So it has been a while since we last heard anything about Alimentation Couche-Tard (TSE:ATD) and its plan to buy 7-Eleven parent company Seven & i. Well, the latest update was not good news for those plans, but investors are calling it good news as shares were up over 2% in Wednesday morning’s trading.
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The Japanese government is getting involved with the potential merger, and not in a way that would be especially helpful, noted Reuters. Word from Ryosei Akazawa, the country’s economy minister, said that such an acquisition would be “heavily related” to national security. How exactly a convenience store chain is even tangentially related to national security—what, is half the Self-Defense Force addicted to Slurpees?—is difficult to countenance, but has been in the making for some time.
Back in September, the Japanese government classified the convenience store chain as “core” to national security. But back then, the finance ministry noted that that classification really would not have much impact on a potential buyout. The situation seems to have changed, and apparently, the Japanese government is now concerned if those stores in Japan would be able to be used to “help bring hot food to people” in regions impacted by natural disaster. While Alimentation Couche-Tard probably would not be opposed to some kind of disaster planning, if it helps the merger, that still represents an unexpected hurdle.
A(nother) New Foe
Meanwhile, a report from C-Store Dive made an unexpected assertion: Alimentation Couche-Tard has another new foe: the quick-service restaurant (QSR). Couche-Tard’s revenues have been in decline for the last four quarters now, the report noted, and that prompted Couche-Tard to start turning to “value meals” in a bid to draw business back in.
Not a bad idea, of course—“eat here and get gas” has been more than just a funny slogan for a long time—but that puts Couche-Tard in the same classification as a slew of fast-food and quick-service options. The new value meal concept is doing well for Couche-Tard so far—over 300,000 such meals sold per week, the report noted—but with a range of other options out there, the impact can only go so far. Couche-Tard has been working hard at differentiation, but when people are looking for a cheap meal fast, product differentiation will only go so far.
Is Alimentation Couche-Tard Stock a Buy?
Turning to Wall Street, analysts have a Strong Buy consensus rating on TSE:ATD stock based on eight Buys and one Hold assigned in the past three months, as indicated by the graphic below. After a 1.8% loss in its share price over the past year, the average TSE:ATD price target of C$90.22 per share implies 16.41% upside potential.
