Couche-Tard’s Q1: Growth Algorithm Holds as Zabka Bet Reshapes the Map

EPS up 15.4% but U.S. merch comps miss; management bets on food, value, and a transformative European deal.

ATD.TO · Earnings Call · 2026-09-02

Steady Start, but the Consumer is Picking a Different Basket

Alimentation Couche-Tard (ATD.TO) opened fiscal 2027 with “encouraged by the start to fiscal 2027” — Alexander Miller, Chief Executive Officer · 2026-09-02, and the numbers back that up: adjusted EBITDA grew 10.5% and adjusted diluted EPS rose 15.4%. Yet the headline was a U.S. merchandise same-store sales gain of just 1.7% — below the 2–3% growth algorithm the company set out at its February investor day. Management acknowledges the miss, but paints it as a function of an increasingly certain market where consumers are “intentional about where they spend.” That intentionality is most visible in the center of the store. Packaged carbonated soft drinks, salty snacks, and confectionery continue to soften, and for the first time management explicitly called out a structural driver: “I certainly think GLP-1 drugs are having an impact on those categories” — Alexander Miller, Chief Executive Officer · 2026-09-02. The shift is not new — the company has been discussing softness in these categories for several quarters — but the acknowledgment of GLP-1 as an accelerant is a fresh strategic signal. To offset, Couche-Tard is reallocating shelf space toward higher-growth areas like Protein beverages, functional drinks, and energy. Energy now generates twice the sales of CSDs, and the company is “actively allocating more assortment” to capture demand that is “gravitating” to better-for-you options. The bright spots are real. U.S. hot food sales grew over 11%, fueled by meal deals and a new Flamin’ Hot Boneless Wings partnership with PepsiCo — a “first hot food collaboration” that now sells 40,000+ units per week. Meanwhile, other nicotine products (mainly pouches) delivered their best quarter in years, with gross profit from that category now comparable to cigarettes in the U.S. and actually higher in Europe. That mix shift is supportive of overall merchandise margin, even as the U.S. merchandise gross margin declined 50 bps to 34.1% due to deliberate price investment and category mix. Management’s messaging is consistent: dollars over rate, and the growth algorithm will deliver over the cycle.

Zabka: A Transformational Bet Beyond the Core

The most consequential development of the quarter was the announced agreement to acquire a controlling stake in Zabka, Poland’s largest convenience chain with ~13,000 sites. This is a fundamentally new strategic move — prior calls only referenced generic M&A interest.

Zabka is one of Europe's most dynamic convenience retailers with significant scale in Central and Eastern Europe, best-in-class capabilities in food and digital and a talented entrepreneurial team we deeply admire.
Alexander Miller, Chief Executive Officer · 2026-09-02

The acquisition accelerates the Core + More strategy by adding a proven food and digital franchise, and — critically for Couche-Tard — a supply-chain infrastructure that can be extended to its own Polish stores. Management highlighted that Zabka’s cost-to-deliver is more than 20% lower than Couche-Tard’s current European network, and the company expects to utilize Zabka’s eight existing (and two under-construction) warehouses to service its own 400+ Polish sites. That is a tangible synergy story that aligns with the company’s broader push to own more of its supply chain, a theme echoed in the ongoing rollout of three U.S. distribution centers and the RELEX forecasting tool. The deal also reshapes capital allocation. Share repurchases are paused to conserve cash, and leverage is expected to rise modestly above the 2–2.5x comfort range at closing. But CFO Filipe Da Silva stressed that the balance sheet remains strong, with ~$3B cash and an additional $3.5B revolver untapped. This is a deliberate pivot: Couche-Tard is willing to take on temporary leverage for a platform that could meaningfully lift the long-term growth trajectory.

Discipline Everywhere Else

Cost control remains a hallmark. Normalized expenses grew just 2.7% year-over-year — well below inflation — thanks to productivity gains in stores, procurement centralization, and technology like the RELEX rollout (now live in over 1,000 locations, improving availability by >5%). Labor hours per location declined 1.1%, and the company is redirecting those savings into customer-facing investments. This discipline is not new; it has been a consistent theme across prior calls, as when Alex Miller noted in June, “when volatility exists, we are well positioned to capture the advantages there” (a recurring “when volatility exists, we are well positioned to capture the advantages there and margin that becomes available with that volatility” — Alex Miller, Chief Executive Officer · 2026-06-23). The fuel business, despite softer volumes, continues to generate strong gross profit per gallon — U.S. $0.5261 — and the company’s supply-and-trading platform is again delivering outsized results in a volatile market. At the same time, the company is not standing still on growth. It added 26 net new sites in the quarter and expects to open >100 stores this fiscal year, with new stores delivering food sales 120% above the network average. The Inner Circle loyalty program added over 1 million members in the quarter, bringing total to nearly 16 million, and the newly launched Inner Circle 2.0 is designed to drive deeper engagement across more purchases. Management also highlighted a 13% traffic lift from its European Extra 2.0 program and a 19% increase in EV-related traffic among app members — evidence that digital and loyalty are becoming primary growth levers, not just support functions.

Balancing Resilience with Reshuffling

What changed at Couche-Tard this quarter is not the headline numbers — growth is on track — but the strategic inflection points. The company is openly acknowledging a structural shift in center-store consumption (GLP-1), leaning harder into food and digital as offsetting growth engines, and making a transformational M&A bet of unique scale. The prior two quarters were dominated by discussions of fuel margins and U.S. regional softness; today the narrative has moved to portfolio modernization, supply-chain ownership, and European expansion. Investors will watch execution on Zabka integration and the pace of U.S. share gains, but the underlying earnings engine remains intact. As Alex Miller put it in the Q&A, “our sales thus far in the quarter are very similar to what we just announced for Q1” — a sign of stability, even as the company positions for a stronger second half. Whether that comes through remains to be seen, but Couche-Tard’s willingness to adapt its assortment and its capital structure to meet the consumer where they are is a clear departure from the defensive posture of earlier quarters. The market has yet to price in the full implications of the Zabka deal, but the company’s own momentum — as captured in its keyword trajectory, where Zabka spiked to the top gainer with a momentum of 270 — suggests this is a story worth watching.