Earnings Call: Q1 2019

Sep 6, 2018

I would now like to welcome everyone to this web conference presenting the financial results for the Q1 of fiscal 2019 of Alimartais en Cuchard. All lines have been placed on mute to prevent any background noise. After the speakers' 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. 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 Hanasch, President and Chief Executive Officer as well as Mr. Claude Tissier, 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 Q1 fiscal 2019 results. I want to begin by going over some highlights from the quarter. First of all, 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 1 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. And 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. Also as first seen in the Q4 of 2018, we continue to see improving traffic trends in the U. S, particularly driven by the ramping up of our traffic driving the 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're all seeing a combination of the 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 across the 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 RightFuel 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 to 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 1 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 with 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 CFT sites in the U. S. This quarter, continuing a positive trend in improving results quarter over quarter. We continue to realize impressive synergies related to the CST acquisition, which have reached approximately 189 $1,000,000 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 Q1 of 2018 saw lots of activity in 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 have seen the 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 and we believe if we reach that conclusion that we've got a winner, we feel we can scale this very quickly. With the hot summer in Europe, Northern in Northern Europe, iced coffee has been tested in multiple businesses with very good consumer acceptance so far. So that may be an add to our Simply Great offer in Europe. Our Tobacco Club in 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 4,000,000 as well as the quantity of offers delivered. We continue to see the Tobacco Club's 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, very strong rates. Some of this is attributable to manufacturer innovation with products like JUUL, but 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 stores 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 and 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 Q1 of 2019 and following last year's completion of the rebranding of Aldestat Oil 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 1700 sites in Europe now complete. In Ireland, the rebranding work continued at a fast pace this quarter and the plan is to rebrand close to 3 50 sites in fiscal 2019 with the remainder in fiscal 2020. Our grand openings in that country have been very, very strong and 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, 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. So ladies and gentlemen, good morning. We're happy to report the Q1 of 2019 net earnings attributable to shareholders of the corporation of $455,600,000 or $0.81 per share on a diluted basis. Excluding certain items for both comparable periods, adjusted net earnings for the Q1 of fiscal 2019 are approximately $498,000,000 or $0.88 per share on a diluted basis compared with $0.67 per share for the Q1 of fiscal 2018 which is an increase of 31.3%. The adjustments of the quarter include a pre tax impairment charge on CrossAmerica Partner 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 and 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 $722,000,000 or 26%. This increase is attributable to the contribution from acquisitions which amounted to approximately $584,000,000 as well as to organic growth. For the Q1 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 $193,000,000 and to our organic growth. Our gross margin increased by 0.2% in the United States 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 Q1 of fiscal 2019 was $0.2270 per gallon in the United States, an increase of $0.0195 per gallon. In Europe, the road transportation fuel gross margin was US0.921 dollars per liter, an increase of 0.0.24 dollars per liter US while in Canada the road transportation fuel gross margin was CAD0.891 per liter an increase of CAD0.69 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 Q1 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 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 guidance described in more details in our MD and A, the adjusted EBITDA for the Q1 2019 increased by $182,200,000 or 25.5 percent 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 $143,000,000 while the variation in exchange rates had a net positive impact of approximately $8,000,000 During the Q1 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 $55,000,000 impairment charge to depreciation and amortization and impairment of property and equipment, goodwill, intangibles assets and other assets on the consolidated statement of earnings. We do not anticipate that the decrease in CAPL's market capitalization CAPL's market capitalization nor the impairment charge will have a significant impact on our future earnings or cash flow. As at July 22, 2018, our return on equity remained strong at 24.8% on a pro form a basis and our return on capital employed was at 12.3 percent also on a pro form a 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:one. Our liquidity position remains stable and we add $739,400,000 in cash and approximately $1,600,000,000 available to our revolving credit facilities providing us ample flexibility to fund our future investments. Yesterday, the Board of Directors declared a quarterly dividend of CAD0.10 per share for the Q1 of fiscal 2019 to shareholders on record as at September 14, 2018 and approved its payment for September 28, 2018. So 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 we've all just passed the 1 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 customers' journey as well as how to anticipate their wants in purchasing patterns to ultimately ramp up traffic and basket growth. And 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. So that concludes our presentation today. We'll now answer questions we've received from the analysts. First question comes from Patricia Baker from Scotia Capital. This quarter was an exceptional one for Christal 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. So we'll try to do our best through several of the questions to add some color to that. So 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, certainly believe we're helped by weather. But we saw strength in all categories and we see business continue to be strong in more 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. But 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. 2nd question, the gap in programs that impacted SO in the quarter, can we assume that this has since been returned to normal? So Patricia, as you probably know, the SO Association ended on May 31. So all summer, the SO stores operated without the presence of a loyalty program. The new SO and PC Optimum partnership started back in mid August. So, too early to tell in the 1st few weeks of implementation and what will be the long term impact of such a program. But we know that generally the loyalty programs have a positive impact on sales. And the team have worked hard to launch the program and we are pretty optimistic that the partnership will bring value to our partners. Questions from Derek Glee, Canaccord Genuity. First question, can you discuss some initiatives implemented at CST which helped drive comparable sales growth? Yes, very pleased with results at CST both in the U. S. And Canada. We've rebranded about 300 sites. And so 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. And then a lot of little things, it's improvements, 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. So just a lot of little things that are going into just really, really good results in that network. 2nd 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 of other things though that are behind the scenes. So our Shell network and Topaz network, which we acquired approximately 1.5 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 and 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 3 are food, beverages and car wash. Just really, really strong results across all three of those areas. And then 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. And so 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. 2nd question, M and A continues to accelerate in the U. S. Can you update us on current thoughts around M and A opportunities and valuation multiple across geographies? With respect to your strategy for an agent partnership, can you give us more color on regions, size and time line? Yes, Irene, we're very 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 ring which we think is good as good as anyone. So we're committed to reign 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. So it's important to get it right, both in terms of the markets we select, but the management team. So more to come there. But again, that's as much about getting it right. So 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 S 2019 versus Q4 of S18? So Peter, when you look at Q4 results, you have to be prudent with the comparison. So results from Q4 2018 included the impact of 1 less week compared with prior year, so Q4 2017. So 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% to 3%. So then looking at this quarter, when we exclude the impact of minimum wage increase and isolate the items, we are still confident that our expense growth is in line with inflation. So we are also using our usual discipline as you know to try to mitigate the impact of increasing wages. So we have undergoing projects that use new technology like robotics and AI to reduce the workload of stores and our refocus time for customer facing activities. In terms of your merchandising store sales growth, you indicated 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 backcourt. Can you please specifically explain these strategies? So 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. That's 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 Lyft 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 4,000,000 customers now enrolled in that program. Next question from Martijn 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? Yes. I feel great about Holiday. As we said when we closed the transaction, just a very, 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 just not even a year. And we've got some material areas of work that we haven't commenced yet due to competing priorities. So again, feel very, 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, copying largely copying the holiday model into multiple markets in the coming quarters. So look forward to seeing those results toward the end of the fiscal year. And 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. So this is in pilot in 5 of our U. S. Business units. Again, that's just in this quarter, so 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 to build their labor model. So we're very actively working to incorporate that into our North American suite of labor tools. Next question was regarding M and A and hopefully it was already answered previously to your satisfaction. Next question, Michael Van Ael with 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 to 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. And so we found a pretty balanced growth across all of our major categories and additions. So again, just a very, 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 and 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. And we're encouraged that we've got something that is resonating with customers and something that we can roll out and scale in the next 6 to 9 months. The next question was about Holiday and was previously answered. Onto questions from Keith Howlett from Desjardins Securities. Kushtal commented its global rebranded commenced, I'm sorry, its global rebranded program almost 3 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 percentage compared to the sites which have not been rebranded? Also, how many years will it require to rebrand the balance of the network? And what is the single biggest impact on consumer behavior of the rebranding? The timeline has been a little bit of a moving target as we acquired CST, Holiday and a few other companies since we started the program. But our current projections is to finish in about 30 months. Shifting or going to Europe, we've done everything, all the stat oil sites are done. Obviously, the Ingo brand, which is our AUTOMAT brand stays in Europe. And we're active in Ireland, which is our last remaining market and have got about 50 of 350 or so sites complete. So about 80% of Europe is done. In Canada, we're obviously keeping the Couche Tard brand in Quebec. And so for those sites that we will rebrand, we're a little over half done, 54% done to be too exact there. And the U. S. About 49% complete, so halfway as well with the focus this year on the CST sites. In terms of impact, the rebrand has been very positive as you've seen over the past quarters in Europe. And that's despite delivering or implementing a brand new brand into the market that nobody had ever heard of. So our teams just did a great, 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 example, the re brands of Corner Store to Circle K have been a very, very strong double digit growth as people immediately know that we've got Polar Pop! And other unique offers in the Circle K that's been in the Circle K offer. And so 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. 2nd 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 and offering in Ireland would be well received in the U. S? Yes. I think the Topaz ReStore store format and offering in Ireland would be well received in the U. S? Yes. I would say, Keith, that this site is really pretty representative of the new sites we did building the last couple of years in the United States, both in terms of footprint and offer, including what you hopefully saw was a very strong focus on dispensed beverage and food. We'll continue to refine the food concepts and beverage concepts, including what we've learned from Holiday and CST and then our Famous4 group, which is dedicated to creating new innovations that we hope we can use to differentiate the brand. This site is pretty representative, I said, and we've been overall very pleased with the consumer response and the returns we're getting on the new to industry sites. With regard to Ireland, a lot to learn from Ireland, 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 taste. 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 growth margins? And what is the outlook for the next 12 to 24 months? Overall, tobacco has had a slightly positive impact on overall same store sales, and I'll break out U. S. And Canada. Canada is largely driven by tax. So units have been relatively stable versus prior trends and the growth has been driven by tax increases. The U. S. Is really kind of made up of 3 factors that have driven some very nice growth in tobacco. So one has been the growth of our private label brand, particularly where we've launched it in holiday and CST. We've seen very strong growth in new categories in vape and moist smokeless, an example of that being Juul. Those categories are driving very, very, very strong sales, so it's encouraging. And then finally, as I mentioned earlier, our Circle K Tobacco Club, which is utilizing our Lyft platform. We think that's also driving some nice growth. So 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 Research, both questions previously answered regarding foodservice and same store sales. Now on to Vishal Shreedhar, National Bank Financial. Same store merchandising sales growth was strong in all regions. However, Canada, in particular, in Europe, to a smaller degree, posted solid merchandising sales despite negative comparable fuel volume growth. Can you comment on the diversions? And if there are any transient or unusual items helping the merchandising same stores number? Yes. If I understand the question right, it's really weak fuel in Canada. How are the merchant results so strong? So I'll try to add a little color to that. So if you look at North America overall, about 68 week 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 and 2, growing disposable income, which we think are both great attributes to convenience growth. Next question. What percentage of the company's tobacco sales come from other tobacco products? Did the proposed tariffs on U. S. Imports from China Did the proposed tariffs on U. S. Imports from China of electric cigarettes and other vaping products pose big threats to the industry? So, Chris, so depending on the region and the customer behavior, we have different rates of penetration in those different geographies. So Canada is probably a lagger in this category today as other regions could be it could go as high as 20% in penetration in the category. So 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 the vaping. So 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 Rimmel James. Your first question was regarding the loyalty program, which was already answered. And so 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? So I'd 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. So the first two markets done of the three hundred were Arizona and Quebec. And as I mentioned earlier, just saw very, very strong results, particularly in Arizona, which is just tremendous results there. Texas and the other markets of Colorado, Albuquerque, markets like that, just kind of in the middle of launching. So more to come there, I think, in the coming quarter and we'll be able to give you more color there. So, that covers all the questions. Thank you for joining us. I wish you a great rest of the day. We will talk to you again in November for our 2019 Q2 results. Thanks everyone. Have a good day. Thank you. This concludes today's conference call. You may now disconnect.