Alimentation Couche-Tard

ALIMENTATION COUCHE-TARD INC., $20.00, symbol ATD.B on Toronto, has more than 3,500 convenience stores in the U.S., and is the largest convenience-store operator in Canada, with over 2,000 outlets. The Canadian stores operate under the Couche-Tard and Mac’s banners, while the U.S. stores mainly use the Circle K brand. Couche-Tard sells fuel at 70% of its stores. Excluding one-time items, Couche-Tard’s earnings rose 45%, to $0.29 a share, in its third quarter, which ended April 25, 2010. A year earlier, it earned $0.20 a share (all figures except share price in U.S. dollars). There were a number of factors behind the gain: the company earned higher profit margins on gasoline, sold more merchandise, paid less income tax and saw its operating costs drop. Sales rose 33.7%, to $4.0 billion from $3.0 billion a year earlier. That’s mainly because Couche-Tard made a number of acquisitions in the quarter, and saw higher merchandise revenue in the U.S. and Canada....

It pays to be skeptical of growth stocks that rely too heavily on acquisitions. That’s because the buyer of something rarely knows as much about it as the seller. So it follows that if a company makes enough acquisitions, it might eventually buy something that has hidden problems. At some point, those problems will come out into the open and hurt the buyer’s earnings.

Big acquisitions can burden growth stocks with high debt

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ALIMENTATION COUCHE-TARD INC., $19.22, symbol ATD.B on Toronto, will now direct its takeover offer to shareholders of Casey’s General Stores (symbol CASY on Nasdaq). In April, Couche-Tard directed its offer at Casey’s management and board of directors, hoping to win their approval. However, Casey’s rejected Couche-Tard’s all-cash, $36-a-share bid as inadequate. Casey’s is now trading at $35.66, which is just 0.9% below Couche-Tard’s offer. That suggests investors may not be expecting a significantly higher bid. Couche-Tard also plans to nominate nine candidates to replace Casey’s current board of directors....

ALIMENTATION COUCHE-TARD $18.47 (Toronto symbol ATD.B: SI Rating: Extra Risk) (1-800-361-2612; www.couche-tard.com; Shares outstanding: 183.6 million; Market cap: $3.4 billion; Dividend yield: 0.9%) has launched a $1.9-billion hostile takeover bid for Casey’s General Stores (symbol CASY on Nasdaq). Casey’s owns 1,507 convenience stores in the U.S. Midwest. The stores offer a wide variety of food and non-food merchandise, as well as gas, under the names Casey’s General Store, HandiMart and Just Diesel. Casey’s has rejected Couche-Tard’s all-cash bid of $36 a share as inadequate. Casey’s is now trading at $39.32, which is 9.2% above Couche-Tard’s offer. That suggests investors expect a higher bid....

ALIMENTATION COUCHE-TARD INC., $18.90, symbol ATD.B on Toronto, has launched a $1.9-billion hostile takeover bid for Casey’s General Stores (symbol CASY on Nasdaq). Casey’s owns 1,507 convenience stores in the U.S. Midwest. The stores offer a wide variety of food and non-food merchandise, as well as gasoline, under the names Casey’s General Store, HandiMart and Just Diesel. Casey’s has rejected Couche-Tard’s all-cash, $36-a-share bid as inadequate. Casey’s is now trading at $39.10, which is 8.6% above Couche-Tard’s offer. That suggests that investors expect a higher bid....

ALIMENTATION COUCHE-TARD INC., $18.41, symbol ATD.B on Toronto, has more than 3,500 convenience stores in the U.S., and is the largest convenience-store operator in Canada, with over 2,000 outlets. The Canadian stores operate under the Couche-Tard and Mac’s banners, while the U.S. stores mainly use the Circle K brand. Couche-Tard sells fuel at 70% of its stores. The stock fell 8% this week after the company reported lower-than-expected earnings. In its third quarter, which ended January 31, 2010, Couche-Tard’s earnings fell 22.9%, to $54.8 million, or $0.29 a share. A year earlier, it earned $71.1 million, or $0.36 a share. (All figures except share price in U.S. dollars.) The latest quarter’s earnings fell well short of the consensus earnings estimate of $0.38 a share. Earnings mainly fell due to lower profit margins on gasoline sales at the company’s U.S. outlets....

REITMANS (CANADA) LTD. $16.28 (Toronto symbol RET.A; SI Rating: Extra Risk) (514-384-1140; www.reitmans.com; Shares outstanding: 68 million; Market cap: $1.1 billion; Dividend yield: 4.4%) owns 984 women’s clothing stores across Canada. The chain consists of 372 Reitmans, 167 Smart Set, 163 Penningtons, 123 Addition Elle, 76 Thyme Maternity, 66 RW & Co. and 17 Cassis stores. Reitmans continues to monitor its regional markets, and open and close stores as necessary. In the three months ended October 31, 2009, Reitmans’ revenue fell slightly, to $270.7 million from $271.2 million a year earlier. Same-store sales declined 2.2%. Earnings fell 17.7%, to $18.9 million, or $0.28 a share, from $23 million, or $0.33 a share....

AEROPOSTALE INC. $34.54 (New York symbol ARO; SI Rating: Extra Risk) (646-485-5410; www.aeropostale.com; Shares outstanding: 66.1 million; Market cap: $2.3 billion; No dividends paid) reports that its December same-store sales rose 10% from a year earlier. Same-store sales compare results from stores that have been open for a year or more. This lets investors see how much of a retailer’s sales gains come from internal growth, and how much from new-store openings. For the five-week period ended January 2, 2009, the company’s total sales (which includes new stores) rose 17%, to $460.8 million. Aeropostale’s profit margins rose, as well. That’s because it’s doing a better job of managing its inventory....

WESTJET AIRLINES, $13.20, symbol WJA on Toronto, is our Stock of the Year for 2010. Next week, Wall Street Stock Forecaster, our newsletter that focuses on the U.S. stock markets, will reveal its #1 pick for 2010. Don’t miss this unique opportunity to profit. If you’re not already a Wall Street Stock Forecaster subscriber, click here to learn how you can get one month free when you subscribe today. WestJet serves 67 destinations in North America and the Caribbean. The company operates a fleet of 86 Boeing Next-Generation 737s. These planes feature more legroom, leather seats and television screens built into the back of each seat. But most important, the Next-Generation Boeing 737 is roughly 30% more fuel efficient than older planes. And WestJet will receive 49 additional 737s through 2016....

METRO INC. $37 (Toronto symbol MRU.A; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 108.5 million; Market cap: $4.0 billion; Price-to-sales ratio: 0.4; Dividend yield: 1.5%; SI Rating: Average) is Canada’s third-largest supermarket operator, after Loblaw and Sobeys. Metro operates roughly 660 grocery stores in Quebec and Ontario. Its major banners include Metro, Super C and Food Basics. The company also operates or supplies around 270 drug stores. Eighty-one of these are located inside its supermarkets. Aside from its grocery business, Metro owns roughly 23% of Alimentation Couche-Tard Inc. (Toronto symbol ATD.B). Couche-Tard has more than 3,500 convenience stores in the U.S., and is the largest convenience-store operator in Canada, with over 2,000 outlets. The Canadian stores operate under the Couche-Tard and Mac’s banners, while the U.S. stores mainly use the Circle K brand. Based on Alimentation Couche-Tard’s current stock price, this investment accounts for 23% of Metro’s market cap. Couche-Tard is a recommendation of Stock Pickers Digest, our publication for aggressive investors....