The owner of 35 liquor stores in B.C. is expanding its U.S. footprint as a way to diversify its revenue beyond what is largely an Alberta base.
Increasing revenue and profit from outside Canada also helps the company hedge against the sagging Canadian dollar, which has been lower for longer than some equity watchers say they expected .
Edmonton-based Liquor Stores N.A. Ltd. (TSX:LIQ) already has 22 liquor stores in Alaska and 15 stores in Kentucky. It announced November 19 that it is expanding to three new markets: New Jersey, Massachusetts and Connecticut.
In addition to its B.C. stores, which are alternately branded either Liquor Barn or Liquor Depot, the company operates 177 liquor stores in Alberta. It is North America’s largest publicly traded liquor retailer.
CEO Stephen Bebis said in a release that the company is “diversifying our revenue base so that we are not as dependent on the cyclical Alberta economy, and growing our business with a significant presence in the northeastern United States.”
The transactions he announced November 19 include Liquor Stores spending US$15 million to buy a 51% stake in Birchfield Ventures LLC, which owns two large stores in New Jersey that are branded Joe Canal’s Discount Liquor Outlet.
Liquor Stores also acquired the right to buy the remaining 49% interest in Birchfield, at similar terms, in the future.
It also finalized leases to open one large store in Massachusetts and another large store in Connecticut by mid-2016.
When the company released its earnings on November 5, it revealed that sales had softened at stores near Alberta’s oil patch.
Slower same-store sales took place in Fort McMurray, where it has seven locations, and Grande Prairie, where there are nine stores.
Same-store sales increased, however, at its 81 stores in Edmonton and its 44 stores in Calgary, the company said.
“B.C. also recorded same-store sales growth, despite increased competition faced from government-owned stores as a result of the recent regulatory changes,” the company said November 5, referring to the B.C. government's change to a new wholesale pricing system on April 1.
Overall, Canadian sales decreased by $1.1 million, or 0.9%, compared with the third quarter of 2014, which ended September 30. Conversely, U.S. same-store sales in the third quarter increased by $0.3 million, or 1.0%, compared with the same quarter in 2014, the company reported.
Total sales for the quarter increased 6.7% to $194.2 million.
