Morning. I would like to welcome everyone to this web conference presenting Alimentation Couche-Tard'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 or 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 Hannasch, 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.
Thank you, Mathieu, 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 Couche-Tard's President and CEO, and the appointment of Alex Miller as our next President and CEO, effective September sixth. 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 Couche-Tard'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 Couche-Tard will be in strong hands with Alex, as he's been one of my closest business partners at Couche-Tard for the last 13 years, and we 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 Alain 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 +0.7% same-store growth. However, overall Europe and other region results were impacted by weak results in our Hong Kong market, driven by large cigarette tax increases 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 was 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 the 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 LTOs, including our Kong Breakfast Sandwich, with triple meat and double cheese this quarter. We've also completed the rollout of our global digital food safety program, which earned a Foods ervice 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 $0.79, and for our Inner Circle members, the same offer starts at $0.69. We've also added exclusive Gatorade 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 sticks globally, in the U.S., we're starting to see some positive results with our tobacco customers.... 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 with 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 year-over-year growth 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. 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 wanna 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 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 in 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?
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, 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 stringent 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 will be on refining our operating model to eliminate redundant efforts, unlock additional value, and expedite processes through 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 float. These tactical actions highlights our firm 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 47 cents per share on a diluted basis. Excluding certain items described in more detail in our MD&A, 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 diluted 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 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 at $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 billion, or 1.7%, primarily attributable to 1 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, and the contribution from net growth in stock count. 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 gross 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 gross margin remained 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 gross margin decreased by 1.7% in Europe and other regions to 39.2%, mainly due to the integration of certain retail assets from TotalEnergies, which have a different product mix than our legacy European operations. Excluding this impact, our gross margin in Europe and other regions would have been stable. For fiscal 2024, excluding the net impact from foreign currency translation, merchandise and service gross profit 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 39.2%, and by 0.9% in Canada to 34%. Moving on to the fuels, fuel side of our business. In the fourth quarter of fiscal 2024, our road transportation fuel gross margin was $0.5879 per gallon in the United States, a decrease of $0.0655 per gallon. In Europe and other region, it was €0.083 per liter, a decrease of €0.023 per liter, while in Canada it was CAD 0.1368 per liter, an increase of CAD 0.0165 per liter. In the United States, road transportation fuel gross 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 the new fiscal year. In Europe and other regions, our road transportation fuel gross margin was impacted by a change in our wholesale business model, with an impact on our revenues and margin, but no impact on overall gross profits. 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 $0.4528 per gallon in the United States, EUR 0.0873 per liter in Europe and other regions, and CAD 0.1335 per liter in Canada. Now, looking at SG&A for the fourth quarter of fiscal 2024, normalized operating expenses decreased by 7.1% year-over-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 increased by 1.1% compared with the previous fiscal year. Excluding specific items described in more detail in our MD&A, the adjusted EBITDA for the fourth quarter of fiscal 2024 decreased by $180.3 million, or 13.6%, compared with the corresponding quarter of fiscal 2023. Excluding the impact of one less week, adjusted EBITDA decreased by a mid-single-digit number, mainly due to lower road transportation fuel gross profit, as well as softness in traffic, as low-income consumers remain 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%, and our Return on Capital Employed stood at 17.3%. During the fiscal year, our leverage ratio increased to 2.21, mainly due to the acquisition of certain European retail assets from TotalEnergies. We also had strong balance sheet liquidity, with $1.3 billion in cash and an additional $2.9 billion available through our main revolving credit facility. Turning to the dividend, the board of directors declared yesterday a quarterly dividend of CAD 0.175 per share for the fourth quarter of fiscal 2024 to shareholders on record as of July 5, 2024, and approved its payment effective July 19, 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 enjoyed 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, operation, and people. I believe that he's the best choice to be Couche-Tard next leader, and I'm really looking forward to working together in the years ahead. Alex, I will hand it, hand it over to you.
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 Alain Bouchard, our founders, and the entire board of directors for their confidence. Working with Couche-Tard 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. On that note, let's turn it over to the operator to answer analyst questions.
Thank you. Ladies and gentlemen, if you'd like to ask a question, please press star one. If you'd like to withdraw your question, please press star two. Again, to ask a question, press star one. One moment, please, for your first question. Your first question comes from Irene Nattel from RBC. Please go ahead.
Thanks, and good morning, everyone, and congratulations, Alex and Brian, happy to hear that you're gonna be sticking around for a little while. If we turn back to the quarter, could 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, and what you have planned for F 25? Thank you.
Yeah. Thanks, Irene, for the kind words. Let's start on the fuel side. You know, we're actually seeing positive traffic on the four quarters globally, but we're seeing lower quantity per visit. So that clearly is a signal that, you know, people are watching, you know, their spend. Inside the box, you know, we've seen strong private label, but there's also been trade downs, too, from premium brands to, you know, 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 growth rate. We performed 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 reflection on the state of the consumer. You know, that's more than just price. You know, there's certainly people watching what they spend. On the bright side, you know, the nicotine, other nicotine category continues to gain strength, and actually in many of our regions now, generates more gross profit than combustible cigarettes. I maybe finish with beverages. You know, that's the number one reason people come to our stores. We continue to gain traction, particularly as we look at May and June. You know, we've got some great values, great exclusive out there. So we think we're you know, 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, you know, the summer months, but, there's no doubt that the weakness in consumer behavior, you know, persists.
Thanks, Brian. Then just coming back to the issue with 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?
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. 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, a focus on beverages are really, really important to 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 digital transactions weekly with them. So we're providing value that really only some of the chains can, that they've got, you know, digital capabilities, including the loyalty platform. So, you know, we're, we're committed on winning in the big areas and committing on taking share in those areas.
That's really helpful. Thank you.
Your next question comes from Michael Van Aelst from TD. Please go ahead.
Hi, thank you. At the time of the Total acquisition, you guys said that it was about EUR 500 million of EBITDA. In this quarter, you had $98 million of EBITDA from acquisitions, which also included, MAPCO, I believe. So I'm curious, that, that seems like a decent sized drop in the run rate of contribution from acquisitions versus what the original business p- case was. So I'm wondering, is this strictly fuel margins? Is there something else happening? Is there greater seasonality? What is it that, that explains the gap between where you thought that profit was gonna be and where it seems to be running right now?
Yeah, thanks for the question, Michael. You know, it's really one word: it's Germany. It's a very large market for us. We picked up 1,200 locations. You know, 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, you know, 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.
Are you seeing any kind of green shoots in Germany? I might have missed it if you said that.
I missed that, Michael. Try me one more time.
Sorry. Are you seeing any green shoots or any normalization in the fuel margins in Germany, or is it, is it more of a-
Yeah.
-competitive issue?
Yeah, no, as I mentioned, recent weeks have been better. You know, it's really 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. And so that's the main problem. There's nothing else.
Yeah.
There's nothing. Okay. All right.
No, we feel good about the people. We feel good about the journey. You know, 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.
Yeah. All right. 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.
Your next question comes from Mark Petrie from CIBC. Please go ahead.
Yeah, 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? I'm just wondering if you could help us understand the trajectory on that business, and maybe you could just summarize the impact it had on your comp in Q3, and then the impact it had on your comp in Q4. 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 in other nicotine.
Yeah, I'll divide the world into three chunks. Start with Canada. It's been a struggle, multi-year struggle. Our focus is clearly on food and beverages. You know, the tobacco issue in Canada is a lot about illicit. And so, 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, you know, that's gonna continue to be a bit of a drag on us in Canada. In Europe, we actually performed pretty well. You know, units are fairly flat, which is kinda interesting because it's very different than the US, and, you know, 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 first 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 in the alternative space. U.S., you know, you see the results from, you know, the Goldman report or, you know, BAT and Altria publish. You know, 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 same-store 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, you know, between the loyalty and digital activities that we have out there, and really surgical investment in price, you know, we feel good that we're gonna be able to continue to take share in that category in a very smart, smart fashion. And, you know, we know that's a valuable customer and a great basket.
That's great color. I appreciate all the comments, and all the best.
Yep, thank you.
Your next question comes from Chris Li from Desjardins. Please go ahead.
Oh, good morning, everyone. I'll 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 your retirement. You know, the timing maybe was a little bit earlier than maybe what some people had expected, especially since you 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?
It's a great question, Chris. I've got a lot of miles on me.
I know, I know.
I turned 58. So nothing magic. 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 Couche-Tard, 10 with the ACT. And then candidly looking at Alex, we've been working on this transition for since 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 just feels like the right time to explore something else.
Okay. No, that makes sense. And then you also mentioned that, you know, you're gonna 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, or there are a few large ones that are potentially on the radar screen over the coming quarters?
Yeah, again, you know, 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, 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.
Great. Thanks, Brian, and all the best.
Thanks, Chris.
Your next question comes from Tamy Chen from BMO Capital Markets. Please go ahead.
Hello, this is Riad on for Tamy Chen. 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 softening 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.
You broke up a little bit, Riad, but I'll give it a shot. You know, in terms of positive trends, you know, I would say it's a large U.S. focus when I say that. I guess I would also say that, you know, we like... believe it's more of our own efforts. When I look at, again, some of the Nielsen data, when I look at, Altria data, the Goldman report on tobacco, you know, we're seeing that consumer softness persist. You know, we've always said that's gonna be with us through the fall, we think. But 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, you know, I think in most of our markets, we feel we're taking share on in the merch side for sure.
Great. Thank you.
Your next question comes from Martin Landry from Stifel . Please go ahead.
Hi, good morning. Congratulations, Brian, on your accomplishments, and congratulations, Alex, on your nomination. I think the company's in great hands. I would like to touch on, you know, your cost reduction. You know, in October last year at your Investor Day, you highlighted a plan to reduce your cost by $800 million, and that included several pockets, including COGS, G&A, 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, you know, 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.
Hi, Martin, and thanks for the question. So yeah, we feel pretty good about, you know, the program that we introduced last year. We were mentioning, you know, the $800 million ambition for the 5 years. I tell you that today we have almost reached the half of the journey already. So, I would say the teams have done an amazing job, I would say across the organization at store level. So just in the quarter, to provide a bit of color, we used 3% less hours in U.S., for example. So there is a lot of things happening on 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 a very positive results on that side, and now we are rolling 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 back office. 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 streams as well, so even in HR. So there, there's a lot happening there, Martin, and yeah, we feel very confident that yeah, we will of course reach this under CAD 800 million, but the objective is of course to be beyond that. So we remain very optimistic on, you know, on our target for this year to, and for the next coming years, to you know to beat inflation by at least 1%, or that's our internal goal, you know, and feel confident about that. At the same time, you know, quarter to quarter, I just wanted to be also 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.
Okay. Just to clarify, you said that you're half the journey already?
Yeah.
So meaning you've generated already $400 million of cost savings?
Yeah, we have already identified $400 million. And yeah, part of that has been already banked, and it's yeah, the last twelve months, yeah.
Okay. Okay, perfect. Thank you.
Just to add, maybe put a little pressure on the team after I'm gone, but you know, we've always had a best-in-class cost structures. We've bought other companies, and we've compared. You know, we are excited about this. We put a big enough goal out there that's caused 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 growing our business. So, you know, we think it's a key part of our foundation of our strategy.
Got it. Thank you.
Your next question comes from Vishal Shreedhar from National Bank . Please go ahead.
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?
Hi, Vishal, thanks for the question. So, yeah, as you have seen, we had a very income tax rate on the Q4. This is indeed a one-off, so this is 10% of the effective tax rate was due mainly to tax reorg that we have done mainly in Europe. So, going forward, I think you should come back, you should see an income tax rate coming back to, you know, a low 20s%. That's what we think that will be. Very minimal, you know, impact expected linked to the global minimum tax, you know, implementation. So, for that, that would be almost neutral. So, yeah, I would say low 20%, that's, that's where we will be in terms of income tax rate.
Okay. Thank you for that. And, you know, Brian, I just wanted to wish you best as you move on to your, your, 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, 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, you know, the, the non-traditional tobacco continues to gain, to gain in, in mix?
Yeah, so if you look at nicotine overall, so it's combustible and alternative, you know, gross profit dollars is absolutely up. You know, we're making more off of nicotine than we ever have in the past. Trips is an issue, though. I mean, you know, right now, the frequency is not the same as combustibles, and so that's why we still are focused on both. You know, we wanna be, you know, leading edge on alternative nicotine, but also take share and outperform the industry on combustibles. And be... There's a lot of poly users out there that shop both, and we want to be their stop.
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.
Your next question comes from Bonnie Herzog from Goldman Sachs. Please go ahead.
All right, thank you. Good morning, and congratulations on your retirement, Brian and Alex, congratulations to you, too. I, I have a question on your OpEx with, you know, another quarter of really good expense management on your part with your OpEx was down, you know, 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, you know, 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, to better OpEx performance? And, you know, really, how sustainable that is gonna be moving forward? I guess, you know, I'm, I'm looking to get a good read on, you know, maybe where your OpEx could trend, you know, this fiscal year. Thank you.
Hi, Bonnie. Thanks for the question. So as I mentioned earlier, we remain very confident on the guidance, you know. We always say that for us, it's beating inflation by 1% on the same store as OpEx. I would say that that's where we feel comfortable to in terms of guidance. Of course, always aiming at being that, that's what we have been able to do on the last three, four quarters. The reality here is that we are bringing the, I would say, the on the feet to serve. So 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 productivity. I was mentioning 3% lower, less hours in the U.S., but that's true as well in Canada, in Europe. We see that productivity, I would say, across the network. And again, we are doing a lot on the back office, so how to reduce the administrative task from the store point of view, but as well, how we can, you know, streamline our back office, you know, from finance to HR to maintenance, real estate, marketing, all these customers, you know, call centers, all these, I would say, activity processes that we have in the back office. We are here, you know, partnering with, you know, organization or companies that are doing that very well, their core business, leveraging that, and with our scale, actually great, great, 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 are organized and we have not necessarily, you know, used our leverage, our scale, and to leverage our expenses. So, for example, on the GNFR, we are, I would say, just at the beginning of the journey, how to standardize what we use in terms of, you know, supply in our stores, in our back office. 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 as well.
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, as you know, I mentioned our, our Gallup achievement, that's engagement. Engagement's leading us to lower turnover. Our turnover levels are lower than the average for the industry, according to the NACS data. So what, what does that do for us? It, it improves productivity of the people in the store, it reduces overtime, and it reduces training hours. And so those are three, 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, you know, 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.
Okay, very helpful. Thank you.
Your next question comes from Luke Hannan, from Canaccord Genuity. Please go ahead.
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, 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 date. Are you, and more specifically, are you seeing that low-income consumer? Is there any change in behavior there, either positive or negative to note?
I think, as I said earlier, I think that weakness persists. You know, in the southern part of the U.S., in particular, you know, we're approaching half of our customer base is in that 50,000 or less income level. So that's where we're seeing, you know, the pain. As you mentioned, SNAP, we're 30% off versus same period prior year. And that's just... You know, that's a clear indicator that, again, 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, again, it persists. We think it's probably another quarter or two, but again, our focus is long term. Our focus is on our strategy, bringing value to our customers, and taking share.
Got it. And Brian and Alex, all the best in your new roles going forward. Best of luck.
All right. Thanks, Luke.
Thank you.
Your next question comes from John O'Brien, from J.P. Morgan. Please go ahead.
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?
It's unclear. You know, we just had a Memorial Day in the U.S. and, you know, Canada had the same, and, you know, miles driven, we think, was very solid. So people are getting out, pursuing experiences. So, you know, we feel good, barring any weather, that the summer's gonna 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'd give more color, but we'll have to watch the movie as it plays. But, you know, we're ready for a good summer.
Yeah. Thank you.
Thanks, John.
Your next question comes from Anthony Bonadio from Wells Fargo. Please go ahead.
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. Looks like year one now behind you, EBITDA may be 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?
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. You know, things happen with our customers, things happen with our business. You know, 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 you know, we're continuing to widen the gap versus a very fragmented industry. So, I'm not panicked at all. I think we've got... You know, the foundations that we're working on are the right ones, and the progress that we hope to make are, we're on track. So, you know, we're, again, we're not knee-jerking based on a couple 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.
Thanks, guys.
Your next question comes from Bobby Griffin, from Raymond James. Please go ahead.
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?
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 basis points of margin, and for the full year, we were up 330 basis points. So that's 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 is a core... 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 One Touch remodel program, where 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.
Thank you.
Your next question comes from Corey Tarlowe from Jefferies. Please go ahead.
Great. Thanks. I, 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.
There's a couple pieces, and, you know, we've talked about it in previous quarters. So one, just on terms of the buy side, you know, as we've transitioned to the Circle K brand, you know, the optionality we have to supply ourselves in conjunction with our partners with Musket, you know, it's just fantastic. We've 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, you know, when you look at your OPIS reports, you see that a lot of c-stores were outperforming OPIS Low significantly, and we think that's sustainable. It will cycle a bit. You know, we've been through two quarters of really, really, you know, relatively no volatility. When volatility happens, we are, you know, able to harvest that. So that's on the cost of goods side. In terms of just the overall market behavior, you know, you see the loss in the channel of units and traffic that's largely impacting, you know, the individual site players. And so, you know, it, it's possible that this becomes an industry, a little bit of have and have-nots. And as 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 Canada, 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, before I forget, thank you for picking up our coverage this quarter.
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. I was curious as to how you're leveraging that as a tool to drive more efficiency in your business. Thank you.
So, 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, yeah, we make pricing decisions both on fuel and merch, 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, Felipe, I missed anything ?
Yeah, no, and on the back office 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 across the organization, some pilots there.
Great. Thank you very much, and best of luck.
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.
Thank you, Brian, Alex, and Felipe. 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 2025 results in September.
All right. Thanks, everyone. Have a great day.