Good morning. I'd like to welcome everyone to this web conference presenting Alimentation Couche-Tard financial results for its fourth quarter and fiscal 2020. All lines will be kept on mute to prevent any background noise. After the presentation, we will answer questions that were forwarded to us beforehand by analysts. 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 might 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, and Mr. Claude Tessier, Chief Financial Officer. Brian, you may begin your conference.
Thank you, Jean Marc. Hey, good morning, everyone. Thanks for joining us for this presentation of our fourth quarter and year-end results. We had really an exceptional year overall, both financially and operationally. We had record earnings, and I think more importantly, we stayed on track during COVID-19 with our strategic goals, including growing organically across the network, beginning the rollout of our new food program in North America, pushing dynamic pricing and loyalty initiatives forward, and improving our customer experience across the globe. Our agile decentralized model, as well as the advancements we made in operational excellence this past year, helped us to face the unprecedented challenges of COVID-19. I'm proud to say, I think we've emerged from this historic year a better and stronger company, both financially and culturally.
We entered the fourth quarter with strong top-line trends, including 12 weeks of positive traffic before we endured a significant decline in traffic and fuel volumes with the pandemic stay-at-home orders implemented across our global footprint. Our customers changed their shopping behaviors, moving to larger basket sizes with more impulse and emergency items and take-home packages. We innovated quickly to meet these desire for less touch points as well as different SKUs and package sizes. We're placing the health and safety of our employees and the customers at the forefront of our decision-making, we're committed to being a part of the solution in our communities where we work and live. I'm truly grateful for the courage, care, and commitment that our employees are showing towards each other, toward our customers, and the business.
I know these brave efforts will continue as we see the virus on the rise in some parts of our network, particularly here in the U.S. I also want to touch briefly on the recent tensions in the United States focusing on racial injustice. The demonstrations following the brutal death of George Floyd have been particularly passionate in Minnesota, where we have hundreds of Holiday stores. While several of our stores were damaged there, thankfully, we had no injuries of our team members, and our northern tier team did a fantastic job working closely with the community to reopen all but two locations.
Across the network, we've expressed the heartbreak felt by our entire company over this tragic situation, as well as our commitment to listening, to learning, and taking meaningful action toward having our entire workforce reflect the diversity of our customer base and the respect inclusivity to which we aspire. I'm going to turn to the results for the fourth quarter. Same-store merchandise revenues decreased 0.5% in the United States and 6.5% in Europe, while increasing 4.7% in Canada compared to the same quarter last year. Due to the implementation of restrictive social measures in the various geographies in which we operate, the COVID-19 pandemic had a meaningful impact on our financial results, mostly driven by declining traffic across our entire network. These measures led to fewer visits to our stores starting in mid-March in Europe and slightly later in North America.
The negative impact from lower traffic was partially offset by larger average basket size as customers clearly consolidated trips. From a fuel perspective, volumes this quarter declined sharply during the first weeks following the stay-at-home orders. For the quarter, same-store road transportation fuel volume decreased 18.3% in the U.S., 13.4% in Europe, and 23.5% in Canada compared to the same quarter last year. The sharp decline in volumes was mitigated by higher fuel margins, which benefited from the rapid and steep decline in crude prices during the quarter, as well as lower competitive activity at retail. Over the course of the year, we've continued to expand the Circle K fuel brand across North America with now more than 2,300 Circle K fuel branded sites.
We've also been testing modified branding strategies with our fuel partners that place the Circle K brand more prominently on the canopies, and we're analyzing the results on a market-by-market basis. Looking forward, we'll continue to work on strategies that grow the Circle K fuel brand with the aim of creating a stronger ecosystem and enhancing the customer experience. Another important focus in the fuel category this year is the development of new promotional and pricing approaches to benefit our customers and increase their frequency of visits, including the testing of more dynamic pricing strategies at 2,400 sites across the U.S. Last summer here in the U.S., we also introduced our Easy Pay loyalty program, which awards points for fuel, food, and beverage items that can be converted to cash discounts and offer also prizes and other benefits.
We completed the rollout of our Easy Pay loyalty program to all U.S. markets where we have Circle K fuel brand in place, and these provide everyday discounts to our most loyal customers. In our mobility work, we've installed more than 450 chargers at 81 sites in Norway and now lead the country both in share and absolute number of high-speed chargers. In the urban market of Oslo, we were the first to convert an entire station to EV charging, and we're now proudly a global pioneer on that front. We've also launched a home charging effort this year, and we've now got 1,200 units installed in residential chargers and 3,000 units committed. That we're committed to being a part of the solution and creating an ecosystem both at home and on the road for our non-oil customers in Norway.
In terms of our brand, we're now in the fourth year of our global Circle K rebranding project. We've converted more than 800 stores this year and now see the work completed across our entire European network and in more than 6,300 sites in North America, including nearly 1,000 former CST locations and more than 1,100 stores in Canada. In addition to our company-owned stores, we've also worked with our franchise partners across our global network to convert more than 1,500 franchise sites to our new Circle K brand. We continue to see many benefits from our transition to a single global brand, including increased awareness by our customers, as well as the ability to speak to them in a unified voice. This latter point has been particularly impactful during the pandemic in communicating emergency procedures, company policies between our teams and our communities.
During the course of the year, we've also continued to build brand awareness through our rebranding to Circle K. We've also increased brand loyalty through many tactical initiatives. I've already mentioned our Easy Rewards and Easy Pay programs. Inside the store, across the network, we've continued to deploy our LIFT platform, providing us the ability to track our customers' purchase history and offer them personalized discounts based on the makeup of their basket. We now have LIFT deployed in about 7,600 sites in North America. We're in the planning stages in Europe. Additionally, as we continue to look at reverse synergies out of the Holiday transaction, we've expanded our Smart Value program, which was a key promotional tool for them. Now it's expanded to the entire North American network. We're seeing great success in growing basket. We're piloting that program in Europe.
Now let's turn to our new food program in the U.S., which we're calling Fresh Food Fast. As I have said on previous calls, this food initiative presents a significant organic growth opportunity with expectations for both top line and margin improvement. We continue to be excited about its potential. In markets where the new program has been available, customer feedback has been very positive, and both food unit sales and overall sales in the stores with the program have significantly outpaced comparable sales at other stores in those same markets. During the pandemic, with the necessity to adhere to local government safety measures, we temporarily delayed opening the new food offer in many of our nearly completed stores, as we didn't think it was prudent to allow sampling and training during this time. However, we continue to build out the program, and we continue to install equipment as planned.
We laid the groundwork in approximately 500 stores during the quarter and continue to expand rapidly toward our target of 1,500 installations for the calendar year and 2,300 stores during the fiscal year. As the pandemic eases in some areas, associate training is resuming, and all converted stores will soon have the new food assortment available to our customers. Our efforts around delivering the freshest cup of coffee continued this quarter. As U.S. deployment of our on-demand coffee was completed this year, we moved our focus to Europe. Our next generation espresso-based beverage equipment was deployed with 450 machines during the quarter, delivering a barista-quality beverage in under 90 seconds. Our Froster program, which has been a mainstay here in North America, has expanded nicely and is now available at more than 200 locations in Europe.
We continue to see great opportunity to scale this offer in that region as it's been a solid driver of incremental trips to our store, especially in Ireland, where we started testing last year, where traction with customers has been impressive. More recently in the Baltics as we entered the warm summer months. During the spread of COVID-19, with the closure of bars and restaurants, we saw a movement in packaged beverage towards larger take-home packages, particularly impacting all beer segments as customer buying shifted to larger pack formats. Throughout the quarter, the hard seltzer category continues to see robust growth. Energy drinks, there was also a notable shift from instant consumption or single-serve to take-home packages in that category, and this drove positive growth during the quarter.
In tobacco category, despite the tightening regulations in the U.S. and change to 21 and the traffic challenges in the back half of the quarter, we experienced increased purchases of tobacco products across the network, resulting in positive overall sales for the category, particularly in Canada. With the shift in consumer buying patterns from single pack to larger cigarette cartons and multi-packs, the margin % did decline. Other tobacco products continues to drive growth at our stores, with all geographies experiencing double-digit growth compared to last year. While vapor flavors were removed in the U.S. in February, this subcategory remained positive, and vapor products in Europe and Canada continue to see strong growth. Modern white nicotine expanded further in Europe and the U.S. and is becoming a significant part of our OTP category.
Before turning to our financial results, I want to briefly mention the meaningful ways in which we became part of the solution in our communities during the pandemic. Starting in March, to recognize all frontline first responders, we launched a free coffee, tea, or Polar Pop offer, and we've now served over 3 million beverages to those heroes across the globe. In the U.S., we've also contributed more than 40 million meals to Feeding America, and starting in June, we pledged 5 million meals to food banks in Canada. In Europe, we've delivered goods to elderly and impaired, as well as care packages to hospitals and other facilities. We've also worked to innovate rapidly during the crisis to meet our customers' desire for convenience anytime and anywhere.
We rapidly developed a click and collect model both in Europe and in North America for curbside delivery. We've expanded home delivery through third parties, with more than 1,000 sites now having home delivery capability globally. We've added touchless and mobile payment options as well. License plate recognition has been piloted for fuel purchases in Norway. The urgency of the pandemic brought out the best in our company's ability to adapt a new community of solutions and technology, adjusting to the rapidly changing retail landscape. I'm going to pause here and let Claude take you through more of our fourth quarter and annual financial results. Claude?
Thank you, Brian. Ladies and gentlemen, good morning. For the fourth quarter of fiscal 2020, we are happy to report net earnings attributable to shareholders of the corporation of CAD 576.3 million, or $0.52 per share on a diluted basis. Excluding certain items for both comparable periods, adjusted net earnings for the fourth quarter of fiscal 2020 would have been approximately CAD 521 million or $0.47 per share on a diluted basis, compared with $0.26 per share for the fourth quarter of fiscal 2019, which represents an increase of 80.8% year-over-year. Net earnings were CAD 2.4 billion for fiscal 2020, compared with CAD 1.8 billion for fiscal 2019, an increase of 28.3%. Diluted net earnings per share stood at CAD 2.09, compared with CAD 1.62 the previous year.
Excluding certain items from net earnings for both comparable periods, net earnings would have been approximately CAD 2.2 billion, compared with CAD 1.8 billion for the previous year, which represents an increase of CAD 374 million, or 20.3%. Adjusted diluted net earnings per share would have been CAD 1.97 for fiscal 2020, compared with CAD 1.63 for fiscal 2019, an increase of 20.9%. The COVID-19 pandemic impacted our business and financial results in many ways, with the decline in traffic across our entire network being the most important. Additionally, various actions were taken to support the health and safety of our employees and customers, which drove incremental operating expenses. These costs were partially offset by initiatives implemented across our network to reduce our controllable expenses.
During the quarter, we closed our asset exchange with CAPL, under which a portion of our U.S. wholesale road transportation fuel operation was exchanged against CAPL's 17.5% limited partnership interest in CST Fuel Supply. This transaction resulted in a pre-tax net gain of CAD 41 million. I will now go over some key figures for the quarter. For more details, please refer to our MD&A available on our website. During this most recent quarter, excluding CAPL's revenue and the net negative impact from foreign currency translation, merchandise and service revenues for the fourth quarter of fiscal 2020 decreased by approximately CAD 33 million, or 1%. This decline is primarily attributable to decreased traffic in our network due to the pandemic, partially offset by growth in the basket size.
For fiscal 2020, on the same basis, merchandise and service revenue increased by CAD 322 million, or 2.2%, driven by organic growth initiatives, partly offset by the negative impact on traffic due to the pandemic. For the fourth quarter of 2020, on the same basis, merchandise and service gross profit decreased by approximately CAD 45 million, or 3.9%, also mainly attributable to the lower traffic in our stores due to the spread of COVID-19. Our gross margin decreased by 0.9% in the U.S. to 33%, by 1.2% in Europe to 40.6%, and by 1.2% in Canada to 31.8%, driven in all three geographies by changes in our product mix towards lower-margin categories. During fiscal 2020, on the same basis, merchandise and service gross profit increased by approximately CAD 73 million, or 1.5%. The gross margin was steady at 33.8% in the U.S.
In Europe, it decreased by 0.3% to 41.5%, and in Canada, it decreased 1% to 32.6%, mainly due to the conversion of Esso stores during the year from an agent model to a corporate one. Let's now move on to the fuel side of our business. In the fourth quarter of fiscal 2020, our road transportation fuel gross margin was strong at $0.4688 per gallon in the U.S., an increase of $0.2837 per gallon, driven by the rapid and significant decline in crude oil prices during the quarter, as well as by changes in the competitive landscape. In Europe, the road transportation fuel gross margin was at $0.0867 per liter, an increase of $0.39 per liter. While in Canada, the road transportation fuel gross margin was at CAD 0.0840 per liter, an increase of CAD 0.0027 per liter.
The road transportation fuel gross margin in fiscal 2020 was $0.3119 per gallon in the U.S., USD 0.0848 per liter in Europe, and CAD 0.0791 per liter in Canada. For the fourth quarter of fiscal 2020, growth in normalized operating expense was 2.3%, driven by COVID-19-related expense and normal inflation, higher labor costs, and incremental investments to support our strategy. COVID-19 related expenses include an emergency appreciation pay of $2.50 per hour in North America for hourly store and distribution center employees, the installation of plexiglass dividers in our store to ensure the safety of our employees at the cash register, additional cleaning and sanitizing supplies, as well as masks and gloves for our employees.
While we expect to retain some of these expenses in the future, the appreciation pay came to an end on June 12th in the U.S. and on June 22nd in Canada, essentially marking three months since the start of this unprecedented crisis. Importantly, as we adjusted to the challenges brought forward by the pandemic, a special focus was placed on cost containment initiatives, allowing us to reduce certain expenses without impacting the service we offer to our customers. During the last few months, we took many actions aimed at maximizing our cash flows, such as deferring non-critical capital expenditures and reducing various operating expenses. We spent time analyzing data from our labor model to adjust store hours and shifts. We shared best practice across business units and realized frequent scenario modeling to help optimize decision-making and minimize business risk.
In our global procurement team, we worked with key vendors to identify areas of potential shortages and put remediation plans in place, meaningfully reducing out-of-stocks across our network. Moving back to our results. Excluding specific items described in more detail in our MD&A, adjusted EBITDA for the fourth quarter increased by CAD 314 million or 42.9% year-over-year, mainly from higher road transportation fuel gross margins in the U.S. and Europe, partially offset by the negative impact of COVID-19 on our traffic, the disposal of our interest in CAPL, as well as the negative impact from foreign currency translation representing approximately CAD 6 million.
During fiscal 2020, on the same basis, the adjusted EBITDA increased by CAD 465.9 million or 11.9% year-over-year, mainly attributable to the higher road transportation fuel margins in the U.S. and Europe, and to organic growth on the convenience side, partially offset by the negative impact of COVID-19 on our traffic. The variation in exchange rates had a net negative impact of approximately CAD 21 million. Excluding specific items described in more detail in our MD&A, the income tax rate for the fourth quarter of fiscal 2020 was 20.7% compared with an income tax rate of 13.5% for the fourth quarter of fiscal 2019. The adjusted income tax rate for fiscal 2020 was 19.9%, compared with an income tax rate of 17.2% for fiscal 2019.
The increase for both the 4th quarter and the fiscal year stems from mainly the impact of different mix in our earnings across the various jurisdictions in which we operate. For the fiscal year, April 26, 2020, our return on equity remained strong at 24.8%, and our return on capital employed was 15%. During the quarter, we continued to generate significant free cash flows and saw our adjusted leverage ratio decline further to 1.6:1. As of April 26, 2020, we had ample balance sheet flexibility with CAD 4.7 billion available through our cash and revolving unsecured operating credit facility. During the 4th quarter and entire fiscal 2020, we repurchased 8.7 million and 16.4 million Class B subordinate voting shares, respectively. These repurchases were settled for a net amount of CAD 233.9 million and CAD 470.8 million, respectively. Our share repurchase program ended on April 9, 2020, and was not renewed.
Finally, on June 29, 2020, the board of directors declared a quarterly dividend of CAD 0.07 per share and approved its payment for July 23, 2020. I would like to reiterate that we have always taken a disciplined approach to capital allocation and cost containment. It is part of our DNA and represents a point of pride for the company, and this crisis has reinforced our belief that only through this discipline will Couche-Tard successfully preserve and continue to grow value for employees, customers, and shareholders. With that, I thank you all for your attention, and I'm turning it back to Brian.
All right. Thank you, Claude. Before I wrap up, I want to talk about what we've been seeing in the first quarter of this fiscal year as part of our network began returning to some semblance of normal. In the first several weeks of the quarter, we saw strong increases in merchandise sales as traffic trends gradually improved from week to week. Many factors appear to be contributing here, but more notably, we continue to see the move to larger baskets that I pointed out earlier and see the customer adjusting their shopping habits. We think there's some preference for the ease and convenience of our locations and our channel over some other channels during this COVID-19 period and COVID-19 recovery.
We've also gained new customers as we stayed open throughout the pandemic to meet their needs for emergency products, impulse buys, and grocery items, which became increasingly popular, and we're seeing some stickiness. On the fuel side, while still negative here too, we've seen a gradual return in fuel volumes, and fuel margins have remained healthy through May and June. In recent days, there's been a resurgence of COVID-19 in parts of our U.S. network, and it is unclear how the virus and the global economy will develop in the weeks and months ahead. As such, we will continue to adhere to our customary financial discipline, maintain a robust contingency planning while taking a long-term view in our decision-making and pushing forward with our Double Again strategy. Our hearts and our thoughts go out to those who continue to suffer from the virus or take care of loved ones.
In conclusion, I want to thank all of our employees, our customers, our shareholders and partners for the trust you've shown in us during this year. Throughout the last few months until today, we're operating with a long-term mindset, relying on our agile operating model and keeping the health and safety of our employees and customers as our key priority. What could have been the worst of times is turning us into a better, stronger company, moving forward with our strategic growth plans and making it easy for our customers' lives every day, even during these difficult days. Now we'll answer the questions we've received from analysts. Thank you.
Thank you, Brian. The first question comes from Derek Dley at Canaccord Genuity. How did fuel volumes trend near the end of the quarter? As the data we track suggests, we have witnessed some week-over-week improvements over the last month. Have you gained market share during the COVID-19 period?
Yeah. Fuel volumes declines really reached the bottom at the end of March. Europe fared better, significantly better than North America. About 50% of our volume in Europe is B2B, which stayed much more toward normal levels. After those couple weeks in March, we saw it stabilize, then begin to improve as markets reopened. Volumes do remain well below last year as people still aren't driving as much, and there's a certain percentage of society that's now officing from home. That's a trend we'll have to continue to watch going forward. With regard to market share, I think it's really difficult to say based on limited data, but we focused on remaining open and consistently competitive in our pricing, which not all in our channel have done. We may have picked up some share over this period, but again, I'd say it's difficult to say.
The second question from Derek Dley. As it relates to the merchandise margins, has the product mix begun to revert back to a more normalized mix? What were some of the categories that led the way for you in the fourth quarter?
As I mentioned, I think tobacco, particularly cigarettes, were initial leaders. Alcohol, as people stayed home, bars were closed. We saw strong growth in beer and wine sales across the board. Certainly inside of that, we saw a shift to larger packages, from 6 packs to 24 and 30 packs. We saw spikes in grocery size packages, whether that be salty or even confectionery. We worked hard to modify our assortment during the period to have those products on hand and in stock. If you could get it was difficult, but certainly, the PPE or cleaning products that everybody was looking for, hand sanitizers, masks, Clorox, all those things, were in high demand. When we had it sold very quickly. I think the areas that got hit, with no surprise, it's categories that are very much reliant on trips.
Our food, our Polar Pop, our coffee, certainly declined in correlation to trips. In many areas, we're forced to modify our offers going to full serve or handing out cups behind the counter. In those areas, we saw even greater declines. I think as we see traffic now improving, I'm a bit surprised to see that some of these larger package sizes are still in play. It seems like customers are still focused on consolidating trips and as traffic has improved, we've seen a commensurate or almost a linear improvement in the on-the-go categories like fountain, prepared food, and coffee. We find that encouraging and just hope to continue to see the improvements in traffic trends continue.
The next set of questions comes from Patricia Baker at Scotia Capital. You noted one of the bigger impacts of COVID-19 on your business was a mixed shift in each of your markets, which in turn impacted margins. Were the shifts pretty similar across all three markets, and were you able to adjust your assortment easily to adapt to changing demand and reduce potential shrink on fresher items?
Yeah, I think overall, as we mentioned, the shift to larger packages, to alcohol, to snacks and tobacco, was pretty global. Our European business and a lot of Canada, we do not have alcohol in place, so they didn't see that same benefit. Globally, we did see larger sizes, certainly demand for sanitation products, things like that. We start with very different mixes. If you think about Europe, food is our number 1 category by far. Car wash is our number 2. Both of those were significantly impacted. People washed their car, didn't drive it, and so we saw a decline in car wash activity, which explains some of the margin impact. Again, I think it's where each area was starting from as to how much they were impacted. In Canada, which was called out, cigarette volume was greater because of the illicit market losing shares.
As the reservation production has resumed, I guess over a month ago, we're happy to see that we've seen some stickiness in retaining some of these sales that we gained during COVID-19. For fresh items, self-serve items were removed in many parts of the network. This is probably more prevalent in the U.S., and we don't have a lot of self-serve in Europe. Where we were forced to go full serve, I think it was resounding that the customers preferred the old way. They preferred the self-serve. In terms of shrink, I think this is the last part of the question. There was initial impact as we really waited to see what changes in consumer patterns were happening. I think our business units did a really good job of adjusting to demand. We also did the same on the cost side, as Claude said.
We're literally modifying or running our labor model weekly, to keep up with just really significant changes, not only in traffic, but also underlying that traffic in the mix, which our labor model takes into account how much food, tobacco, things like that take different time, very task-oriented approach there. I think we've been very responsive.
The second question from Patricia Baker. You've always talked about Couche-Tard being in the business of selling time and convenience to consumers. What have you learned or experienced through the crisis with respect to that positioning, and how important do you believe it will be in the future?
I think what we've learned is it's really premature to predict. This has almost been a weekly conversation and weekly changes that we're seeing. We're really trying to take a long-term view and be cautious about driving conclusions at this point. I think one benefit we do have, and we had it as we entered the crisis, is watching our businesses in Asia and even in Europe, which were ahead on the COVID journey. We're watching those with great interest to stay on top of consumer trends and see if that may provide insight into what happens here in North America. In China, we're seeing a lot of behaviors go back to normal, maybe with the exception of online ordering, whether that be for grocery or just general items. I joked the other day in a meeting, my mother's 78 years old and had never used Amazon.
She's got it figured out now, and she's not going to unlearn that. Beyond that, I think it's premature to make calls on what customers will do long term. I think the one theme that we're working on, and it's a core part of our strategy, is we do want to sell time back to customers. People want to transact quickly, and that was heightened certainly during COVID. We've accelerated our focus on home delivery, click and collect, curbside. We now, as I mentioned earlier, have over 1,000 sites with home delivery and 300 sites with curbside. Still a long way to go to prove there's a business model there and to prove that customers want that from us. We're certainly committed to learning. We are actively, where we don't have it, deploying frictionless payment options, including leveraging mobile payments, our mobile app, prepay.
Essentially, our goal is, and it's a core part of our strategy, is to serve the customer anywhere, anytime, in whichever way they want.
The next set of questions come from Martin Landry at Stifel GMP. Could you give us more color on the home delivery initiative? How many locations currently offer home delivery in North America, and what is your goal for the next 12 months?
As I mentioned, we're offering home delivery in the U.S. now with over 1,000 locations, partnering with Favor down in Texas, DoorDash and Uber Eats in other geographies. In Canada and Europe, we're also partnering for home delivery with a limited number of stores at the moment. We'll continue to deploy these initiatives and work on increasing consumer awareness as scale will be important to make these successful. Like the restaurants, the QSRs, I think the business model still has to be figured out. We're watching this closely. We recognize the need to better understand the trend and how consumers are responding. I think what we see the consumer needing from us will dictate how we proceed going forward.
The next question from Martin Landry. How does the basket size and how do the economics for home delivery compare with in-store?
I'd say the basket size is significantly higher for home delivery. So far we're seeing it being very complementary to our typical patterns. Our key day parts today are morning and evening. What we see with home delivery is, we see the spike start really after 9:00 P.M. when people don't want to go out anymore. From an economics perspective, I think it's early and probably difficult to compare as these on-demand services are not at scale at this point. Again, I think the important part of these trials is to understand what the consumer wants and gain insight into the business model. These programs make sense in the context of the last 12 weeks through the pandemic, but I think it's too early to tell how things will evolve longer term. Again, we're going to let customer needs guide us going forward.
The next set of questions come from Irene Nattel at RBC Capital Markets. We are nine weeks into the fiscal first quarter. Can you give us a view on how things have been trending? Have you continued to outperform broader industry metrics?
Yeah, I would say in Europe, where the economy started to reopen a bit earlier than North America, we saw improvements in merchandise with many weeks now being positive in sales. Fuel volumes, as I mentioned earlier, fared better throughout due to a higher mix of B2B business. We've also seen the B2C or business to consumer business bounce back, but more slowly. While we've had some positive weeks on fuel volume, we're still negative in most of the countries that we're currently in. In Canada, alcohol, tobacco, grocery continue to trend very well. Nice weather has been a positive. We're still seeing traffic improving inside the box with a significantly larger basket than what we would normally have. Customers seem to want to avoid lines, and I think, again, we're stealing some trips from other channels.
In Canada, fuel volume is coming back more slowly than merchandise and remains a challenge. We just need to see what happens with office trends and other things like that get people on the road. In the U.S., I'd say we've seen similar trends with fuel volumes being soft. Our rural areas are faring better, but the entire U.S. is still soft on fuel. In terms of sales and mix, we're seeing positive sales trends. Merchandise categories are doing well, are some of those the same as in Canada. Beverages, alcohol, tobacco, impulse, and now as traffic improves, we're continuing to see improvements in food, Polar Pop, coffee. Again, I think cautiously optimistic, but as I mentioned earlier, we're obviously seeing some hot spots in the U.S. and some renewed stay-at-home orders. We're being cautious in how we look at the future here right now.
The second question from Irene Nattel. Obviously, a lot of discussion out there right now around potential M&A. Can you please update us on the key considerations for you to move forward and execute on M&A, on your current estimate of balance sheet capacity and availability of capital for Couche-Tard, and on your geographic priorities?
Thank you, Irene. Well, first to start, we are pleased with the current performance of the company, we've continued to deliver strong cash flows. These are essential for us to continue our M&A journey. The other considerations are still the same. The quality of assets, the right price, as always, a strong strategic fit is required, and solid brand that fills our network well and with good locations. Finally, our ability to drive synergies and apply our best practices is always important and will remain. In terms of geographic priorities, they are still the U.S. because it's the market we know well and one that provide us meaningful synergies with the acquisition, intra-network acquisition, and the synergies we can generate with this. The second priority is Asia Pacific.
We still want to create a new leg of growth and take advantage of countries with favorable demographics and consumer trends. As far as balance sheet's concern and our capacity, we estimate our capacity to close to CAD 7 billion with also a significant cash position that we have. We did a bond offering in January that was very well received by the market, and we're pleased with that. Finally, the bond market is open right now, and we feel good about our ability to access the market right now. We're feeling good of our capacity to finance.
The next question comes from Michael Van Aelst at TD Securities. To what degree has the advanced learnings from Europe helped your North American operations adapt quicker than the competition, and can you provide some examples?
I think it was a big win, maybe even starting with Asia. Our Hong Kong licensee reached out saying, they needed masks. It's a bit ironic, but we actually shipped masks to Asia. As we saw the crisis head to Europe and then to the U.S., we knew that was a priority. I think we were very early in securing masks from China. We went to great lengths to have those shipped at great cost. Again, the safety of our employee base is very high. A couple examples that I think were very meaningful. Plexiglass. We actually had a business unit in Poland start that very early in the process, and I think a lot of our people thought it was premature. We pulled the trigger.
I can't say we were the first one in every market, but I think we were very early in putting up barriers between the cashier and the customer, which I think has been very well received in my travels through the stores. I think it's just done a lot to instill confidence that we're creating the right environment. On the community side, which again, is being a part of the solution. We had the first responders, as an example, giving away free beverages. That was started in one of our Baltic countries and was quickly circulated as a best-in-class idea and just the right thing to do. In a matter of days, we had launched that globally. I think it has been helpful to have a global footprint, a global view here, because it's helped us be more responsive in the markets that trail.
The next question comes from Bobby Griffin at Raymond James. Understanding there's still a lot of uncertainty, can you please talk about how the COVID-19 pandemic might change the U.S. C-store industry? Do you believe it will further accelerate M&A and industry consolidation?
Well, what we think is that with the pandemic, some smaller operators and chains might struggle to keep up with investments in technology and enhanced safety measures for customers and for their employees. This could even be truer if we are going into a prolonged period of weakness or recession that could reduce their ability to deliver a strong performance. We're watching that very closely. This could create opportunities to consolidate the market, or simply we could see a general reduction of stores or network rationalization taking place. We believe store location will be important, and it's still important, and we can count on having a great network with a high proportion of top-tier location. As always, we are going to remain disciplined so that we can take advantage of situation that could help us improve our network.
We're going to watch carefully what the market is doing and how the multiples are behaving in the market.
The next question comes from Peter Sklar at BMO Nesbitt Burns. You mentioned in your press release that the company has been pushing dynamic pricing initiatives. Can you please elaborate on this?
So we-
Yeah, I think our core-.
Go ahead, Brian, sorry.
Yeah. I think a core pillar of our Double Again strategy has been to drive organic growth, and a key piece of that, underlying that, is just to become more local. We serve a very local customer base, typically two or three miles. When you think about a city or a state, the needs of those customers within that city, within that state, vary dramatically. What you need in downtown Chicago is very different than what you need in Naperville or what you need in downstate rural communities. We think that applies across assortment, across pricing and promotion. Over the last year, I think we've kind of quietly built some significant analytical capabilities in-house, and we've been examining the last history of the products in our stores and identified different products that can be priced differently.
We've had, inside the box, two large tests in Sweden and Arizona and developed clusters of our store networks and applied pricing within those clusters and have been very pleased with the results. We plan to roll this out globally over the next 24 months if we continue to see the success that we had in our first two markets. Ultimately, I think that will apply to promotional activity as well. Again, this is all about tailoring to benefit the customers on a local basis. On the fuel side, using advanced analytic capability that we've been developing, working on models that incorporate many more variables into our pricing than just the typical competitive price. Examples could be things like time of day and weather.
What you'll see us doing is, and what we have been doing across these 2,400 stores that we've piloted at is, we're changing prices more frequently. We have more data points to set the price, we think that we're being more responsive to, again, to not only just competitive price, but also other factors that influence demand. We're excited. We think this is a key part of our foundation of being more local for our customers and I think can be key competitive advantages for us going forward.
The next question comes from Vishal Shreedhar at National Bank Financial. Has this pandemic caused management to revisit its goals and timelines regarding its food service aspirations?
I'd say, as we entered the pandemic, we were very quick to cut capital, cut costs, there were a few things we've held sacred, if you will. We're not altering our IT agendas. We think that's so foundational to our future, as I just talked about with data and analytics. We're continuing with our NTI builds, I would say the third is our food offer. We committed to build out 1,500 stores by the end of the fiscal or by the fall, 2,300 stores by the end of the year. That capital is committed, and it is underway. We're installing about 20 stores each and every week. While COVID-19 did delay the implementation, it did not delay the installation. Where we've installed these offers over the last three months, we're now opening those up as markets open with training, sampling, things like that.
We have again, been very pleased with the response. Large increases in food sales, large increases in customer satisfaction as we measure via Net Promoter Score. The next question comes from Karen Short at Barclays Capital. Can you discuss promotional activity during the quarter? Historically, Couche-Tard has used things such as targeted traffic campaigns, LIFT, and the Smart Value program. Is there anything to call out in terms of pressing on the promotional front, specifically throughout COVID-19, to drive traffic? Where are you in terms of the expansion of the Smart Value program globally?
Okay. I'd say overall promotional activity and marketing activities were less. The conversation was around COVID and, to the extent we thought our messaging would be lost, we cut back on a lot of those channels. What we did continue to do was make it clear to customers that we're open, that we can be counted on, that we want to be a part of the solution in the communities that we serve. While we did scale back traditional product promotions, we did push our community efforts. As I mentioned earlier, we're a large part of Feeding America, and I know other people in our channel have done the same, and that's great. 40 million meals donated to local food banks in the U.S. We've launched a similar program in Canada. We delivered care packages to hospitals and homes for the elderly in Europe.
We've given away over 3 million beverages to first responders and healthcare workers. Those were things we did because we think it's the right thing to do, but we've seen a lot of positive response in social media and surveys and from our employees. I think that's done something for our brand. It's certainly done something for our culture. Going back to your question on LIFT, we've deployed it in the remaining parts of North America and Canada, including Holiday. We're now at 7,600 stores in the U.S. and largely complete with Canada. The next step is rolling out local incentive contests, activating that associate to engage with the customer. We're seeing nice increases in penetration, which is key to building the basket.
Smart Value, a great win from Holiday, has been expanded entirely to North America and is now rolling out in Europe after successful pilots in Norway. Along with LIFT, I think Smart Value has just been a nice tool to help us grow the basket and provide value to our customers during these distressing times.
The second question from Karen Short. You announced increased wages for $2.50 per hour. Can you parse out this impact to SG&A in dollars? Can you remind us of when these incremental wages will expire or have expired, and how you would characterize the offset from a reduction in store hours or any benefit from the recently scaled labor program from Holiday? How much of these SG&A dollars do you expect to be sticky?
First, quarterly, we saw an increase of 2.3% in OpEx. Still very good considering what we are seeing in other industries or retailers that were affected by the pandemic. We stated also in the notes that the appreciation pay expired on June 12th in the U.S. and June 22nd in Canada. We still have some thank you bonuses in the summer for qualified workers. We also kept health benefits through the end of our calendar year for our employees. We also incur other maintenance costs and employee safety costs as we installed plexiglass, increased store maintenance, and provided masks to all our employees. To offset these additional costs, on the other end, while the majority of our stores remained open, we, in some market or location, reduced the opening hours.
We also adjusted shifts within stores to better match the demand and the visit patterns of our customers. We will maintain our activities related to cleaning and sanitation as well as continue supplying protective equipment to our employees. However, we do not anticipate that the ongoing costs of keeping those measures will have a material impact on our results. Furthermore, even if the pandemic was on us, we are still working hard on our cost optimization projects to mitigate the impact of increased costs in the business, and we're satisfied with the initiatives and the potential savings we can make using our scale. We're continuing to work on this in parallel.
The next questions come from Jenny Wang at Eight Capital. Same-store merchandise sales for Q4 declined the most in Europe while it increased in Canada, given the onset of the pandemic in Europe was a bit ahead of North America. In May and June, are you seeing a delayed reaction in the U.S. and Canada, where the consumer stockpiling effect is wearing off and North America is now trending similar to Europe?
I think we certainly saw different patterns between North America and Europe, but I don't believe stockpiling was a material factor. While I'm overall pleased with our supply chain, a large percentage of our items are produced in-country, we were able to stay generally in stock. Those items that people were really looking for, like toilet paper, like paper towels, things like that, we were not set up, and I don't think our industry was set up to stay in stock on those. I don't think we saw stockpiling as a major factor. Even if I looked across tobacco or alcohol, I don't think that's the case. I'd say the difference in patterns that we see is, Europe was just harder hit inside the store due to overall much tighter lockdowns than what we saw in North America.
Also, I think the greater penetration of prepared food and car wash, which just were not selling as people stayed home. They don't have alcohol. I guess we have a couple countries that do, but the majority of our network does not have alcohol, so we didn't see that benefit that we see in a lot of our North American markets. As we mentioned, there's particularly dynamic with tobacco that helped Canada sales to a greater degree, but I certainly wouldn't tie those patterns together between Europe and North America and say that stockpiling is going to create a weak trend. That's not what we're seeing.
Second question from Jenny Wang. Is Asia Pacific a market that Couche-Tard is interested in entering in the near to medium term through M&A? Is there still an intention to pursue the Caltex offer once the economic environment improves?
I'd say throughout COVID-19, our goal here, while short term, certainly it's about taking care of our customers and our employees, it's to take a long-term look at the industry. Our focus on M&A hasn't changed at all, as Claude said. We're still interested in Asia-Pac and in U.S. consolidation. The key is and always will be, it's getting the right assets and the right management team. We have ongoing conversations with several opportunities, but we'll have to see what pans out. We're going to do the right thing for our shareholders. In terms of Caltex, I think we've already talked about the rationale for pausing that. There's just a lot of uncertainty. Not only in North America, but globally, and certainly within the Caltex business. That's something we'll continue to watch and make appropriate decisions as the time comes.
The next questions come from Chris Li at Desjardins Securities. Are consumers starting to feel more comfortable with self-serve food, or is there still a high degree of reluctance? Over the longer term, how do you expect the pandemic will impact the food service business and the company's expansion strategy in light of the shift from self-service to packaged food and more telecommuting?
As I mentioned earlier, I think it's premature to say what the future will bring in terms of permanent changes in consumer habits. That said, the grab-and-go, low-touch nature of our Fresh Food Fast program could be beneficial to us, where we're delivering quality products, good taste, great taste actually, that doesn't need to be handled by our staff in-store. How do you communicate that effectively to our customers? We've created a very sanitary, safe program there that, if something like COVID were to persist, I think could be a benefit to our customers. During COVID, in some areas where changes were mandated, we did go full serve, whether that be in our Polar Pop or our fountain. We found customers preferred to do it themselves. We saw sales decline in those stores more than we did in stores where self-serve remained in place.
As I mentioned earlier, in terms of our expansion strategy, no change. We've got the capital committed, the equipment's ordered. We'll essentially cover the majority of our North American network and working hard in Europe, to simplify and reduce touch in our food operations there while not sacrificing the quality we're known for there. Finally, we'll continue to focus on providing convenience and serving customers in whatever way they require. If telecommuting becomes a bigger part of society, we'll figure out ways to adapt our offer and serve that trend as well.
Second question from Chris Li. Management referred to changes in the competitive landscape as having a favorable impact on merchandise sales in Canada and on fuel margins in the U.S. during the quarter. Can you please elaborate, and do you expect the changes to be structural or transitory in nature?
Yeah, I think we've covered merchandise pretty comprehensively, so I'll maybe touch on fuel. Our perspective is, there's been tremendous uncertainty in demand, just even what good looks like. Volumes are down. We've seen less competitive pressures, particularly in the U.S. When we look at ourselves versus our industry, we think we've got one of the lowest cents per gallon or cents per liter breakeven in the industry. We've bought enough companies and looked at enough companies over the years to understand the profitability of the industry overall. We think between having solid fuel volumes, really strong backcourt or store, and a very competitive cost structure, we believe over the long term, the industry will have to realize higher fuel margins. I think we're in a very good place to compete, when you still look at this as being a very fragmented industry.
The last set of questions come from Mark Petrie at CIBC World Markets. What changes in consumer behavior and attitudes have you seen that have caused you to rethink the particular ways you approach the customer experience as well as the assortments you offer in store?
I'm not sure if it's caused a change, but maybe an acceleration. We've talked about less friction with the overall experience. That's brought into focus just accelerating touchless payments, creating social distancing measures within our stores. Pre-COVID, people didn't like to touch bathroom doors. In COVID, they like it even less, so we're putting foot pedals on our bathroom doors. Other things to, again, just reduce the things that customers have to touch in our shopping experience. I think we've spent more time monitoring consumer sentiment on social media and through surveys. I think there's a lesson that we have an opportunity to listen more, listen better, and that'll stick with us. New stores, certainly we're preparing them. There's some no-regret moves as you think about touchless sinks, touchless toilets, bathrooms with no doors.
Some of those we just view as no regret, and we've already modified our store plans to incorporate things that were just heightened during COVID. Then, in terms of assortment, we've seen, as we talked about a couple of times, larger package sizes, more grocery items, more staples sell. We think that our industry's maybe walked away from some of those over the years. I think COVID's a good reminder that the demand's out there, and we can provide a quick in and out for customers that need those. We're gonna try to stay committed to some of those changes and see if some of those customers and some of that demand will remain sticky as we get through the COVID period.
Second question from Mark Petrie. Could you please give further commentary about how in-store transactions have paced as miles driven and fuel volumes have improved?
I think I'd start by reminding you that while there's certainly a correlation, there's not a perfect correlation between fuel and merchandise sales. Our store traffic has fared much better globally than our fuel trips as people have needs for our products and services, even though they're not traveling or going to their office. As a reminder, in normal times, 60%-65% of our visits are to our store only, 25% are fuel only, and then that kind of remains 15%-20% that's a combined trip. As customers see the importance of rapid service and proximity to their home, we're being used as more of a fill-in trip than we were before. While we don't have great data, we believe we welcomed some new customers into our stores during COVID-19.
As we've come out of COVID and society's opened up a bit, we've seen the pace of improvement of in-store traffic improve significantly faster than fuel demand.
Great. Thank you, Brian. Thank you, Claude. That covers all the questions for today's call. Thank you all for joining us. We wish you a great day and look forward to discussing our first quarter 2021 results in September.
Thank you, everyone. All right. Thanks, everyone. Have a great day.
This concludes today's conference call. You may now disconnect.