I would now like to welcome everyone to this web conference presenting the financial results for the first quarter of fiscal 2019 of Alimentation Couche-Tard. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, we will be answering 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. 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. 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, as well as Mr. Claude Tessier, Chief Financial Officer.
Brian, you may begin your conference.
All right. Thank you, Marie-Noelle, and good morning, everyone. Thanks for joining us for the presentation of our first quarter fiscal 2019 results. I want to begin by going over some highlights from the quarter. Very pleased with the quarter, highlighted by strong year-over-year same store sales growth across the network with a good balance of traffic and basket growth. We also reached the one-year anniversary of our CST acquisition, and the great work by that team in improving sales trends, as well as realizing impressive synergies, has been fantastic. Finally, the exciting work we've done on our global rebranding in Ireland and beginning at the former CST sites. Our CFO, Claude Tessier, will then go over the financial details of the quarter during his part of the presentation. Let me begin with our year-over-year same store sales, which were up across the network.
In the U.S., we saw an increase in same store merchandise revenue of 4.2%. There was good performance in the majority of the U.S. business units, including stronger sales at the CST sites in the U.S. As first seen in the fourth quarter of 2018, we continue to see improving traffic trends in the U.S., particularly driven by the ramping up of our traffic driving and promotional activities. In Canada, same store merchandise revenue increased by 6.6%, a significant improvement over the results of the last two quarters, with the best performance in Central Canada and all the business units seeing positive traffic and growth in our CST sites also in Canada. Weather certainly benefited us in the East, but we continue to be pleased with our trends, even looking into the last couple of months. In Europe, same store merchandise and service revenues increased by 7.3%.
All of our European businesses benefited from increased traffic to our stores. This is based on the continued success of the food programs, our rebranding efforts, as well as an unusually warm weather, particularly in Scandinavia. I believe we are seeing a combination of results of the focused work by our global marketing teams and business units in improving traffic trends and basket size, and also strengthening consumer confidence, which we've noted has crossed other retail channels during this quarter. Shifting to fuel, I'm pleased with our fuel volumes and margins in the U.S. and Europe in the face of sharply higher retail prices than prior year. We had generally healthy margins compared with the previous quarters, as well as an improvement in volumes in the business units with CST sites. In the U.S., same store road transportation fuel volumes increased by 0.6%.
In Europe, overall same store fuel volumes were down slightly with a decrease of 0.1%. However, we had positive volumes in our Sweden, Denmark business units. In Canada, same store transportation fuel volumes declined 3.3%. While we did see volume growth in most of Canada, our Esso branded stores were affected by a temporary transition of loyalty programs this quarter. We also continue to focus on partnering with the right fuel brands and building differentiation into the Circle K brand, as seen in the inclusion of our top-tier additive offer that we've rolled out in selected U.S. business units. We're also working on how to bring more value at our forecourts, including improving the speed of our pumps, our lighting, and more discipline around our painting and cleaning cycles so that our customers' fuel experience can be a core differentiator at our sites.
This quarter marked the one-year anniversary of our CST acquisition, and as I mentioned in my opening, I'm very proud of our integration and results. It all starts with people, and we added a lot of great people to the Couche-Tard family this year who've done an amazing job turning around the business trends at the former CST sites. Once again, this quarter, we had good same store merchandise results at the CST sites, leading the U.S. network with an increase of 5.4%, driven by the success of our rebranding, improvements in our store layouts, and other traffic-driving activities. Same store road transportation fuel volume were up at 1% at the CST sites in the U.S. this quarter, continuing a positive trend and improving results quarter over quarter. We continue to realize impressive synergies related to the CST acquisition, which have reached approximately $189 million since the acquisition.
We're also well on our way to rebranding the former CST Corner sites to Circle K, which started in earnest this quarter, and I'll go into more detail later in the presentation. The first quarter of 2018 saw lots of activity and integration and reverse synergy work at our Holiday acquisition. Through the collaboration of our integrated leadership teams, we're looking at ways to make Holiday's significant food programs work to scale in a meaningful way in other parts of our organization. Holiday also has great operational disciplines, including labor management, store communications, new to industry store layouts, which enhance the customer journey and drive traffic. These are all areas that we're looking at and focusing on how do we bring them into our wider network. Talk a little bit about what's going on with the stores in our key categories.
This quarter, we expanded our pilot test of new consumer offers, including our hot beverage offer in the U.S. While Simply Great Coffee has been a resounding success in Europe and Canada, we haven't seen a need to differentiate the offer in the U.S. This includes piloting offers that maintain drip brew at the center and showcase more seasonal blends with bean to cup, resulting in fresh brewed coffee each and every time. Early results are encouraging, we believe if we've reached that conclusion, we've got a winner and we feel we can scale this very quickly. With the hot summer in Europe, in Northern Europe, iced coffee has been tested in multiple businesses with very good consumer acceptance so far. That may be an add to our Simply Great offer in Europe. Our Tobacco Club in the U.S. grew sequentially through the quarter.
We increased both the number of unique users enrolled in the program, now pushing almost 4 million, as well as the quantity of offers delivered. We continue to see the Tobacco Club as a unique differentiator and anticipate further leveraging of the program across other categories as we enrich and refine our marketing capabilities. We saw significant unit and dollar growth in other tobacco products in the quarter in the U.S. Sales of these products, including vapor, snuff, and cigars, are growing at very strong rates. Some of this is attributable to manufacturer innovation with products like Juul, it's also reflective of our merchandising, the speed at which we've been activating new offers and emerging brands, and how we're presenting these offers to the consumers in our stores.
This quarter, we once again had strong performance in food in Canada, up with all metrics of sales units and margin driven by our Baked On Site program in Western and Eastern Canada, the expansion of Real Hot Dog program in Western Canada. Also in Canada, as well in other markets, we are introducing new approaches and layouts to the Real Hot Dog to maximize the program's impact and generate higher return on capital. Finally, our car wash has had a great quarter globally as it has in recent quarters. Throughout the fiscal year, we continue to expand the number of sites with our proprietary offers to maintain the positive sales growth that we've seen in the last couple of quarters.
During the first quarter of 2019, following last year's completion of the rebranding of all the Statoil sites, we continued the progression of our Circle K brand across the globe, with now more than 3,650 sites in North America and more than 1,700 sites in Europe now complete. In Ireland, the rebranding work continued at a fast pace this quarter, the plan is to rebrand close to 350 sites in fiscal 2019, with the remainder in fiscal 2020. Our grand openings in that country have been very strong, the Circle K sites are outperforming the old Topaz branded sites in all the main categories of fuel, traffic, and merchandise. As I mentioned earlier, the rebranding is also well underway at the former CST sites, both in the U.S. and Canada, with close to 300 of those sites now rebranded to Circle K.
In Texas, the work is quickly progressing with the kind of big campaign and customer acceptance we would expect in the state of Texas. Our Rocky Mountain business unit has also been permitting, and we've seen very strong results at the sites that we've rebranded in Arizona to date. I'll pause there and let Claude take you through more of our fiscal 2019 results. Claude?
Thank you, Brian. Ladies and gentlemen, good morning. We're happy to report the first quarter of 2019 net earnings attributable to shareholders of the corporation of CAD 455.6 million, or CAD 0.81 per share on a diluted basis. Excluding certain items for both comparable periods, adjusted net earnings for the first quarter of fiscal 2019 are approximately CAD 498 million, or CAD 0.88 per share on a diluted basis, compared with CAD 0.67 per share for the first quarter of fiscal 2018, which is an increase of 31.3%. The adjustments of the quarter include a pre-tax impairment charge on CrossAmerica Partners LP's goodwill, which I will go into in more detail shortly. I will now go over some key figures for the quarter. For more detail, please refer to our MD&A, which is available on our website.
During this most recent quarter, excluding CAPL's revenue as well as the positive net impact from currency translation, merchandise and service revenues increased by approximately CAD 722 million, or 26%. This increase is attributable to the contribution from acquisitions, which amounted to approximately CAD 584 million, as well as to organic growth. For the first quarter of 2019, excluding CAPL's gross profit, as well as the net positive impact from currency translation, merchandise and service gross profit increased by 25.9%. This rise is attributable to the contribution from acquisition of approximately CAD 193 million and to our organic growth. Our gross margin increased by 0.2% in the U.S. to 33.5%, and by 0.3% in Europe to 42.4%.
In Canada, our gross margin decreased by 0.5% to 34.5%, mainly as a result of change in our product mix, as well as from the impact of the conversion of certain Esso agent sites to company-operated stores. The road transportation fuel gross margin in the first quarter of fiscal 2019 was $0.2270 per gallon in the U.S., an increase of $0.0195 per gallon. In Europe, the road transportation fuel gross margin was at $0.0921 per liter, an increase of $0.0024 per liter. While in Canada, the road transportation fuel gross margin was CAD 0.0891 per liter, an increase of CAD 0.0069 per liter, still driven by the inclusion of the CST stores in our network and different pricing strategies.
While in store, hourly wage rate pressures brought this quarter's growth in expense to higher levels than in the past, we have effectively kept the rest of our cost increase in line with inflation. As always, this cost control is due to our rigorous financial discipline and focus on increasing value for our shareholders. For the first quarter of fiscal 2019, growth in operating expenses was 3.6%, primarily driven by higher minimum wages in certain regions, higher expense needed to support our organic growth, and by the conversion of CODO stores into company-operated stores, and by proportionally higher operational expenses in our recently built stores, as these stores generally have a larger footprint, higher sales than the average of our existing network.
Excluding specific items described in more details in our MD&A, the adjusted EBITDA for the first quarter of fiscal 2019 increased by CAD 182.2 million, or 25.5%, compared with the corresponding period of the previous fiscal year, mainly through the contribution from acquisition, higher fuel margins, organic growth, and the net positive impact from currency translation. Acquisitions contributed approximately CAD 143 million, while the variation in exchange rates had a net positive impact of approximately CAD 8 million. During the first quarter of fiscal 2019, as a result of the reduction in the fair value of incentive distribution rights and in CAPL's market capitalization, we recorded a CAD 55 million impairment charge to depreciation, amortization, an impairment of property and equipment, goodwill, intangible assets, and other assets on the consolidated statement of earnings.
We do not anticipate that the decrease in CAPL's market capitalization, nor the impairment charge, will have a significant impact on our future earnings or cash flow. As of July 22nd, 2018, our return on equity remains strong at 24.8% on a pro forma basis, and our return on capital employed was at 12.3%, also on a pro forma basis. During the quarter, we've continued to generate significant free cash flows, allowing us to accelerate our deleveraging plan, as evidenced by our adjusted leverage ratio that ended the quarter at 2.86 to 1. Our liquidity position remains stable, and we add CAD 739.4 million in cash and approximately CAD 1.6 billion available to our revolving credit facilities, providing us ample flexibility to fund our future investments.
Yesterday, the board of director declared a quarterly dividend of CAD 0.10 per share for the first quarter of fiscal 2019 to shareholders on record as of September 14, 2018, and approved its payment for September 28, 2018. Thank you for your attention, and now back to you, Brian.
All right. Thank you, Claude. I'm pleased with the work we're doing across the network to bring more customers into our stores and have them buy more products for our customers on the go. Increasing traffic to our sites continues to be a key focus of our global marketing operations and IT teams for this fiscal year. This quarter, we were more disciplined around fewer but bigger promotional activities, an example being our North American Polar Pop campaign and a broad summer campaign in Europe to drive more traffic inside and offer broad selections of food and higher volume promotional items. As I mentioned earlier, the anniversary of the CST acquisition was a special milestone this quarter, especially as we've all just passed the one-year anniversary of Hurricane Harvey last week.
During that catastrophic storm, one of the worst in U.S. history, our teams proved their great work ethic, big hearts, and pride that continues every day. The Texas business unit, home to hundreds of CST stores and thousands of our employees, was affected by Hurricane Harvey, but is now thriving and fully embracing the Circle K brand and our mission. Across the network, we continue to look at how to best use our technology and data gathering to have a better understanding of our customer's journey, as well as how to anticipate their wants and purchasing patterns to ultimately ramp up traffic and basket growth.
As always, we've used our customary financial discipline to manage our expenses, as well as our ability to leverage both our global scale and at the same time, our local business unit structures, on a journey to become the world's preferred destination for convenience and fuel. That concludes our presentation today. We'll now answer questions we've received from the analysts.
First question come from Patricia Baker from Scotia Capital. "This quarter was an exceptional one for Couche-Tard with respect to organic growth as same store sales across the board, strongest we've seen in some time. Can you walk us through the basket and traffic trends by market and perhaps discuss some of the highlights regarding merchandising initiatives that really worked in this quarter?
Seems to become a general theme of questions, we'll try to do our best through several of the questions to add some color to that. At the highest level, we saw what we thought was very nice balanced growth across the U.S., Canada, and Europe. That being an increase in traffic trends, units in the basket, and also price. In Eastern Canada and Scandinavia, as we mentioned in our opening statements and in the press release, we certainly believe we were helped by weather. We saw strength in all categories, and we see the business continue to be strong in recent weeks with more normal weather. A lot of traffic initiatives in place and more planned through the year.
For obvious reasons, I'm not going to go into any details on which are driving our best results, we do feel good about the momentum we have, and we believe there are clear signs of improved consumer spending, particularly in the U.S., as we've seen with other retailers who are posting quarterly results in recent weeks.
Second question, the gap in loyalty programs that impacted Esso in the quarter, can we assume that this has since been returned to normal?
Patricia, as you probably know, the Esso Aeroplan Association ended on May 31st. All summer, the Esso stores operated without the presence of a loyalty program. The new Esso and PC Optimum partnership started back in mid-August, too early to tell in the first few weeks of implementation what will be the long-term impact of such a program. We know that generally, the loyalty programs have a positive impact on sales. The team have worked hard to launch the program, and we are pretty optimistic that the partnership will bring value to all partners.
Questions from Derek Dley, Canaccord Genuity. First question, can you discuss some initiatives implemented at CST which helped drive comparable sales growth?
Yeah. Very pleased with results at CST, both in the U.S. and Canada. We've rebranded about 300 sites. In markets like Quebec and Arizona, where we've got a strong presence with our Couche-Tard and Circle K brands, we've seen really, really strong results, double-digit results. Polar Pop is largely rolled out now to the U.S. CST sites. We know that's driving traffic. In Texas, we've scaled a food, kolache specifically, and bakery rollout to the majority of our sites in that state. A lot of little things. It's little improvements in operations, it's resets, it's improving placement of impulse products, revising assortments to make sure we've got high velocity, attractive items. Just a lot of little things that are going into just really, really good results in that network.
Second question, your sales growth in Europe was exceptionally strong. What were the key drivers behind this growth?
As I mentioned, Q1, we saw some very good weather, particularly in Scandinavia and Northern Europe. I'll highlight a couple other things, though, that are behind the scenes. Our Shell network and Topaz network, which we acquired approximately one and a half and two years ago, respectively, continue to show very strong results both inside and outside in the fuel. In Poland, there was a legislative change that affected the opening hours of grocery, that's had a material positive effect on our network in Poland, with just dramatically increased traffic on Sundays as every other Sunday, grocery is not able to open. Categories driving growth, the top three are food, beverages, and car wash. Just really, really strong results across all three of those areas.
I would say we're also working hard to improve our Circle K Extra loyalty program to drive additional traffic and basket, trying to go beyond more of a club-type loyalty program into something that is more surprising and delighting to our members. Some good work happening there that I feel good will drive results in the coming quarters.
Now on to questions from Irene Nattel, RBC Capital Markets. First question was about same-store sales, which was answered. Second question, M&A continues to accelerate in the U.S. Can you update us on current thoughts around M&A opportunities and valuation multiple across geographies? With respect to your strategy for an Asian partnership, can you give us more color on regions, size, and timeline?
Yeah, Irene, as Claude mentioned, very pleased with our deleveraging both this quarter and the quarter before. As we've always done in the past, we focused hard on returning the balance sheet after a large acquisition to a place to be ready for good opportunities, and we feel we're on a very, very good path to do that. We are seeing good deal flow, particularly in the U.S., but I'll just be candid and say some of the valuations we've seen on recent deals don't make sense to us, quite honestly, too rich. Even in despite what we're able to bring to the table in terms of synergies, which we think is good as anyone. We're committed to reining discipline and wait for the right opportunities. We've seen this movie before, valuation cycle, and we'll wait for the right opportunities at the right price.
With regard to Asia, we're very active there with a small, dedicated team focusing on understanding the opportunities in our target countries. It's a big step, it's important to get it right, both in terms of the markets we select, but the management team. More to come there, but again, that's as much about getting it right, it's hard to talk about specific timing.
Question from Peter Sklar, BMO Capital Markets. Can you explain why the organic growth rate for operating costs have accelerated in Q1 of FY 2019 versus Q4 of FY 2018?
Peter, when you look at Q4 results, you have to be prudent with the comparison. Results from Q4 2018 included the impact of one less week compared with prior year, Q4 2017. Excluding the estimated impact of this week as well as other non-recurring items, our growth in OpEx in last quarter was estimated to be in the range of 2.5%-3%. Looking at this quarter, when we exclude the impact of minimum wage increase and isolated items, we are still confident that our expense growth is in line with inflation. We are also using our usual discipline, as you know, to try to mitigate the impact of increasing wages. We have undergoing projects that use new technology like robotics and AI to reduce the workload of stores and are refocused time for customer-facing activities.
In terms of your merchandising store sales growth, you indicated that you have strategies to drive traffic in store, which we assume means you have certain programs in place to drive traffic from the forecourt to the back court. Can you please specifically explain these strategies?
Yes. We have a myriad of tactics both in our local business unit as well as nationally. The focus is really on driving more traffic to site as opposed to driving traffic from the forecourt into the box. We do have some pilots focused on fuel in the box, but again, the focus I would say, across all three platforms is really off-site, driving more traffic to site as opposed to fuel to inside. I'll give one example. Again, I'm not going to give a lot of color on the tactics, but our LIFT Club, that's a very public thing. We use our proprietary technology in the site to offer some unique value propositions to our Tobacco Club customers, and as I mentioned earlier, over 4 million customers are now enrolled in that program.
Next question from Martin Landry, GMP Securities. Can you discuss how the integration of Holiday is progressing? Do you have any color to give on progression of synergies and reverse synergies?
Yeah, I feel great about Holiday. As we said, when we closed the transaction, just a very strong disciplined team that's built a great brand up in the northern tier of the U.S. In terms of synergies itself, we're very close already to our synergy goal after not even a year. We got some material areas of work that we haven't commenced yet due to competing priorities. Again, feel very good about where we're at with synergies. We'll talk a little bit more later, but we're working on scaling food pilots, largely copying the Holiday model into multiple markets in the coming quarters. Look forward to seeing those results toward the end of the fiscal year. Our reverse opportunities continue to be very active with a dedicated small team. I'll give you two examples.
Holiday has a very unique promotional process that forces discipline into what we promote, how to promote it, but also very strong response from the customers. This is in pilot in five of our U.S. business units. Again, that's just in this quarter, too early to have results, but that's one example of what we think is a strong reverse synergy. Another is a labor model. They've got very detailed time studies that build their labor model. We're very actively working to incorporate that into our North American suite of labor tools.
Next question was regarding M&A. Hopefully it was already answered previously to your satisfaction. Next question, Michael Van Aelst, TD Securities. How much of same-store sales by geography is related to basket inflation? As for real same-store sales growth, what were your traffic trends by geography, and can you discuss some of the strategies that led to this? Which fresh food programs are contributing the most to same-store sales growth in each geography?
Mike, I'm not going to go into specifics of the basket composition by area, but I would say we saw strong improvements in traffic in the U.S., Canada, and Europe. We saw unit growth in all three of those areas, we found a pretty balanced growth across all of our major categories in addition. Again, just a very balanced growth in basket and traffic across all three geographies. In terms of food, Europe continues to drive strong growth. In Canada, it's our coffee and bakery that's delivering great results. In the U.S., we rolled out a bakery and kolache program to most of the sites in Texas, the early results are encouraging.
As I said in my comments, we've also piloted several coffee offers in the U.S. to see if we can improve our Simply Great results, which have been good in Canada and Europe, but not as strong in the U.S. We're encouraged that we've got something that is resonating with customers and is something that we can roll out and scale in the next six to nine months.
The next question was about Holiday and was previously answered. On to questions from Keith Howlett from Desjardins Securities. Couche-Tard commented its global rebranded commenced, I'm sorry, its global rebranded program almost three years ago. The global brand and offering is in place at about 36% of U.S. sites and about 62% of European sites. What is the impact on average in the U.S. of the rebranding of a site in terms of incremental fuel volume, incremental convenience sales, and incremental convenience gross profit % compared to the sites which have not been rebranded? Also, how many years will it require to rebrand the balance of the network, what is the single biggest impact on consumer behavior of the rebranding?
The timeline's been a little bit of a moving target as we acquired CST, Holiday, and a few other companies since we started the program. Our current projections is to finish in about 30 months. Shifting or going to Europe, we've done everything. All the Statoil sites are done. Obviously, the Ingo brand, which is our automat brand, stays in Europe. We're active in Ireland, which is our last remaining market, and have got about 50 of 350 or so sites complete. About 80% of Europe is done. In Canada, we're obviously keeping the Couche-Tard brand in Quebec. For those sites that we will rebrand, we're a little over half done, 54% done to exact there. In the U.S., about 49% complete. Halfway as well with the focus this year on the CST sites.
In terms of impact, the rebrand's been very positive as you've seen over the past quarters in Europe. That's despite delivering or implementing a brand-new brand into the market that nobody had ever heard of. Our teams just did a great job of launching the brand there. In other markets, it really depends on the strength of the brand and where the site is versus being in a new market. In an existing Circle K market, Arizona being an example, the rebrands of Corner Store to Circle K have been a very strong double-digit growth, as people immediately know that we've got Polar Pop and other unique offers that's been in the Circle K offer. Again, overall, I would say that we've seen incremental growth in traffic, sales, and volume, but the results vary depending on the nature of the market and the launch.
Second question from Keith Howlett. "Circle K recently opened a new large format store in Rockford, Illinois, with an expanded food offering. How has the store been received by consumers in the trade area? What are your plans to open new stores of this format with the extended offering? Do you think the Topaz Re.Store store format and offering in Ireland would be well received in the U.S.?
I would say, Keith, that this site is really pretty representative of the new sites we have been building the last couple of years in the U.S., both in terms of footprint and offer, including what you hopefully saw was a very strong focus on dispensed beverage and food. We will continue to refine the food concepts and beverage concepts, including what we have learned from Holiday and CST, and then our Famous Four group, which is dedicated to creating new innovations that we hope we can use to differentiate the brand. This site is pretty representative, as I said, and we have been overall very pleased with the consumer response and the returns we are getting on the new-to-industry sites. With regard to Ireland, a lot to learn from Ireland. They are very advanced in the food journey, but those learnings are more about platforms and processes as opposed to local recipes.
We find that our goal is really to share learnings, develop common platforms, and control processes, but be very cognizant of local tastes.
Next question is from Mark Petrie from CIBC. "Could you please summarize the impact of tobacco on your business this quarter, and specifically the impact from each of private label loyalty programs and alternative tobacco products overall? What effect is tobacco having on merchandise organic growth and gross margins, and what is the outlook for the next 12 to 24 months?
Overall, tobacco's had a slightly positive impact on overall same-store sales. I'll break out U.S. and Canada. Canada is largely driven by tax, units have been relatively stable versus prior trends, and the growth has been driven by tax increases. The U.S. is really made up of three factors that have driven some very nice growth in tobacco. One has been the growth of our private label brand, particularly where we've launched it in Holiday, CST. We've seen very strong growth in new categories, vape and moist smokeless, an example of that being Juul. Those categories are driving very strong sales, it's encouraging. Finally, as I mentioned earlier, our Circle K Tobacco Club, which utilizing our LIFT platform. We think that's also driving some nice growth. Very pleased with the performance of that category in the U.S. and Canada.
Your other question was already answered in previous Holiday questions. Jim Durran, Barclays. Both questions previously answered regarding food service and same-store sales. On to Vishal Shreedhar, National Bank Financial. "Same-store merchandising sales growth was strong in all regions. Canada in particular, and Europe to a smaller degree, posted solid merchandising sales despite negative comparable fuel volume growth. Can you comment on the divergence? If there are any transient or unusual items helping the merchandising same-stores number?
If I understand the question right, it's really weak fuel in Canada, how are the merch results so strong? I'll try to add a little color to that. If you look at North America overall, about [ weak fuel due to a gap in loyalty that Claude talked about, but recall, we don't have a corporate model in Ontario and don't report those sales. Two, just growing disposable income, which we think are both great attributes to convenience growth.
Next question. "What % of the company's tobacco sales come from other tobacco products? Do the proposed tariffs on U.S. imports from China of electric cigarettes and other vaping products pose big threats to the industry?
Chris, depending of the region and the customer behavior, we have different rate of penetration in all those different geographies. Canada is probably a lagger in this category today, as other regions could go as high as 20% in penetration in the category. The U.S. market for other tobacco product is currently enjoying strong growth, as Brian mentioned in his introduction, with the new categories that are coming into vaping. As far as tariff, majority of the sales in this category is coming from domestic products, and we believe that any new tariffs would have a minimal impact on the category sales as it would apply to all industry and also to a small portion of the sales.
Next and last question is from Benjamin Brownlow from Raymond James. Your first question was regarding the loyalty program, which was already answered. To your last question, "The 5% same-store merchandise sales increase at CST site was impressive. Was there a quantifiable traffic lift tied to the rebranding of the first 300 CST sites, and what is the planned timing on the remaining CST rebranding?
I would say the majority of the sites will be rebranded by the end of this fiscal year. We started with markets where we had a strong presence. The first two markets done of the 300 were Arizona and Quebec, and as I mentioned earlier, just saw very strong results, particularly in Arizona, with just tremendous results there. Texas and the other markets, so Colorado, Albuquerque, markets like that, just kind of in the middle of launching. More to come there, I think, in the coming quarter, and we'll be able to give you more color there.
That covers all the questions. Thank you for joining us. I wish you a great end of the rest of the day. We will talk to you again in November for our 2019 second quarter results.
Thanks, everyone. Have a good day.
Thank you. This concludes today's conference call. You may now disconnect.