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Couche-Tard says store rebranding has boosted Europe traffic

Pedestrians walk past a Couche-Tard convenience store in Montreal.

CHRISTINNE MUSCHI/REUTERS

Alimentation Couche-Tard Inc. says its decision to rebrand all its convenience stores outside Quebec under the Circle K banner is having a surprise effect in Europe: More people are visiting its revamped locations there than before.

"Our global Circle K brand rollout continues to proceed as planned and continues to gain momentum both in North America and Europe," Couche-Tard chief executive officer Brian Hannasch said on a webcast to discuss second-quarter results, adding Europe was pegged as a "high-risk" market at the beginning of the renaming process.

"Rebranding has in fact increased traffic at our stores compared to non-rebranded sites. This performance certainly exceeds our expectations as a decline in customer traffic can usually be expected when replacing an established and well-recognized brand."

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Couche-Tard announced a sweeping rebranding effort in September, 2015, that will see its Circle K moniker quarterback its international growth. Circle K is replacing the Statoil name in Scandinavia, Mac's in Ontario and Western Canada and Kangaroo Express in the United States among other sites. The company said more than 1,400 stores had been rebranded as of Oct. 9.

In the U.S. Southeast, the name change is not going quite that smoothly, the company said. Gasoline and diesel sales volumes continue to be hurt by fuel rebranding activities on more than 1,000 stores, including those of the Pantry Inc. network, which Couche-Tard bought in 2014. That difficulty added to other problems in the region that hurt sales for the company during the quarter, including floods in Louisiana in August, the Colonial pipeline leak in September and hurricane Matthew in October.

The decision to rebrand was a difficult one for Couche-Tard to make because each of the names being consolidated had an existing relationship with their clientele. The name Statoil is "a religion" in Scandinavia, Couche-Tard executive chairman Alain Bouchard has said. Couche-Tard took over the Norwegian oil giant's retail operations in 2012. The Mac's name, meanwhile, goes back 50 years.

But it was done to provide a unifying brand to unite the company's disparate operations – a name consumers across the planet would recognize as Couche-Tard's rivalry with its main global competitor, 7-Eleven, intensifies, according to a recent authorized biography of Mr. Bouchard. The unveiling of the rebranding decision had such strategic importance for the company that the operation was given a code name: Skyfall, after the James Bond movie, according to the book.

Details about the rebranding exercise came as the company hiked its dividend by 16 per cent to 9 cents per share on the back of healthy same-store sales growth during the latest quarter. Merchandise revenue from existing stores in Europe grew 3.4 per cent, topping gains of 2.3 per cent in the United States and 1.2 per cent in Canada. Same-store fuel volumes also rose except in Canada, where they were hurt by a weak economy in the West.

Profit for the three-month period ended Oct. 9, 2016, was $324-million (U.S.) or 57 cents per share, a 22-per-cent decline from the same period the year before. Revenue totalled $8.4-billion, up 0.1 per cent.

Stripping out special items for both quarters this year and last, Couche-Tard tallied a profit of $331-million or 58 cents per share for its most recent earnings period, a decrease of 11.7 per cent from the same period a year ago. The decline is explained by margins on fuel sales, which have come down from unusually high levels in 2015, the company said.

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Couche-Tard is coming off one of its busiest period ever for acquisitions, striking four significant deals since Mr. Hannasch replaced Mr. Bouchard as chief executive officer in September, 2014. Shareholders of CST Brands, the company's latest target, approved the takeover in a vote last week.

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About the Author
Quebec business correspondent

Nicolas Van Praet is Quebec correspondent for the Report on Business. He joined The Globe and Mail in 2014 after eight years at the National Post, where he covered the North American auto industry crisis and several other major stories. More

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