Convenience store operator Alimentation Couche-Tard may launch a credit card with other Canadian and American retailers to bypass financial institutions and their high card fees.
Chief executive Alain Bouchard disclosed the potential venture following the company’s annual meeting Wednesday.
Couche-Tard and other retailers have long complained about the fees charged by the major credit card companies such as Visa, MasterCard and American Express.
The company said the fees account for between 1.75% and 2% of the value of transactions in U.S. and Canadian gas stations and convenience stores, compared with just 0.5% in Australia where the fees are regulated.
The situation became more important for Couche-Tard and its competitors when fuel prices rose last summer. It caused profit margins to fall as card fees surged to US$180 million in 2008, almost as much as its US$189.3 million in net earnings.
Industry figures suggest convenience stores and gas stations paid US$8.4 billion in credit card fees in 2008, while their before-tax profits were US$5.3 billion.
Couche-Tard said its own credit card would allow fees to be one quarter of their present level, or 0.5%.
“It’s clear that the savings [realized by Couche-Tard] would be directed to consumers through a rewards program,” chief financial officer Raymond Pare told a news conference.
Bouchard declined to provide many details on what he described as “Plan B,” and refused to say if the retailers would partner with a financial group to establish a debit-credit card.
Meanwhile, Bouchard said Couche-Tard believes it can further expand through acquisitions over the coming months, mainly in the United States.
Unlike last year, however, the company wouldn’t disclose the number of stores it expects to purchase, which doesn’t mean its ambitions aren’t as big.
“In the United States, I see at least seven or eight acquisitions of 1,000 stores and several interest me,” he said.
Despite challenges in concluding large acquisitions, Bouchard said the company could double its size in the coming years.
Couche-Tard has 5,906 stores in Canada and the United States, including 4,414 company-owned locations and more than 1,492 franchises.
Last month, the Laval, Que.-based company, which reports in U.S. dollars, reported a profit of US$91.1 million or 48 cents per share during the quarter ended July 19, compared with a profit of $47.2 million or 24 cents per share a year earlier.
Total revenues fell to $3.7 billion, from $4.3 billion.
Couche-Tard said it benefited from strong management of operating expenses, acquisitions, increased same-store merchandise revenues, higher fuel volumes and lower electronic payment expenses.
