alimentation couche-tard

METRO INC. $39 (Toronto symbol MRU; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 241.5 million; Market cap: $9.4 billion; Price-to-sales ratio: 0.8; Dividend yield: 1.2%; TSINetwork Rating: Average; www.metro.ca) operates 600 grocery stores and 250 drugstores in Quebec and Ontario. In its 2015 fiscal year, which ended September 26, 2015, Metro’s earnings rose 13.6%, to $523.6 million from $460.9 million in 2014. It spent $418.0 million on share buybacks in 2015, which is why earnings per share gained 18.7%, to $2.03 from $1.71. Overall sales rose 5.5%, to $12.2 billion from $11.6 billion. Same-store sales increased 4.0%....

ALIMENTATION COUCHE-TARD, $62.68, symbol ATD.B on Toronto, has agreed to buy Ireland’s Topaz chain for an undisclosed amount. Topaz is the country’s leading operator of gas stations and convenience store stations, with a 35% share of the market. The chain consists of 464 locations across Ireland, including its recently acquired Esso network. Topaz owns 162 of these outlets, while dealers own the remaining 302. The agreement also includes a commercial-fuels operation with more than 30 depots and two terminals. Growth by acquisition can be risky, especially with a deal this big. But Couche-Tard has a long record of successfully integrating acquisitions, including Norway’s Statoil Fuel & Retail gas station chain, which it bought for $2.7 billion in June 2012. It also paid $1.7 billion for the Pantry, which has more than 1,500 convenience stores in 13 southern U.S. states, in March 2015....

ALIMENTATION COUCHE-TARD, $62.78, symbol ATD.B on Toronto, operates 8,006 convenience stores throughout North America and 2,217 in Europe, including Scandinavia (Norway, Sweden and Denmark), Poland, the Baltic States (Estonia, Latvia and Lithuania) and Russia. In the three months ended October 11, 2015, Couche-Tard’s sales fell 5.7%, to $8.44 billion from $8.95 billion a year earlier (all figures except share price in U.S. dollars). The decline came from lower gasoline prices and the sale of its aviation-fuel business late last year. The higher U.S. dollar also cut the contribution from the company’s European operations. Without one-time items, earnings per share rose 20.0%, to $0.66 from $0.55, partly due to higher profit margins on merchandise and fuel. The company also paid less interest as it reduces the debt it took on to fund acquisitions, including its $2.7-billion purchase of Norway’s Statoil Fuel & Retail gas station chain in June 2012. As well, in March 2015, it paid $1.7 billion for the Pantry, which has more than 1,500 convenience stores in 13 southern U.S. states....

In June 1999, the Loewen Group, North America’s second-largest funeral company, filed for bankruptcy protection in the U.S. and Canada. At the time, it operated 1,116 funeral homes and 429 cemeteries in North America and 32 funeral homes in the U.K.

Loewen Group grew rapidly by acquisition, but it made other moves that greatly added to its risk.

For one, it took on a lot of debt to finance its purchases, many of which it bought at inflated prices in bidding wars with larger rival Service Corporation International.

The new operations’ profits didn’t cover the extra interest costs. Loewen eventually had to sell many of them below cost to comply with its debt obligations.

Loewen Group’s debt stood at $2.3 billion when it filed for bankruptcy in 1999. That was high even in relation to its market cap of $3.4 billion at its stock-price peak of $57 in 1996. It was insurmountable in 1998, when the company’s interest costs of $182.4 million exceeded all its earnings and cash flow. That year, Loewen had negative cash flow (more money flowed out than in) of $34.3 million.

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CANADIAN PACIFIC RAILWAY LTD., $198.88, Toronto symbol CP, has offered to buy U.S.-based railway Norfolk Southern Corp. (New York symbol NSC). The combined firm would be North America’s largest railway, with more than 56,000 kilometres of track. Buying Norfolk would also give CP greater access to ports on the U.S. Gulf Coast and Atlantic Ocean. Norfolk shareholders would receive $46.72 U.S. a share in cash and 0.348 of a CP share (or roughly 50% in cash and 50% in stock). That would give them 41% of the combined company....

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ALIMENTATION COUCHE-TARD $61.06 (Toronto symbol ATD.B: TSINetwork Rating: Extra Risk) (1-800-361-2612; www.couche-tard.com; Shares outstanding: 567.4 million; Market cap: $34.9 billion; Dividend yield: 0.4%) has agreed to buy all stores operating under the Texas Star brand from Texas Star Investments and its affiliates. Terms were not disclosed. These assets, all in southern Texas, include 18 convenience stores, two free-standing Subway locations and a network for supplying fuel to gas stations. Following the acquisition, Couche-Tard will operate all of the stores under the Circle K brand. This purchase is very small compared to the company’s $2.7-billion acquisition of Norway’s Statoil Fuel & Retail gas station chain in June 2012 and The Pantry, which Couche-Tard bought for $1.7 billion in March 2015. The Pantry operates more than 1,500 convenience stores in 13 southern U.S. states....

Takeovers have helped Canadian beverage maker Cott Corp gain momentum as a growth stock, but the company also faces a number of risks.

CHIPOTLE MEXICAN GRILL, $722.70, symbol CMG on New York, has hired Curt Garner as its first chief information officer. The company hopes Garner will improve its mobile presence, including the ability to order and pay through smartphones and tablets. Mobile apps have already paid off very successfully for fast-food and fast-casual chains like Domino’s, Panera Bread, Starbucks and Taco Bell. Previously, Garner spent 20 years at Starbucks in various technology roles, including CIO. The coffee chain recently finished rolling out its mobile ordering and payment app at its more than 7,400 U.S. outlets....