximately $168 million or 2.8%. Our gross margin in the United States increased by 0.2% to 34%, by 0.4% in Europe and other regions to 59.2%, and by 0.9% in Canada to 34%. Moving on to the fuel side of our business, in the fourth quarter of fiscal 2024, our road transportation fuel gross margin was $38.79 per gallon in the United States, a decrease of 6.55 cents per gallon. In Europe and other regions, it was 8.3 cents per liter, a decrease of 2.3 cents per liter. While in Canada, it was 13.68 cents Canadian per liter, an increase of 1.55 cents Canadian per liter. In the United States, road transportation fuel growth margins were compressed for most of the quarter, primarily due to the reduced volatility in road transportation fuel prices. However, volatility picked up towards the end of the quarter, and that trend continued into a new fiscal year. In Europe and other regions, our road transportation fuel growth margin was impacted by a change in our wholesale business model, with an impact on world news and unit margin, but no impact on overall growth performance. This had a negative impact of approximately 0.6 cents per liter on road transportation fuel margins. During fiscal 2024, our road transportation fuel gross margin, fuel gross profit, sorry, was $5.8 billion, a decrease of $139.7 million compared with fiscal 2023. Our road transportation fuel gross margin was 45.28 cents per gallon in the United States, 8.73 cents per liter in Europe and other regions, and 13.35 cents Canadian per liter in Canada. Now looking at HG&A for the fourth quarter of fiscal 2024, normalized operating expenses decreased by 7.1% the other year. This is mainly driven by the impact of one less week in the fourth quarter of fiscal 2024 compared with the fourth quarter of fiscal 2023, as well as by the continued strategic effort to control our expenses, including labor efficiency in our stores. For fiscal 2024, normalized operating expenses decreased by 1.1% compared with the previous fiscal year. Excluding specific items described in more detail in IMDNA, the adjusted EBITDA for the fourth quarter of fiscal 2024 decreased by $118.3 million, or 13.6% compared with the corresponding quarter of fiscal 2023. Excluding the impact of one less week, adjusted APDA decreased by a mid-single-digit number, mainly due to lower road transportation fuel gross profit, as well as shortness in traffic, as low-income consumers remained impacted by challenging economic conditions, while being partly offset by the contribution from acquisition, which amounted to approximately 98 million and strong control in operating expenses. During fiscal 2024, on the same basis, the adjusted EBITDA decreased by $161.2 million, or 2.8%, compared with fiscal year 2023, mainly attributable to similar factors as those of the fourth quarter. From a tax perspective, the income tax rate for the fourth quarter of fiscal 2024 was 10.2%, compared with 19.2% for the corresponding period of fiscal 2023. Income tax rate includes a net tax benefit derived from an internal reorganization, which had a favorable impact of 6.5% on the income tax rate. The remaining decrease of 2.5% is mainly stemming from the impact of a different mix in our earnings across the various jurisdictions in which we operate. As of April 28, 2024, we recorded a return on equity at 21.2%. during the fiscal year our leverage ratio increased to 2.21 mainly due to the acquisition of certain European retail assets from Total Energy. We also had strong balance sheet liquidity with 1.3 billion dollars in cash and an additional 2.9 billion dollars available through our main revolving trading facility. Turning to the dividend, the Board of Directors declared yesterday a quarterly dividend of 17.5 cents Canadian per share for the fourth quarter of fiscal 2024, to shareholders on record as of July 5th, 2024, and approved its payment effective July 19th, 2024. With that, I thank you all for your attention. I will turn the call over to our incoming President and CEO, Alex Miller. First, let me say I will really miss Brian as I truly enjoy our time working together, and I have learned a great deal from him about our organization. However, I'm thrilled that Alex has accepted the position. We have collaborated very closely over the last year, and I'm deeply impressed by his knowledge of our business, operations, and people. I believe that is the best choice to be pushed out next year, and I'm really looking forward to working together in the years ahead. Alex, I will hand it over to you.
spk06: Thank you for those kind words, Felipe, and thank you, Brian, for your support and friendship over the decades. I'm extremely fortunate to have worked alongside both of you and learned from the very best in the business. I'm also humbled and honored by this appointment, and I want to thank Elaine Bouchard, our founders, and the entire board of directors for their confidence. Working with Kushta for the last 13 years has been the highlight of my career. I firmly believe that we are only at the beginning of our journey to become the world's preferred destination for convenience and mobility. And I have full faith that with our engaged people, culture, strong leadership team, and long-term strategic plan, we will continue on our incredible growth trajectory. I look forward to meeting and working with all of you in the months and years ahead. But for now, I just want to say thank you for your support. And on that note, let's turn it over to the operator to answer analyst questions.
spk10: Thank you. Ladies and gentlemen, if you'd like to ask a question, please press star 1. If you'd like to withdraw your question, please press star 2. Again, to ask a question, press star 1. One moment, please, for your first question. Your first question comes from Irene Nattel from RBC. Please go ahead.
spk11: Thanks, and good morning, everyone. Congratulations, Alex, and Brian, happy to hear that you're going to be sticking around for a little while. If we turn back to the quarter, can you spend a little time, please, walking us through what you're seeing in terms of consumer behavior, which we know across the board is weak, and what specific initiatives seem to be gaining the best traction in what you have planned for F25? Thank you.
spk20: Thanks, Irene, for the kind words. Let's start on the fuel side. We're actually seeing positive traffic on the forecourts globally, but we're seeing lower quantity per visit. So that clearly is a signal that people are watching their spend. Inside the box, we've seen strong private label, but there's also been trade downs from premium brands to lower tier brands, whether that be in the beer category or others. Cigarettes has been, you know, an issue for the channel. You know, you see Altria and BAT's numbers, you know, they're kind of in that high single-digit unit loss rates. We perform significantly better than that, and our trends continue to improve, and our gap continues to widen there. But certainly, I still think that's a, you know, a big issue. reflection on the state of the consumer. That's more than just price. There's certainly people watching what they spend. On the bright side, the nicotine, other nicotine category continues to gain strength and actually in many of our regions now generates more gross profit than combustible cigarettes. And then we finish with beverages. That's the number one reason people come to our stores. We continue to gain traction, particularly As we look at May and June, we've got some great values, great exclusive out there. So we think we're really providing some very strong value between the Polar Pop and some of the brand work that we've done with partners like Pepsi. So we feel good about the summer months, but there's no doubt that the weakness in consumer behavior persists.
spk11: Thanks, Brian. And then just coming back to the issue of follow-up on cigarettes, Obviously, it's another key traffic driver. So if we assume that, you know, it's reasonable to assume that this behavior continues, you know, what gives you the confidence that you can continue to, let's say, offset those trips with other categories inside the store?
spk20: Just in terms of scale, you know, beverage is one that we think we can leverage. You know, it's got almost three extra visits of tobacco products. So we're fishing where the fish are, you know, where we've got the ability to really impact big numbers. So, you know, focus on fuel with Inner Circle, focus on beverages are really, really important offsetting that. But we're also not giving up on that nicotine customer. You know, our goal is to win with them. You know, we're focusing on our assortment, our pricing, partnering with companies like Altria on digital relationships with their customers. We now, just with Altria in the United States, have over 1.2 million customers. digital transactions weekly with them. So we're providing value that really only some of the chains can that they've got electric, you know, digital capabilities, including the loyalty platform. So, you know, we're committed on winning in the big areas and committing on taking share in those areas.
spk12: That's really helpful. Thank you.
spk09: Your next question comes from Michael Van Hills from TD.
spk10: Please go ahead.
spk04: Thank you. At the time of the total acquisition, you guys said that it was about 500 million euros of EBITDA. In this quarter, you had 98 million US of EBITDA from acquisitions, which also included MAPCO, I believe. So I'm curious, it seems like a decent sized drop in the run rate of contribution from acquisitions versus what the original business case was. So I'm wondering, is this strictly fuel margins? Is there something else happening? Is there greater seasonality? What is it that explains the gap between where you thought that profit was going to be and where it seems to be running right now?
spk20: Thanks for the question, Michael. It's really one word, it's Germany. It's a very large market for us. We picked up 1,200 locations. There's no secret, the economy's been soft there, and that's created really a pretty sloppy fuel market. So we've seen margins in the past quarter in Germany that were really multi, multi-year lows and far below what our normal European business looks like. We've seen some rebound in the most recent weeks to that. And if you look at the rest of our countries in Europe, they perform very similar to our legacy businesses in Europe. So, you know, I fully believe that that's just a transitory issue with the German fuel margins specifically.
spk04: And are you seeing any kind of green shoots in Germany? I might have missed it if you said that.
spk20: I missed that, Michael. Try me one more time.
spk04: Sorry. Are you seeing any green juice or any normalization in the fuel margins in Germany, or is it more of a competitive issue?
spk20: Yeah. As I mentioned, recent weeks have been better. You know, it's really – it's a complicated issue. There's really kind of two supply markets. There's an inner Germany and then imports. And, you know, one part of that market being kind of central along the Rhine has just been oversupplied and very, very weak. But it's improving. Okay.
spk04: Okay. And so that's the main problem. There's nothing else. Yeah. There's nothing. Okay.
spk20: All right. No, we feel good about the people. We feel good about the journey. And synergies, you know, we're five months into this, so, you know, we're starting to ramp synergies. But in the coming quarters, you should see synergy capture start to, you know, make an impact as well.
spk04: All right. Thank you. I'll get back in the queue, and I'll echo Irene's congratulations and best of luck in the future there, Brian. All right. Thank you.
spk10: Your next question comes from Mark Petri from CIBC. Please go ahead.
spk05: Thanks, and good morning, and definitely congratulations to both of you, Brian and Alex, and wish you all the best, Brian. Could I just follow up quickly on the tobacco conversation, and I'm just wondering if you could help us understand the trajectory on that business, and maybe you could just summarize the the impact it had on your comp in Q3, and then the impact it had on your comp in Q4, and then just in general, if you're expecting it to continue to be a drag, or if you think you can neutralize it with the efforts with your manufacturing partners, and then also with the continued growth in other nicotine.
spk20: Yeah, I'll divide the world into three chunks. I'll start with Canada. It's been a struggle, multi-year struggle, Our focus is clearly on food and beverages. The tobacco issue in Canada is a lot about illicit. As prices have gone up, consumers have gotten squeezed, the percentage of people buying in the illicit channels continue to rise. And that's a big headwind to fight. So that's going to continue to be a bit of a drag on us in Canada. In Europe, we're actually performing pretty well. Units are fairly flat. which is kind of interesting because it's very different than the U.S. And we continue to be optimistic about that category. We have one of our larger countries, Netherlands, is banning tobacco from the grocery channel, which controls the majority of the volume. So we think we're very well positioned as that expires July 1st to capture a significant share in that category. So I feel good about our tobacco business, nicotine business in Europe. And we continue to roll out new products and new innovations in Europe and the alternative space. U.S., you see the results from the Goldman Report or what BAT and Altria publish. We were running pretty similar to those numbers if you go back to Q2, Q3, Q4. In Q4, if you would take tobacco out, we would have been a positive seeing for sales. If you look at recent end of the quarter and our first full period in Q1, our unit decline is far less than half of what the industry decline is. So we're widening the gap to the industry. So we expect that headwind to moderate for us. I'm not saying we'll fully have it negated in the coming quarter, but between the loyalty and digital activities that we have out there and really surgical investment in price, we feel good that we're going to be able to continue to take share in that category in a very smart smart fashion, and we know that's a valuable customer and a great basket.
spk05: That's great, Collar. Appreciate all the comments and all the best.
spk12: Yep, thank you.
spk10: Your next question comes from Chris Lee from Desjardins. Please go ahead.
spk00: Good morning, everyone. I'd also like to add my congratulations to Alex and Brian. Best wishes to your family as you start a new chapter of your life in a few months. Brian, maybe I'll start with maybe your retirement. You know, the timing maybe was a little bit earlier than maybe what some people had expected, especially since you've just started your five-year plan not so long ago. So can you maybe share with us sort of why you and the board believe now is the right time for the succession?
spk20: It's a great question. Chris, I've got a lot of miles on me. I know, I know.
spk00: I know.
spk20: Nothing magical. I'd always kind of said somewhere between 58 and 60. It just seemed a little bit elegant, you know, 35 years in the industry, 25 with Kushtar, 10 with ACT, and then candidly looking at Alex. We've been working on this transition for just 2019, so five years, and, you know, he's ready. You know, the time's right, and he's got a good team, so it just seems like the right moment. The company's at a great place, and its best days are ahead of it, so... this feels like the right time to explore something else.
spk00: Okay. Now that makes sense. And then you also mentioned that, you know, you're going to spend more time looking at M&A. Can you share with us, you know, what does the landscape look like right now in terms of the opportunities? Are you able to share with us the size of those opportunities? Are there a few large ones that are potentially on the radar screen over the coming quarters?
spk20: Yeah, again, you know, we, We can't ever guarantee landing anything, and our first and foremost commitment to our shareholders is to be disciplined. That said, you know, we went through four or five years pre-total with a pretty quiet period as we had, you know, large gaps in what we believe were appropriate values and what sellers' expectations were. Recently, you know, I would say in the last couple months, we've seen quite a few deals come across our desk, a mix of both Europe and North America and a mix of size, you know, some in you know, approaching the total size and some that are just nice tuck-ins for us. And so, you know, again, we'll remain disciplined. We commit to that. But, you know, we'd like to think we can, you know, land a few opportunities over the coming quarters.
spk00: Great. Thanks, Brian, and all the best. Thanks, Chris.
spk10: Your next question comes from Tammy Chan from BMO Capital Markets. Please go ahead.
spk16: Hello. This is Riyadh on for Tammy Chan. Thank you for the question. My question was, when you say that same-store sales so far in fiscal Q1 is better sequentially, do you mean this for all the regions? Is that only for merch? And why is the consumer swapping and improving? Or is it more that your own initiatives now are becoming more material, like, for example, your private label or your loyalty program? Thank you.
spk20: And you broke up a little bit, Riyadh, but I'll give it a shot. In terms of positive trends, I would say it's a large U.S. focus when I say that. I guess I would also say that we believe it's more of our own efforts. When I look at, again, some of the Nielsen data, when I look at the Goldman report on tobacco, we're seeing that consumer softness persist. And we've always said that's going to be with us through the fall, we think. But I think the initiatives we're taking around nicotine and thirst in particular, the investing and signing up people in our loyalty programs, which allow us to really surgically target investment in our most valuable customers, will pay dividends for us both near-term and medium-term. So I think in most of our markets, we feel we're taking share in the merge side for sure.
spk12: Great. Thank you.
spk10: Your next question comes from Martin Landry from Stifel. Please go ahead.
spk15: Hi, good morning. Congratulations, Brian, on your accomplishments, and congratulations, Alex, on your nomination. I think the company is in great hands. I would like to touch on your cost reduction. In October last year, at your investor day, you highlighted a plan to reduce your costs by $800 million. And that included several pockets, including COGS, G&E, store-ops and fuel. So I was wondering if you could talk to us a little bit about what's been achieved so far. I know it's only been less than a year, but more importantly, what you plan to achieve maybe next year in terms of cost reduction, that would be super helpful.
spk18: Thanks for the question. So yeah, we feel pretty good about, you know, the Fit2Shop program that we introduced last year. We were mentioning, you know, the 800 million ambition for the five years. I tell you that today we have almost reached the half of the journey already. So the teams have done an amazing job across the organization, at store level, so just in the quarter to provide a bit of color. We use the 3% less hours in the U.S., for example. So there is a lot of things happening in the ground to improve productivity. We have also worked a lot on the procurement side, as you know, both on the GFR and GNFR. GFR, for example, we run a program in U.S. that actually brought very positive results on that side, and now we are running this same program in Canada and Europe. And on the GNFR side, we are also – we have seen already some good savings coming there and leveraging our scale on the supply, on the signage, for example. But there is more coming there. We are setting up actually a central team there on the GNFR, so more to come as well in the next coming quarters and, I believe, years on the procurement side. And we continue to look at ways of, you know, optimizing our faculty. So, as you know, we had a partnership with CGI last year on the tech side. But we are also now working with other partners to optimize and streamline our organization in maintenance, over finance things as well. So, even in HR. So, there's a lot happening there, Martin. And, yeah, we feel very confident that, yeah, we will, of course, reach this 800 million, but the objective is, of course, to be beyond that. So we remain very optimistic on our target for this year and for the next coming years to beat inflation by at least 1%. That's our internal goal, you know, and feel confident about that. At the same time, you know, quarter to quarter, I just want it to be also very – very cautious because you may see some adjustment or some investment that we are doing on the tech side, on the digital side. I was mentioning that earlier. So we are also investing in digital capabilities to improve service to our customers, but also to make the life easier to our employees in the store. So that's also something that we are working on.
spk15: Okay. And just to clarify, you said that You're half the journey already, so meaning you've generated already $400 million of cost savings.
spk18: Yeah, we have already identified $400 million, and yeah, part of that has been already banked in the last 12 months. Okay.
spk15: Okay, perfect. Thank you.
spk20: Just to add, maybe put a little pressure on the team after I'm gone, but we've always had a best-in-class cost structure as we've bought other companies and we've compared. We are excited about this. We put a big enough goal out there. It costs us to not think incrementally but really challenge how we do business. And when we execute this, we think the cost structure we'll have will really give us license to continue to do M&A and grow in our business. So we think it's a key part of our foundation of our strategy.
spk12: Got it. Thank you.
spk10: Your next question comes from Vishal Sridhar from National Bank. Please go ahead.
spk07: Hi, thanks for taking my questions. Regarding the tax rate, how should we think about that over the course of the next fiscal year and if any of the changes that resulted in the Delta notice to this quarter, at least relative to my expectations, if any of those will persist?
spk18: Hi, Michel. Thanks for the question. So, yeah, as you have seen, we have a very complex rate on the form. It's definitely a one-off. So, just 10% of the effect rate was to many, to that we have done in Europe. going forward i think you you should come back you should uh see um uh any complex state coming back to uh you know a lower uh 20 percent uh that's what we we we think that will be a very minimum you know impact expected linked to the global minimum tax you know implementation so for that, that would be almost neutral. So, yes, I would say low 20%, that's where we will be in terms of income tax rates.
spk07: Okay. Thank you for that. And, you know, Brian, I just want to wish you best as you move on to your next chapter. And Alex, I want to wish you well as well. Brian, hopefully, can you give us some color on the non-cigarette portion of your business? Specifically, I know you're closing the gap versus the industry delta on cigarettes, but is the gross profit dollars in your business, including the alternative tobacco products, is that growing or is that under pressure as well as the non-traditional tobacco continues to gain in mix?
spk20: Yeah, so if you look at nicotine overall, so it's combustible and alternative, gross profit dollars is absolutely up. We're making more off of nicotine than we ever have in the past. TRIPS is an issue, though. I mean, right now, the frequency is not the same as combustibles, and so that's why we still are focused on both. You know, we want to be, you know, leading edge on alternative nicotine, but also take share and outperform the industry on combustibles. And there's a lot of poly users out there that shop both, and we want to be their stop.
spk07: Okay. So within your total nicotine category, the gross profit dollars is up, notwithstanding the sharp declines in traditional cigarettes, yeah? Correct, yes. Okay. All right, thank you for that. Sure.
spk10: Your next question comes from Bonnie Herzog from Goldman Sachs.
spk13: Please go ahead. All right, thank you. Good morning, and congratulations on your retirement, Brian and Alex. Congratulations to you, too. I have a question on your OPEX with another quarter of really good expense management on your part with your OPEX was down, what, 7% on a normalized rate. So curious to hear how you're thinking about the trajectory of OPEX moving forward, especially in the context of inflation, hopefully easing further. And then could you highlight some of the key initiatives you've implemented that have you know, ultimately, I guess, contributed to better OpEx performance and, you know, really how sustainable that is going to be moving forward. I guess, you know, I'm looking to get a good read on, you know, maybe where your OpEx could trend, you know, this fiscal year. Thank you.
spk18: Hi, Monique. Thanks for the question. So, as I mentioned earlier, we – we remain very confident on the on the on the guidance you know uh we always say that uh for us it's bidding inflation by one percent on the sense of the opex i would say that that's where we we we feel comfortable to in terms of guidance of course uh always aiming at being that that's what we have been able to to do on the on the last three four quarters uh the reality is that we are bring the I would say the pre queens on the on the feed to serve. So when when I was mentioning earlier, you know a lot of things happening in store in terms of productivity. The tools that we are I would say putting in place there to help the probability I was mentioning 3% less hours in in US, but that's true as well in Canada. In Europe we see that that probably I would say across the network. And again, we are doing a lot on the back office, so how to reduce the administrative tasks from the store point of view, but as well how we can streamline our back office from finance to HR to maintenance, real estate, marketing, all these customers, call centers, all these, I would say, activity processes that we have in the back office. We are here partnering with organizations or companies that are doing that very well, their core business, leveraging that, and with our scale, actually, achieving great savings. So we continue to believe that there is still a lot to do there. Brian was mentioning that we have been a very lean company and cost-focused, but the reality is that when we look at the way we we organize and we have not necessarily you know used our leverage our scale and to leverage our our expenses so for example on the gnfr and we are i would say just at the beginning of the journey how to to standardize what we use in terms of you know supply in our stores in our offices I think here we have a huge opportunity to leverage, and that's what we are today working on, and expect that in the next 18, 20, 24 months, we'll see a very strong result.
spk20: So, Bonnie, I'll add one more, which, you know, our largest investment we make is in our store people, our people in our stores. And so, you know, I mentioned our Gallup achievement. That's engagement. Engagement is leading us to lower turnover. Our turnover levels are lower than the average for the industry, according to the NAACS data. So what does that do for us? It improves productivity of the people in the store. It reduces overtime, and it reduces training hours. And so those are three levers. If we continue to perform well, building culture, that should continue to deliver value for us. And as you saw for this quarter, we ran our business on 3% less labor hours than the same quarter prior year. And I believe we can continue that for a while.
spk13: Okay, very helpful. Thank you.
spk10: Your next question comes from Luke Hannon from Canaccord Generity. Please go ahead.
spk02: Yeah, thanks. Good morning. My question here is on consumer behavior, but across income cohorts. Brian, last quarter, I think you gave good color on the decline that you saw related to SNAP-related revenues. Just curious to know where that stood at for Q4, and then maybe as A quick follow-up, what you're seeing, again, across income cohorts in quarter-to-dates, and more specifically, are you seeing that low-income consumer? Is there any change in behavior there, either positive or negative to note?
spk20: I think, as I said earlier, I think that weakness persists. In the southern part of the U.S. in particular, we're approaching half of our customer base is in that $50,000 or less income level. um so that's where we're seeing you know the pain as you mentioned snap uh we're 30 off uh versus same period prior year and that's just you know that's a clear indicator that again there's there's stress out there and some of the benefits that we had from the government are no longer out there no longer enabling some of the spend that we had out there so um again it persists we think it's probably another quarter or two um But again, our focus is long-term. Our focus is on our strategy, bringing value to our customers, and taking care.
spk02: Got it. And Brian and Alex, all the best in your new roles going forward. Best of luck. All right. Thanks, Luke. Thank you.
spk10: Your next question comes from John Orr from JPMorgan. Please go ahead.
spk14: Hi. Good morning. Thanks for taking my question, and congratulations to Brian and Alex. I was hoping you could just talk about your outlook for the summer travel season. What have you seen so far in June, and what are your expectations for the heavier part of the driving season in July and August? Are you seeing the pressure on the low-income consumer manifesting specifically in less discretionary travel?
spk20: It's unclear. We just had a Memorial Day in the U.S., and Canada had the same. Miles driven, we think, was very solid. People are getting out pursuing experiences. So, you know, we feel good barring any weather that the summer is going to be good for us. And again, we've got a gun that's loaded with some very unique, you know, propositions for our customers. So we're hoping we can take advantage of that. Yeah, I wish I could get more color, but we'll have to watch the movies as it plays. But, you know, we're ready for a good summer.
spk14: Thank you. Thanks, John.
spk10: Your next question comes from Anthony Bonadio from Wells Fargo. Please go ahead.
spk19: Yeah, hey, good morning, guys, and congrats to you both on your respective transitions. I just wanted to take a step back on the five-year plan. It looks like year one now behind you, EBITDA maybe flat to modestly down, backing out the extra week. I know you guys had talked about something like a 12% CAGR over that period. I guess, how are you feeling now about that growth rate and then any change to your confidence level and how you're thinking about the trajectory of growth there?
spk20: I think first, I wish we were farther ahead financially. But if you look back over my 25 years, whether it's our EBITDA or whether it's our stock price, it's not a straight line. Things happen with our customers. Things happen with our business. Again, we believe in our strategy. We believe we can create differentiation. We believe that growing the Circle K brand and the associated loyalty and B2B businesses globally will be a differentiator and that we're continuing to widen the gap versus a very fragmented industry. So I'm not panicked at all. I think we've got the foundations that we're working on are the right ones and the progress that we hope to make, we're on track. So again, we're not knee-jerking based on a couple of soft quarters and a weak consumer. We think that's transitory, and we're focused on, you know, again, winning with the customer longer term.
spk12: Thanks, guys.
spk09: Your next question comes from Bobby Griffin from Rem and James. Please go ahead.
spk08: Good morning. This is Alessandra Jimenez on for Bobby Griffin. I wanted to echo the prior comments. Congratulations, Alex, on the new role, and I wish you all the best of luck in the future, Brian. I just wanted to follow up on the Fresh Food Fast new production planning tool. Is that fully rolled out to the entire network today? And then have you seen any initial impact to sales or margins from that tool and any sequential improvement in the prepared food category?
spk06: Sure. Thanks for the question. We grew food again this quarter. We're up to about 12% of our sales for food now across our network in our mix. Our goal is to get to 20%. If you look at the quarter, we were up 144 bps of margin, and for the full year, we were up 330 bps. So that's a pretty significant improvement, a lot more dollars to the bottom line from food in this fiscal year. To answer on the planning tool, yes, it is rolled out, and it's at the core of us continuing to reduce spoilage. I think as we look to the future, we've got a couple other things that we think will continue to help us grow margins. The first would be we're in our second year of our OneTouch remodel program. We'll touch about 80% of our sites in the United States and Canada, and we are seeing nice food growth on the back of those remodels. Second would be we have a commissary in Minneapolis. that we acquired with Holiday. We've scaled that commissary. It's now servicing four of our business units. We have plans to add commissaries throughout our geography so we can service the majority of our stores through our own commissaries, and we see a nice COGS improvement, and it gives us more LTOs and better assortment flexibility. So, on the operating side, we are focused on execution, executing every day, and on getting food to trial and sampling. Where we're sampling well, we see nice food gains. Thanks for the question.
spk10: Thank you. Your next question comes from Corey Tarlow from Jefferies. Please go ahead.
spk03: Great, thanks. I just wanted to get your perspective long term on what you see the drivers of fuel margins being in the U.S., and maybe if you could unpack what you've seen a little bit quarter to date. It sounds like you've seen some improvement. If you could talk a little bit about anything you're seeing in the drivers of that as well.
spk20: There's a couple pieces, and, you know, we've talked about it in previous quarters. So, one, just in terms of the buy side, you know, as we've transitioned to the Circle K brand, The optionality we have to supply ourselves in conjunction with our partners with Muscat, it's just fantastic. We built out a transportation fleet of over 1,000 trucks, so we're able to capture both location and time arbitrages that most of the industry can't, candidly. So that differentiation, when you look at your Opus reports, you see that a lot of quarters were outperforming. Opus low significantly, and we think that's sustainable. It will cycle a bit. We've been through two quarters of really, really relatively no volatility. When volatility happens, we are able to harvest that. So that's on the cost of good side. In terms of just the overall mark behavior, you see the loss in the channel of units and traffic that's largely impacting the individual site players. And so You know, it's possible that this becomes an industry a little bit of have and have nots. Those smaller players, less effective players, you know, have less traffic, but their costs continue to rise like ours do, that their unit break-even margin continues to go up. And so we think that's, you know, that incremental margin requirement of the single site operator is going to continue to underpin a very strong margin in the United States and candidly globally. Again, will that look the same every quarter? No. But, you know, we feel that, you know, the guidance we gave at our investor day, which is kind of low 40s, you know, we still feel very good about that as a go-forward run rate. And also, I forget, thank you for picking up our coverage this quarter.
spk03: Yes, thank you. And then I did just want to follow-up. There's a buzzword that's flying around, and it's AI more recently. We're curious as to how you're leveraging that as a tool to drive more efficiency in your business. Thank you.
spk20: Early days, you know, we're certainly engaged with some of our key partners to look at business cases, customer care, Employee enablement, you know, if you think about, you know, the 140,000 team members out there using AI to help them get answers more quickly are a couple. And then, you know, we make pricing decisions both on fuel and merge, you know, tens of thousands a day. And so, you know, we believe that that has a place in our future helping us make, you know, more informed, more localized decisions. So we've got active projects in that space as well. But, you know, we're also – Again, I think watching for big use cases that we think we can scale outside of pricing. Anything to add, Philippe?
spk18: Yeah, no, and on the back of this as well, for example, in finance, we are starting to have some pilots on using AI in some of the processes. So, yeah, it's a further organization, some pilots there.
spk12: Great. Thank you very much, and best of luck.
spk10: And this is all the time that we have for today's questions. I will turn the call back over to Mathieu Brunet for closing remarks.
spk17: Thank you, Brian, Alex, and Philippe. That covers all of the questions for today's call. Thank you for joining us. We wish you a great day and look forward to discussing our first quarter of 2025 results in September. that may not be the MSP. All right.
spk20: Thanks, everyone. Have a great day.
spk17: Thank you.
spk20: Thank you.
spk10: Ladies and gentlemen, this concludes today's conference call. You may now disconnect. Thank you. Merci.
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