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Alimentation Couche-Tard CEO optimistic worst of labour shortages is behind it

Alimentation Couche-Tard Inc. says labour shortages have been a big challenge for its convenience stores and suppliers, but the Quebec company believes the worst is behind it. The company says it faced a 7.

Alimentation Couche-Tard Inc. says labour shortages have been a big challenge for its convenience stores and suppliers, but the Quebec company believes the worst is behind it.

The company says it faced a 7.7 per cent increase in operating expenses in its latest quarter, including about two per cent for employee retention measures.

Labour shortages have also impacted suppliers, particularly in the U.S., from shortages of truck drivers to warehouse staffing and production delays caused by disruptions in receiving raw materials.

But chief executive Brian Hannasch says it has seen recent improvements in the situation with staff turnover rates easing.

"I'm cautiously optimistic the worst is behind us, and I'm pleased that as we face these labour and supply chain obstacles head-on, we continue to deliver a solid quarter and kept on track with our strategic goals," he said Wednesday during a conference call with analysts about its second-quarter results.

The convenience store industry is less impacted than other retail because it has fewer overseas imports, but Hannasch said it is receiving less product selection as manufacturers faced with ingredient shortages focus on bestsellers.

The situation is more acute in some markets with parts of the U.S. being more impacted while Europe and Canada are "relatively unaffected."

He said same-store sales were impacted in the quarter, but other retailers faced similar or worse challenges.

"So net-net, we think we've left sales on the table, but again, as the vaccination rates continue to rise, we're seeing more stability with many of our key supplier partners and are cautiously optimistic that the worst of that situation is behind us today."

Hannasch said very few of its stores were forced to reduce hours of operation because of labour shortages.

"No doubt, this is the most difficult labour market, and we've been working hard to mitigate it. What we found is there's not a silver bullet."

He said the company is taking a comprehensive approach on hiring and retention issues, including offering bonuses. It hired 20,000 employees over the summer as it speeded up the hiring process.

Alimentation Couche-Tard also said it has faced cost increases in every category of its business, but has managed to pass that escalation to consumers through higher prices while maintaining volumes and margins.

"I don't think we're unique there. I think that's affected really all retail. And quite honestly, I expect more to come," Hannasch said about price increases.

"I believe that we're remaining competitive on a relative basis. We strive to continue to provide our customers value through smart multipack pricing, offering different assortments and working with our vendors on private label and other exclusive innovative values ideally leverage our scale."

Meanwhile, the retailer's class B shares are set to be delisted on Dec 20. Following an automatic conversion on a one-for-one basis, only one class of shares will be traded on the TSX.

Couche-Tard boosted its quarterly dividend Tuesday to 11 cents per share, up from 8.75 cents per share.

The increased payment to shareholders came as it reported it a second-quarter profit of US$694.8 million or 65 cents per diluted share, down from US$757 million or 68 cents per share a year earlier.

Adjusted profits were US$693 million or 65 cents per share, down from US$735 million or 66 cents per share in the same quarter last year.

Reporting in U.S. dollars, revenue increased 33.5 per cent to US$14.22 billion from US$10.66 billion in the prior-year quarter, mainly due to higher fuel prices.

Couche-Tard was expected to report 66 cents per share in adjusted profits of US$14 billion of revenues, according to financial data firm Refinitiv.

On the Toronto Stock Exchange, Couche-Tard's shares lost $2.46 or 4.9 per cent at $48.06.

This report by The Canadian Press was first published Nov. 24, 2021.

Companies in this story: (TSX:ATD.B)

Ross Marowits, The Canadian Press