Alimentation Couche-Tard Inc. (OTCPK:ANCUF) First Quarter 2023 Earnings Conference Call August 31, 2022 8:00 a. m. m. ET
Participating companies
Jean-Philippe Lachance – Vice President, Investor Relations and Treasury
Brian Hannasch – President and Chief Executive Officer
Claude Tessier, Executive Vice President and Chief Financial Officer
Conference Call Participants
Patricia Baker – Scotia Capital
Irene Nattel – RBC Capital Markets
Mark Petrie – CIBC Global Markets
Peter Sklar – BMO Capital Markets
Vishal Shreedhar – National Financial Bank
Bonnie Herzog-Goldman Sachs
Michael Van Aelst – TD Securities
Martin Landry – Stifel GMP
Chris Li – Desjardins Capital Markets
Bobby Griffin-Raymond James
John Royall – JP Morgan Securities
Operator
Sylvie de Bonjour. Je and I will be your convention operator today. [A language]. I will now introduce Mr. Jean-Philippe Lachance, Vice President of Investor Relations, Treasury and Financial Planning and Analysis at Alimentation Couche-Tard. [A language].
Jean Philippe Lachance
[Foreign Language] Bonjour. Je welcomes everyone to this Internet convention that presents the monetary effects of Alimentation Couche-Tard for the first quarter of its fiscal year 2023. All lines will be kept muted to avoid background noise. After the presentation, we will respond to the analysts. ‘ questions asked live at the Internet convention. We would like to remind everyone that this Internetcast presentation will be available on our website for an era of 90 days.
Please also note that some of the topics discussed in this webcast could be forward-looking statements, which are provided through the Company with its same cautionary statements as above. These warnings or dangers and uncertainties are described in our financial reports. As a result, our long-term effects are likely to differ from the data presented today.
Our monetary effects will be presented through Mr. Brian Hannasch, President and Chief Executive Officer, and Mr. Claude Tessier, Chief Financial Officer.
Brian, you can start your talk.
Brian Hannasch
Thank you Jean Philippe. Et hello everyone. Thank you for joining us in this presentation of our effects for the first quarter of 2023.
In the face of continued inflationary pressures and high fuel prices, we are pleased to report strong effects this quarter, in the convenience store segment where we have strong same-store sales in our U. S. markets. USA and Europe.
We also continue to generate strong fuel margins across all of our platforms. In this era of superior fuel value inflation, we remain focused on providing a solid and consistent load to our customers, maintaining the cargo field in our operations, and advancing our strategic priorities. .
Through our Fresh Food, Fast program, we are reaching our sales and implementation goals and seeing strong double-digit expansion in our personal labels as consumers seek in those difficult times.
To the delight of visitors to our sites, we are making progress in implementing our smart, innovative and easy-to-use payment generation, after announcing our goal of deploying 10,000 games in 7,000 outlets over the next 3 years.
In addition, after a year of record biological expansion in store construction, we added 30 more new sites this quarter. I’ll talk more about those projects later in the presentation.
Let me turn to our results, conveniently. Compared to the same quarter last year, same-store sales increased 3. 5% in the United States, 2. 8% in Europe and other regions, and decreased 1. 3% in Canada.
Across the network, our Fresh Food, Fast program continues to grow and generate more sales and profits in our stores. Sales of our new chicken-based parts continue to increase and we added new pieces to our collection this quarter. So, very well earned through our customers. We are pleased that sampling has returned and have extended it to all regions to introduce our new products to our customers.
We have also activated several promotions to raise awareness about our program. Our operators continue to work hard to buy the execution and allow us to make significant progress in our gastronomic adventure and the long-term progression of our food culture.
In beverage distribution, we laughed at our exclusive Purple Thunder spray for our sources this quarter, which actually boosted customer engagement. We have already sold more than five million polar glasses with this exclusive flavor.
Our Sip subscription
In packaged beverages, we registered a strong expansion in all spaces thanks to our promotions and differentiated offers. In particular, comfortable drinks were highlighted. Here, we continue in the supply chain and pricing to make sure we meet the wishes of our customers.
In the age-restricted category, cigarette sales continue to decline due to pressure on cigarette prices, pressure on units, and renewed tension from the illicit market in Canada. In Europe and the United States, other tobacco products continue to perform well. Across the network, we see a development of beer sales in salads, as well as wine and spirits in the quarter.
In our localized pricing work, we have focused more on visitor elasticities in this existing inflationary environment, in order to improve the speed of decision-making and the execution of adjustments to our ability to respond to conversion conditions.
We also began implementing collection optimization in North America, adopting a category-by-category approach in our U. S. business units. We spot our retail outlets faster, while also spotting trends in underperforming parts and making sure they are removed from our shelves faster than in the past.
In promotions, we have data-driven analytics charts to better align our value levels with single and multiple buy pieces to optimize drive and margins.
With respect to our fuel business, same-store transport fuel volume decreased by 4% in the United States, 3. 7% in Europe and 0. 4% in Canada. As I mentioned earlier, we will continue to take advantage of solid fuel margins, offsetting volume pressures across the network. It is clear that high fuel costs during the quarter and general inflationary pressures are having a transient effect on the driving and refueling behavior of our consumers.
In our paintings to renew the Circle K fuel logo, this quarter we focused on ongoing promotions and the progression of campaigns to raise awareness of the logo, as well as payment systems to create, facilitate and offer discounts to our loyal customers. You’ll see this come to life in the coming quarters. And in fact, you might even see something very special coming from our Circle K fuel logo in the US. The U. S. and parts of Canada for this Labor Day long weekend. We continue to rely on the power of the strong source and the functions of our own fleet to mitigate the load pressures where possible. We are pleased with our partnership with Musket and there is much more price to capture as we expect energy market volatility to continue in the medium term.
In Europe, the B2B business continued to develop solidly and ahead of its forecasts in terms of total card volume and bulk fuel sales.
Also in Europe, our fast charging network for electric cars now includes more than 1180 charging issues covering more than 270 outlets with a combination of our own Circle K chargers and spouse chargers, which basically come from IONITY and Tesla. We continue to expand the cargo network in Scandinavia, as well as pilot tests in the Baltics, Poland and Ireland.
In the last quarter, we also started our EV adventure in North America with our first chargers with the Circle K and Couche-Tard logo in retail stores in South Carolina and here in Quebec. is established at our retail outlets in North America for the next 24 months. Here we take a strategic approach, build a network for the future, in spaces with the best EV adoption rates and forced delivery infrastructure.
We also plan to deploy our own charging assets to serve the visitor base of developing EV vehicles, as we are doing in Europe, while also partnering with other players in the emerging e-mobility economy.
After a record year of biological expansion into new structure, we continue to expand the network with the structure of 30 new sites this quarter. We also have structure of 55 sites lately.
All of this is a component of our efforts for our expansion, design and authorization process, which translates into a solid line for long-term store openings. existing points of sale and expand a new prototype of major store, which we appreciate for reducing prices and shortening structure times.
We also just announced the end of the acquisition of the Wilsons Gas Stops and Go!We are thrilled to welcome those branches and family members to the Couche-Tard family and expand our success in Atlantic Canada. “
Now, before I pass the floor to Claude, I wanted to review the apparent progress we are making in overcoming personnel issues, especially in North America. This quarter, our hiring rates were higher than our completion rates and the workforce is returning. much closer to the general levels. We took a step forward in the number of candidates, which allowed us to fill positions at our outlets by hiring staff for the busiest summer season. This also translates into a relief in the overtime and retention prices we had in position past quarters.
In early June, we introduced a crusade to rent 25,000 for the summer. I am pleased to say that we have won more than 160 000 applications. We are making great strides in reducing hiring times and continue to review responses for additional improvements.
The expansion of our AI smart payment technology, which is particularly faster and less difficult to use, is now offered in approximately 1,000 locations. It aims to provide our customers with a truly differentiated and faster experience while reducing the pressures our groups feel in today’s task market.
This cutting-edge generation is a huge stimulus and a great initiative on our side as we expand this to 10,000 games over the next 3 years.
Now, I will warn here and let Claude provide our first quarter monetary results. Claude?
claude tessier
Thank you Brian. Ladies and gentlemen, good morning. For the first quarter of fiscal 2023, we are pleased to report a net revenue stream of $872. 4 million or $0. 85 consistent with a consistent percentage on a diluted basis. Excluding certain parts described in more detail in our MD
We had an impressive quarter, highlighted through 10. 6% increases in adjusted EBITDA and 19. 7% increases in adjusted diluted net profit consistent with the constant percentage compared to the first quarter of fiscal 2022, which brought our adjusted EBITDA over the past 4 quarters to over $5400 million.
Our same old fiscal discipline, combined with a worsening labor market, allowed us to limit normalized spending growth to 5. 3% compared to the first quarter of last year, more than 1% below inflation, which is notable in this quarter.
Our monetary position remains strong, highlighted through our leverage ratio of 1. 31 times, which offers us opportunities for the future. I am proud of our team’s execution this quarter, which resulted in a sequential improvement in our two key measures of functionality.
Now I’ll come back to some key figures for the quarter. For more details, see the MD
Sales of same-store products increased 3. 5% in the United States, 2. 8% in Europe and other regions, and decreased 1. 3% in Canada. Revenue from products from the same store in Canada was strongly impacted by an increased festival in the cigarette category in the same quarter of fiscal year 2022.
Excluding the net effect of currency translation, gross margin on goods and facilities increased by approximately $30 million or 2. 1%. This is basically due to biological expansion as well as pricing initiatives. Our margin for expansion of goods and facilities decreased by 0. 3%. in the United States to 33. 9%, while it increased through 0. 5% in Europe and other regions to 38. 9% and through 0. 8% in Canada to 33. 1%.
Now let’s move on to the fuel aspect of our business. In the first quarter of fiscal 2023, our gross margin for road transportation fuel was $0. 49 per gallon in the U. S. In the U. S. , an increase of $0. 1225 per gallon. In Canada, CAD 0. 1404 per liter, an increase of CAD 0. 0312 per liter In Europe, our fuel margins for road transport were $0. 1226 per liter, an increase of $0. 0194 per liter. Fuel margins remain healthy in our networks thanks to favorable market situations and continuous research to optimize our supply chain.
Now let’s take a look at SG
Despite challenging market conditions, we continue to make efforts to mitigate the effect of emerging inflation and continued wage pressure, as evidenced by our expansion of normalized spending under inflation.
Excluding the express parts described in more detail in our MD
From a fiscal perspective, the tax rate for the first quarter of fiscal 2023 was 21. 9% compared to 21. 3% for the corresponding fiscal year 2022 period. The accumulation is basically due to the effect of the other composition of our profits. in the various jurisdictions in which we operate.
As of July 17, 2022, our return to equity remained at 20. 4% and our return on contracted capital was 15. 9%. , 8 foundation issuances decreased from the fourth quarter, despite the repurchase of $478 million in the quarter as a component of our issuer offering.
We also have strong liquidity on our balance sheet, with $2. 2 billion in cash and another $2. 5 billion available through our revolving credit facility.
Let’s move on to the dividend. The Board of Directors declared a quarterly dividend of CAD 0. 11 consistent with the percentage corresponding to the first quarter of fiscal year 2023 for shareholders registered in the
September 8, 2022 and approved its payment on September 22, 2022.
With that, I thank you all for your and I refer the call to Brian.
Brian Hannasch
It is ok. Thanks Claude. No there is doubt that this quarter was again challenging, especially in terms of inflation and fuel costs and the effect this has on our consumers and team members.
I am proud of the way we have operated and weathered this volatile moment. We have been able to keep our prices under inflation, offer prices to consumers through our projects based on localized data and the robust functionality of our personal label products.
As inflationary pressures persist, I am encouraged by recent economic signals in several of our key markets. Lower fuel costs and improved staffing are also positive. We will continue to work hard to make our guests’ lives a little less difficult every day. on our adventure to the world’s favorite destination for convenience and mobility.
Now, with that, we’re going to answer analysts’ questions. Operator, pass to you.
Q&A session
Operator
[Operator Instructions]. And the first will come from Patricia Baker of Scotiabank.
patricia boulanger
Brian and Claude, can you tell us a little bit, after the end of the quarter, what you see in terms of fuel volumes, that is, in the United States, where, in the first quarter, volumes fell by 4%?you believe that the outlook for the rest of the year will be related to fuel volumes and the habit of customers in particular.
Brian Hannasch
I would say that at the time when part of the quarter and retail costs skyrocketed, that’s when we saw a volume erosion. And it’s not just in the Unidos. Es States on a global scale. As we look ahead to the next quarter, they are cautiously positive about declining retail costs and expect to see an improvement in volume trends.
Just to give a little more information about what’s going on, in fact, our traffic to the esplanade has an average increase of 5% globally. That’s 5% more trips, but the average load is down almost 10%. So in the U. S. , that would equate to going from 11 gallons to about 8. 5 gallons consistent with filling. Therefore, it shows us that the customer is affected there. , we will see those trends improve in the coming quarters.
Operator
And the next one will come from the hand of Irene Nattel of RBC.
irene natel
I stay true to Patricia’s question, but this time thinking more about the inside of the store. What do you see in terms of customer behavior? I guess, more broadly, how do we think about this MTL of $5. 4 billion in EBITDA compared to the $5. 1 billion target you talked about.
Brian Hannasch
I’ll start and actually inspire Claude to speak, especially in the last part of your question. Inside the box, Irene, is a kind of logo story. So we have some logos, I’ll point out as a Monster or a Coke in which there is great customer loyalty. We don’t see the industry going down much.
In other categories, for example, beer, confectionery, salting, we have noticed a significant expansion in our personal brand products in the central store and in beer. Certainly, we have noticed a transition from super premium to economical. So, it depends on which component of the store we’re talking about. But visits overall remain solid. And I think we’ve done a moderate balancing task, capturing the higher prices from our suppliers, while continuing to be a price proposition for our customers.
In the LTM, super LTM, super quarter this quarter. We’re on the hunt for the next quarter, we’re a month away and the trends sometimes continue. The market remains highly disciplined and faces higher operating costs. And then the functions that we’ve created, especially around fuel, aren’t fully realized, I think we’re in a unique position, just like some other players in the industry, to profit from periods of volatility. So while we can’t, we’re not decision makers in the market and we can’t necessarily be one waiting for the long term: I expect volatility in margins. Our purpose is to continue to create profits in the industry and that is our purpose.
claude tessier
I think, Irene, also from what we have discussed in the past, we are also very satisfied with the functionality of all our biological expansion projects that we have all planned in our strategy and they are still very solid. And we are confident in our ability to achieve our purpose there and I hope we can be a little better. But it’s hard to wait for the future.
Operator
The next one will be by MARK Petrie of CIBC.
marc petrie
Brian, he talked about this in his ready comments, but I’m curious to hear how the kind of super inflationary environment affects his technique to his pricing and promotion work, and more particularly the location and type of optimization initiatives. So, given the evolution of the way consumers shop, I’d be interested to know how you react to that and whether you adjust the earning advantages you would have targeted.
Brian Hannasch
I would say inflation went up very temporarily, as we’ve seen, at the end of COVID, the war in Ukraine, etc. So it would be a lie if I didn’t say that we made a combination of value increases based on data. , but also only cost-driven value increases. And then we check temporarily to monitor what’s happening as we put them in. We have intensified our external investigations of the competition, only for that we keep in touch not only with the competition in our channel, but through channels. That we take a look at the values.
So, as we have done, we will continue to temporarily study our trends in sets and prices. We also continue to advance in parallel in the collection and promotion. We control the collection in North America and the promotion in Europe. And so, we keep painting with them. Honestly, those two levers are just as vital as pricing for us. So more to come there. But we are in the early stages of large-scale deployment, whether in North America and Europe.
Operator
The next one will be asked through Peter Sklar of BMO Capital Markets.
pierre sklar
I was wondering if you could just comment on your total buying activity. I Stopped buying its shares on July 5, long before the blackout. I was wondering, were you ahead of your buyback program or did you feel the desire to build your balance sheet?Are you limited to corporate activities? Any kind of flavor you can supply would be helpful.
claude tessier
You know what we’ve committed to in terms of acquisitions this year, so we’re still on that strategy. Our goal is to increase our leverage ratio to 2. 25 times. And frankly, we bought back 11 million shares for $178 million during the quarter. So, our opinion about our purchase is to use it opportunistically, and we will make the decisions to use them when we believe it is the right time for the organization.
Operator
The next one will be from Vishal Shreedhar of the National Bank.
Vishal Shredhar
[Technical difficulty] Wilsons’ acquisition, closed a little later than expected. And the disposals, the sale of retail outlets were in line with your expectations?
Brian Hannasch
Yes, they were, Vishal. We knew very early on what our exposure was. Therefore, we are very happy with the acquisition. This brings 79 strong COCO retail outlets and 147 resellers to the market and family, and strengthens our position in Atlantic Canada. Therefore, in the coming months, we will make divestments; I think it’s about 47 sites with other buyers. . So we feel smart about it. It’s a strong network, a smart story, lots of wonderful people and would be a wonderful addition to the family.
vishal shredhar
Just to replace the topic here about the Musket component, I wonder if you can describe exactly how this component generates price for Couche-Tard, how much of the benefits have been captured, and if there is an opinion on the materiality of the remaining component. of this component. ?
Brian Hannasch
Yes, top level, because there are a lot of moving parts. So Musket, [indistinguishable] moment largest, I think, diesel warehouse in the United States, we are the largest moment, I think, gasoline warehouse. So given the breadth of the two products, I think we can get a very unique set of answers for our refining partners when sourcing fuel. I think we benefit them and they can benefit us by being able to get either side. Therefore, the fountain is one piece. Ethanol, which a lot of other people don’t communicate about, renewable energy, but ethanol in the United States and indeed biofuels in other parts of the world continue to grow in importance, and I think being able to commercialize those products and get them strategically it is also a merit that we see and are accelerating to capture. Logistics, a very vital element. As we go from being a flagship American brand store to being primarily a Circle K brand store, the choice we have over fuel is expanding significantly. Therefore, the ability to systematically understand, site by site, day by day, the optimal location for refueling is vital and has significant merits for us. This forces us to have more control over our source chain. So during COVID, while we’re not perfect, we added 1,000 drivers to our in-house Circle K fuel hauling fleet. And that’s starting to lay the groundwork, Vishal, for us to be much more opportunistic, whether it’s in location and arbitrations of time that we see that they exist and that we will probably persist at a very high level, given the interruption in the global fuel supply with the scenario between Ukraine and Russia. So the ones are the big two.
And then, I would say that the third one considers the industry. We have been actively involved, we have created a workplace in collaboration with Musket in Houston and we are establishing a workplace in Switzerland to concentrate on our European activities where we have exclusive industry opportunities around some of our short and active ones that we own in terms of terminal infrastructure. So, the ones are the 3 big pieces. I would say we’ve noticed significant benefits to date, but I’d say we’re not halfway there yet. There are still benefits of curtains that can be obtained.
Operator
The next one will be from Bonnie Herzog of Goldman Sachs.
Bonnie Herzog
I had a query about fuel margins. They have been incredibly powerful physically as you and other large-scale stores gain advantages from reduced costs or fuel costs and you too from your Circle K optimization and rebranding initiatives. He therefore wondered whether it could also help quantify the advantages gained. You get from those initiatives, possibly in terms of consistent cents per gallon, and are you looking to figure out how much way is left with those initiatives?And then, curious, I possibly would have missed it, but what were its fuel margins in August compared to July?
Brian Hannasch
You make the crystal ball query, Bonnie. I would say that for the month of August, we saw trends very similar to those of the last quarter in terms of margins. And we’re satisfied during the quarter if you think crude is rising a lot. temporarily and is slowing down now. We saw margins remain fairly strong during the quarter. So, again, the market is still disciplined. We are an exclusive industry. Every site has the value on the street, but the truth is that we all feel inflation. We all have higher credit card fees. get fuel, I think they want that margin. So the extra margin required across the industry, I think, is very different from what it was 3 years ago.
As for breaking it down into GIC, Bonnie, it’s hard. It depends on where we are in the world, where in the country are we in the United States or Canada?Because our ability to have merit over the source varies. So again, we’re not necessarily focusing on the absolute margin we have, but simply expanding that merit we have over the market. We are satisfied with the opportunities to do so.
Bonnie Herzog
But can you help us understand where you stand with this initiative?Are you halfway through [Technical Difficulty]?
Brian Hannasch
. . . with more to do. Some of them require investments in personnel, others require investments in metal and trucks. On the customer side, I think we have an advantage. We now have approximately 3500 Circle K locations. In some of those logo changes, we have moved away from very strong unbreakable programs. When you think, for example, of Shell with its Kroger and FRN. We don’t have a wonderful unbreakable fuel program. We’ve designed one, we’re testing it in two markets in Denmark and Goldsboro, South Carolina. We are very satisfied with the results, either in terms of customer engagement. We have gained very smart feedback from customers in terms of appreciation of the program and application. So we were excited, honestly, to work with our POS provider to get the rights to the code and possibly implement it. So we anticipate that the year-end schedule will possibly increase that. And it will be a difficult tool for us to speak and praise unwavering customers, whether in the aspect of fuel or in the appearance of products.
So when I think about the advantage, I think the Circle K logo is our big advantage. We temporarily replaced our name. Now is the time to invest in this logo wisely, increase customer awareness, foster customer loyalty.
In the meantime, as we prepare to launch this loyalty program, we’re going to do more guerrilla-style tactical stuff to make sure the awareness of the Circle K logo continues to grow.
Operator
The next one will be from Michael Van Aelst of TD Securities.
michel van aelst
You argued about Wilson, you had to sell or you’ll have to sell, I think, about 43% of the company-owned sites. And where do you still see the maximum white area for making acquisitions without significant divestments in Canada?And what are your global priorities right now?And what do you see in this M&A market?maximum transactions because some auctions restrict the number of bidders to what results?
Brian Hannasch
Michael, with Wilson in particular, I think we had a very clever understanding of what we were offering. I think the assets we hold, especially coconut assets, is where we have value. A giant component of those divestments is DODO, therefore it is a broker that has its own site, and it is purely a fuel source relationship. So, net-net, we are satisfied with the value at which we acquire the network and the quality of the assets we have.
In terms of the M&A environment, overall, I’d say we’re seeing smart business. I think last quarter I said it was more in Europe. I’d say we’ve noticed more transaction activity in the U. S. USA Beyond a few weeks. So even though we don’t know where the valuations are today, just because it’s been a little calm, I think with the higher interest rates and actually some uncertainty about EBITDA and the long-term trends and all that stuff, the recession and all that, I hope that the uncertainty that exists today creates an environment where we can make acquisitions.
As Claude mentioned, the balance sheet is in good shape. It’s ready. We have the appetite and the ability. So we crossed hands to do something. But there is activity there.
michel van aelst
But are the existing debt markets? I know you have to capitalize, however, many others do not have the same capital point. So, I wonder if the tougher debt markets right now are delaying or postponing some of the bigger deals they can will just take place in the coming moments?
Brian Hannasch
I don’t know if it delays other people’s access to the market or not. I think when you look at who has competed with us in the last 4 or five years, it’s other people who use high-performing markets and personal equity partnerships, and those who are largely outcast today. So we feel smart about it. So we’re well prepared for that. But I can’t say if other people are just putting off their business and coming to the market because, again, as I mentioned earlier, we’re seeing activity there.
claude tessier
Michael, in fact, is also familiar with the IPO market, which is a strategic choice for people. So, I think this market is also a bit complicated right now. Therefore, it has an effect on strategy, whether on merchants or buyers.
Operator
The next one will be by Martin Landry of Stifel GMP.
Martin Landy
Since gas costs are the highest in a long time in the U. S. In the U. S. , I was wondering if this would have an effect on your in-store customer conversion rates. And to that end, I was wondering what their conversion rate is lately. comparison with old levels?
Brian Hannasch
Martin, I think I said before, we saw a building in traffic on the esplanade, about 5%. The conversion, I don’t have it in front of me, but I don’t feel like there has been a fall. When we take a look at the internal traffic of the stores, the trends there are quite stable. So I feel pretty smart that the conversion is there. I think the big adjustments in the client habit we talked about, smaller fillers consistent with the visit, of course. Premium sales were under pressure. So premium fuel has shrunk, which is normal when we see price spikes, and it tends to come back when retail prices drop. And then inside the box, a 21% increase over the quarter in line with the personal label. So obviously some customers are looking for value, and we’re excited to be able to supply that and the problematic exchanges, but also some strength in some key brands. So, we don’t realize anything materially different with the fuel affecting the box today.
Martin Landy
And is your conversion rate different from what is observed historically?
claude tessier
No, we don’t see any difference in conversion rate right now. So we are satisfied with the functionality of the box at the moment, Martin.
Brian Hannasch
The only comfortable domain, Martin, was tobacco. And those are classic cigarettes, and we continue to see that select cigarettes are strong. But I think habits, as other people get out of their homes and get away from society a little bit, you probably smoke a little less. in industry trends, or look at the [indistinguishable] results, see it as well. But other than that, I think the customer habit has been pretty consistent for us.
Operator
The next one will be chris Li of Desjardins.
chris li
I know it’s possibly a bit early, but I wonder at retail outlets where smart payment has been implemented, are they already starting to see new benefits when it comes to problem mitigation?-long-term vision, how big is that opportunity once payment is implemented at the maximum of your points of sale?
Brian Hannasch
Cris, we are delighted. This is one of our big bets of the year. We have been satisfied to innovate with this company. And the customer reaction and the net scores of the promoters have been solid. While some sites have been around for 3 to 6 months and others for weeks, I think we’re averaging a conversion rate of around 35%, 38%. Therefore, the Visitor uses the smart box instead of going to the checkout. We still have a very complicated job market. Therefore, today we do not look so much to optimize the workforce. We focus on having a differentiated visitor experience, helping our clients perceive what is.
In the longer term, I think it particularly reduces our exposure to the job market, or at least allows us to relocate to do other things on our sites. Therefore, it is a key initiative.
And the other one I’ve talked about in the past, we were on a witch hunt, to remove administrative and value-free processes and activities from our sites. And so, while our biggest investment is labor, this smart money record, so Claude’s projects around optimizing administrative activity, we believe, are two big benefits in the medium term. Array
Operator
The next one will come from Bobby Griffin in Raymond James.
bobby tap
Brian or Claude, it is transparent that the existing environment in the United States is much more complicated than in the April or January quarter. So when you look at in-store activity in the current inflationary environment, do you still see opportunities to expand?Or would something more favorably change in the environment for this company to enjoy a margin expansion?
Brian Hannasch
I would say there are several things. First of all, today we are very cautious. There is a segment of our consumers that is a little distressed by high fuel costs and inflation. So in the long run, not even in the long term, I would say that food, as it continues to grow, has an upward margin. And us and decrease the losses in the sales we make. I think there will be upside-down curtains there.
And I discussed earlier in the question, we have a three-pronged technique around data. So, one is the value you asked for. The other two are collection and promotions. I think the merit we have in promotions to perceive what motivates the customer’s habit rather than what is just a signal in the store that gives the value or margin is vital to us. And I think we have a lot to be informed there. So, I think, just above my head, I would say that food, expanding penetration, and smarter use of promotional activity ensure that we obviously bring costs to the visitor and that we optimize the unit of value the trade-offs are the two big merits I’ve noticed on the margin.
Operator
The next one will be by John Royall of J. P. Morgan.
John Royall
Regarding OpEx and SG
claude tessier
With the drop in fuel prices, this will have a direct impact on credit card fees. So, as you know, they’re very similar as a percentage of our asking price. That’s what we expect.
On a normalized basis, the 7. 3% we have this quarter is smart compared to what we had in the last quarter. Thus, the last quarter 9. 1%. And as we approach the end of the year, we move toward a less difficult comparison.
But at the same time, we see a lot of uncertainty. So calling a number for the year is complicated for us because of the inflationary uncertainty we have throughout our market. And we bring all the projects together to make sure they are.
So if you want, for example, to go back to that 7% or perceive how it’s built, and I think I did this fiscal year last quarter to give a concept of what’s in it, then 7. 3% is basically. . . if you look at it from 3 buckets, there is a 3% that comes from salary increases. So a little bit of tension on the salary side. But that diminishes with our ability to eliminate retention systems as the shortage of hard work decreases. And because we’re getting a bigger reaction in terms of hiring people, we’ve had a really successful summer at that.
There are some other 2 percent that are actually similar to inflation. Inflation has an effect on our activities in Europe, such as maintenance, energy costs have an effect, basically in Europe, but we also see that this has an effect in North America, as inflation is also in North America.
Finally, there’s 2% of that. These are our initiatives. We are communicating about fresh and fast food. We communicate about our fuel rebranding marketing and also about our marketing efforts. So, those are all things that have an effect on us on the charges side. Therefore, we see a relaxation during the trimester. It’s more to come [indistinguishable]. Inflation is difficult to describe because it will decline in the coming quarters. So, yes, I think we can expect the next quarter to be another heavy quarter in terms of special finish. let’s see the end of the year.
Operator
The next one will be asked via Irene Nattel of RBC.
irene natel
Brian, in his remarks, discussed that mergers and acquisitions in the U. S. UU. se have accelerated a bit. Could you give us a concept of the duration or duration of transactions?And then, I guess the query is similar, and this goes back to some other comment that was made, as you think about some kind of, let’s call it, the LTM run rate in EBITDA, whatever you’re contemplating acquiring, how should you think about that instead of normalized EBITDA?calculate that you might be willing to pay or whatever you can give us about it, please?
Brian Hannasch
Irene, I think in terms of what we see there, it’s a mix of medium and large opportunities. I guess big is a relative term, but you can check the list of the two hundred most sensitive channels and perceive how big it looks. .
In terms of how we look at it, that’s exactly what we do. It’s about putting everything aside through being very active and digging, making sure of the risks we take, whether it’s around fuel margin logo conversions, everything we need to do. Familiarize yourself with the synergies we assign. Therefore, there is no magic formula. It’s a type of line-to-line effort. I think the big query you’re referring to is, hey, do you assume margins on fuel in perpetuity?in our capabilities, the strength of our logo and things like that. So, there is no magic formula. But it’s actually a question when we take a look at mergers and acquisitions in the future.
irene natel
Big, are we talking big or just big. . . ?
Brian Hannasch
Irene, come on.
Operator
The next one will be from Michael Van Aelst of TD Securities.
michel van aelst
I tried to stick to European fuel margins. They rebounded very strongly this quarter after the last quarter where there were supply chain disruptions. It seemed like when we spoke last quarter, it would take a little bit of time to fully reposition their supply and bring margins back to normal. But of course that was not the case. So was there something in the quarter that was some kind of providence benefit that might not happen again? And what did you do to recover, to stabilize this so quickly?
Brian Hannasch
I would say that what is unique to our European market, Michael, is the fact that we have shares. We have our own network of terminals. And since we have noticed that the scenario is coming in Ukraine and we have felt the scenario happening in Ukraine, we have actively accumulated stocks to ensure the reliability of the source and we are very much in almost all our European countries. While we have noticed commodity costs fluctuating, our inventories are being revalued. And this can have significant effects on our margin symbol in Europe.
So when I look at the underlying street margins, if you will, as was the case in the United States, they’ve remained pretty stable. I’m going to compare this to the US, where we keep 3 days of stock closer, largely just on site. It just doesn’t look on our P
michel van aelst
And how many days of stock do you have in Europe then?
claude tessier
Michael, we’ll contact you to give you an accurate figure, but it’s more than the United States. We have a significant position in terms of terminals in Europe.
Brian Hannasch
That would be two weeks.
claude tessier
Yes, of course. Certainly.
Brian Hannasch
Then we can give you a number.
Operator
Merci. Et for the time being, we have no further questions. Please continue with the closing remarks.
End of questions and answers
Jean Philippe Lachance
Thank you. Thank you Brian. Thank you Claude. This covers all the problems of today’s appeal. Thank you all for joining us. We wish you a wonderful day and look forward to discussing the effects of the timing of the 2023 quarter in November. [A foreign language].
Brian Hannasch
Thank you all. Have a day.
claude tessier
Have a day.
Operator
Ladies and gentlemen, this concludes your call to today’s convention. Once again, thank you for coming. And at this time, we kindly ask you to disconnect your lines.