Good morning, and my name is Eric, and I will be your conference operator today. [Foreign Language] I will now introduce Mr. Mathieu Brunet, Vice President, Investor Relations and Treasury at Alimentation Couche-Tard. [Foreign Language]

English will follow. [Foreign Language] Good morning. I would like to welcome everyone to this web conference presenting Alimentation Couche-Tard's financial results for the third quarter of fiscal year 2024. All lines will be kept on mute to prevent any background noise. After the presentation, we will answer questions from analysts asked live during the web conference. We would like to remind everyone that this webcast presentation will be available on our website for a 90-day period. Also, please remember that some of the issues discussed during this webcast might be forward-looking statements which are provided by the corporation with its usual caveats. These caveats or risks and uncertainties are outlined in our financial reporting, therefore our future results could differ from the information discussed today. Our financial results will be presented by Mr. Brian Hannasch, President and Chief Executive Officer, and Mr. Filipe Da Silva, Chief Financial Officer. Brian, you may begin your conference.

All right. Thank you, Mathieu. Good morning, everyone, and thank you for joining us for our presentation of our third quarter results. As we continue to navigate some near-term headwinds, particularly in the US, we remain focused on providing value needs for our customers with a growing selection of private label options, continued rollout of our Inner Circle loyalty program, which now is 1,600 members, including almost 5 million fully enrolled members in the US, and then we continue to execute on recurring Circle K Fuel promo days, bringing value to our customers. All these offers are providing meaningful rewards and compelling value, especially for more cash cost consumers that are out there. However, our business is extremely diversified around the globe, and we feel very good about its proven resilience and the continued focus on our strategy, building on our key points of differentiation with our customers and maximizing the advantages of our scale. We're especially pleased this quarter was a significant growth in our network. In January, we closed on the acquisition from TotalEnergies, welcoming four new countries, nearly 22,000 new team members and 2,175 sites into the Couche-Tard. We have a strong track record of successful integration and realization of synergies, and we're proud of how the transition is progressing to-date. We've identified local leadership, re-branded our first two Circle K locations, one in Berlin, the other in the Netherlands, and we're well on our way. We're working closely with our new highly engaged teams to test new programs and share best practices. As previously reported with this acquisition, we have an ambition to unlock synergies of approximately $187 million over the five years and with a clear well-structured plan to make that happen. We're also advancing nicely on integration of 112 macro sites that we closed on last quarter, including the rebranding of many of these stores, and we're excited to have these locations and team members as part of our family as we increase our presence in the southern part of the U.S. On the organic front, we're making good progress on our five-year goal of building 500 new industry stores. We're on track to open about 100 in North America in this fiscal year, and we have a great pipeline for the coming years. Now, let me turn to the results for the quarter, beginning with our convenience business. Compared to the same quarter last year, same-store merchandise revenue decreased by 1.5% in the United States, by 0.3% in Europe and other regions, and by 1.2% in Canada. As I mentioned earlier, these results were impacted by near-term headwinds in the economy as well as the continued softness in the cigarette category, partly offset by the growth in other nicotine products, which I'll go into more detail later. It's worth noting that Europe really has had good performance during the quarter with a positive 2.6% same-store sales growth. However, the overall Europe and other region results were impacted by weak results in Hong Kong, driven by a very large tax increase on cigarettes and continued softness in tourism. In the U.S., we continue to focus on the expansion of Innercircle as a free membership program with rewards, fuel rewards, food rewards, and much more, Innercircle is providing a differentiated personalized experience to our most loyal and valuable customers. I'm pleased to report that registrations and full enrollments have doubled over the quarter, and we continue to see steady growth in enrollments in the program. We now have over 4,000 locations on Innercircle, and we've expanded to three new business units in early March, bringing the total to 10 and covering over 30 states in the U.S. We're seeing that our highest penetration sites that have more than 25% of the transactions coming from Innercircle are outperforming our non-loyalty sites and that these loyal customers are visiting our locations more frequently and with a higher basket. In Europe, our updated extra loyalty program continues to perform well, is now fully rolled out in the Baltics with plans to bring it to Ireland in the new fiscal year. We're also piloting a new tier-based concept in Scandinavia to drive both fuel volume and store traffic being based on visits versus purchases. Across the network, Fresh and Fast is now in more than 5,700 locations globally. Over the quarter, our operations teams are focused on improving execution and profitability. Margins and profitability are up materially year-over-year, however, as we continue this journey in building our food culture, we need to ensure availability and in-stock during our business times of the day. In our quest to have our customers have what our customers want when they want it, while making it easy for our team members, we're excited to be rolling out a new forecasting production tool in North America that leverages AI to more accurately determine demand on a site-by-site and time-of-day basis. Sampling has also increased across our business units as we promote our food offer and try to gain trial. Winning the thirst occasion is a core part of our long-term strategy. And in this quarter, packaged beverage sales were up across the network with especially strong performance in Europe due to well-executed initiatives, including the first to launch Red Bull Purple can in Europe and always on value, multi-buy beverages in Ireland. Alcohol sales were also strong in Europe. In the U.S., we announced an exclusive partnership with Warner Bros. and Legendary Pictures in conjunction with the upcoming film, Godzilla x Kong: The New Empire, which will be introducing five exclusive limited time offers, including two exciting new Froster flavors and branded cups. Also in the US where alcohol sales have been a bit soft, we're leveraging aggressive promotional activity to drive volume, present value and gain share. As I mentioned earlier, we continue to see pressure on cigarette units globally, while power usage continues to grow, driving strong growth and other nicotine products in the quarter. In the US, we have initiatives underway with our supply partners including brand focus contests and personalization programs for age-verified customers. Here, we're starting to see positive results with gains in market share as we look to stay relevant and provide choice to our nicotine consumers. In Europe, other nicotine remains strong with iron leading the way, following successful new launches of new products. Moving to our fuel business, same sort of transportation fuel decreased by 0.8% in the US, 1.9% in Europe and other regions and increased 0.2% in Canada. During the quarter, fuel demand was certainly impacted by economic uncertainty, particularly in diesel, which was significantly weaker than gasoline. In that context, when we compare results to industry data and our public peers, we're pleased with our results and remain positive about our long-term initiatives to gain share in the fuel space. Over the quarter, we have healthy fuel margins across the network and we're continuing to build value for our customers and business to the optimization of our fuel supply chain globally. While the advantage model we've developed does better in periods of higher volatility, this was not the case this quarter. Our increased trading supply and logistic capabilities continue to capture opportunities. In North America, our partnership with Musket empowers us to explore new and lower-cost sourcing options while ensuring we maintain supply across our network. In Europe, our newly built fuel supply and trading capability, which we based in Geneva, is moving forward to integrate our supply chains for expanding counterparty engagement and new supply paths. As our B2B business continued with solid growth in Europe, we are gaining traction in the US, B2B business where we believe we have tremendous opportunities. Our Circle K Pro proprietary card platform is seeing positive momentum and volumes as new initiatives and strategic partnerships are bringing in fuel customers. While we continue to invest in developing our US B2B offer with simple self-serve solutions, easier site experiences and compelling inter-circle offers. Also, our network of more than 440 high-speed diesel truck sites is growing as we expand our offer of diesel, DEF and relevant services for the long-and short-haul trucking. Our EV fast-charging network now consists of more than 2,400 charging points, including those in our four new European countries and 50 charge points for heavy trucks in Sweden. We're seeing a significant increase in charging actions on our Circle K branded chargers driven by network expansion, improved payment offers and station upgrades making it easier for our EV customers. In North America, we remain committed to deploying chargers at 200 sites. Our footprint in Canada now covers Quebec, Ontario, BC, and Alberta and 11 states in the US. Before I conclude, I want to mention the important work that we're doing in North America to improve retention and turnover at our stores. Operations first culture, we're investing in our team members in areas that they cannot, including benefits, training and engagement. As a result, we're seeing notable improvement in turnover, both in our associate and manager rank, and we're doing significantly better in the industry when compared to released NAICS data. We're also continuing to implement solutions that reduce administrative hours, making it easier for our store teams, allowing them to focus on serving our customers. We are continuing the evolution of our easy office program and gaining efficiency in store labor hours through automation. We're also bringing our successful European inventory management program to North America to help simplify the ordering process and enable more informs to our merchandising decisions, which we believe and we've shown in Europe will lead to better to stock conditions. And with that, I'll turn it over to Filipe to go more deeply in the results. Filipe?

Thank you, Brian. Ladies and gentlemen, good morning. Our commitment to disciplined operational cost control has led to a 1.6% reduction in normalized expenses, a performance that is notably better than the weighted average of inflation affecting our business operations. This standard achievement in the quarter highlights our commitment to financial prudence and operational excellence, even amid widespread economic challenges. The key highlights of our capital structure initiatives this quarter was the issuance of a new CAD500 million, 5-year unsecured notes. Following the end of the quarter, we also priced private debt offerings denominated in both US dollars and euros, achieving combined totals of $1.5 billion and €1.35 billion, respectively, across several tranches. This carefully planned financial actions, strengthened our capital structure and set us on a firm part to execute our 10 for the Win strategy successfully. I will now go over some key figures for the quarter. For more details, please refer to our MD&A available on our slide. For the third quarter of fiscal 2024, net earnings attributable to shareholders of the corporation were $623.4 million or $0.65 per share on a diluted basis. Excluding certain items described in more detail in our MD&A, adjusted net earnings attributable to shareholders of the corporation were approximately $625 million compared with $741 million for the third quarter of fiscal 2023. Adjusted diluted net earnings per share were $0.65, representing a decrease of 12.2% from $0.74 for the corresponding quarter of last year. During the third quarter, excluding the net impact from foreign currency translation, merchandise and services revenue increased by approximately $62 million or 1.2%. This increase is primarily attributable to the contribution from acquisitions, partly offset by softness in traffic. Excluding the net impact from foreign currency translation, merchandise and service gross profit increased by approximately $48 million or 2.9%. This is primarily attributable to the contribution from acquisitions, which amounted to approximately $75 million, while partly offset by softness in traffic. Our gross margin decreased by 0.1% in the United States to 33.1%, increased by 1.9% in Canada to 34.2%, mainly due to pricing initiatives and increased by 1.9% in Europe and other regions to 39.2%, mainly due to a change in product mix. Moving on to the fuel side of our business. In the third quarter of fiscal 2024, our road transportation fuel gross margin was $0.4319 per gallon in the United States, a decrease of $0.366 per loan, mostly driven by the low volatility of the global fuel markets. In Europe and other regions, our road transportation fuel margin was $0.0856 per liter, an increase of $0.55 per liter per liter. In Canada, it was CAD0.01299 per liter, an increase of CAD0.47 per liter. Notwithstanding the decline from previous levels, fuel gross margin remained healthy throughout our network. Now looking at SG&A for the third quarter of fiscal 2024, normalized operating expenses decreased by 1.6% year-over-year. This is mainly driven by the continued strategic effort to control our expenses, including labor efficiencies in our stores. Our Fit to Serve program is well underway and delivering tangible results across the organization. We are enhancing our centralized back office operation by extending its reach to areas such as HR, facility management and customer contact, aiming at optimizing our cost structure by leveraging our scale, while improving service levels and capabilities. Our control of expenses is evidenced by a reduction in normalized expense as disciplined cost control compensated the inflationary pressures, the impact of costs from rising minimum wages as well as incremental investment to support our strategic initiatives. Excluding specific items described in more detail in our MD&A, the adjusted EBITDA for the third quarter of fiscal 2024 decreased by $18.5 million, or 1.2% compared with the corresponding quarter of fiscal 2023, mainly due to lower road transportation fuel growth profit and softness in traffic as a portion of our customers are impacted by challenging economic conditions, while being partly offset by the contribution from acquisition, which amounted to approximately $65 million, lower expenses as well as the translation of our foreign currency operation into U.S. dollar, which had a net positive impact of approximately $6 million. From a tax perspective, the income tax rate for the third quarter of fiscal 2024 was 22% compared with 21.9% for the corresponding period of fiscal 2023. The increase mainly stems from the impact of a different mix in our earnings across the various jurisdictions in which we operate. As of February 4, 2024, our return on equity remained strong at 23.2%, and our return on capital employed stood at 14.9%. During the fiscal year, our leverage ratio increased to 2.19, mainly due to the acquisition of certain European retail assets from TotalEnergies. Subsequent to the end of the third quarter of fiscal 2024, we issued U.S. dollar-denominated and euro-denominated senior unsecured notes totaling $1.5 billion and €1.35 billion, respectively. We also have strong balance sheet liquidity with $1 billion in cash, an additional $2.8 billion available through our main revolving credit facility. Turning to the dividend. The Board of Directors declared yesterday a quarterly dividend of CAD 0.175 per share for the third quarter of fiscal 2024 to shareholders on record as at April 1, 2024, and approved its payment effective April 15, 2024. With that, I thank you all for your attention and turn the call back over to Brian.

All right. Thank you, Filipe. Again, I want to welcome all of our new TotalEnergies and MAPCO team members to the family, and thank everyone for the relentless focus on making it easy for our customers. We feel really good about our resilient and diversified business, relevance to our consumers of our long-term strategy with our differentiated convenience mobility offers and the way in which we're increasing efficiencies and taking advantage of our global scale. We're also significantly expanding our footprint both through acquisitions and organic growth, as we bring increased our customers, our team members and our shareholders. Now with that, I'll turn it back to the operator to answer analyst questions this morning.

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Your first question comes from the line of Irene Nattel with RBC Capital Markets. Please go ahead.

Thanks. Good morning, everyone. Could you thought -- you provided some color, but can you please provide more detail around what you're seeing with respect to consumer spending, where are the pockets of weakness and maybe less weakness are? And also notably what you're seeing in terms of competitive response and how that plays into the gas margin environment?

Yes. Thanks, Irene. Happy to. In terms of people, yeah, I think a lot of you would compare us to OPUS, and we've pretty traditionally outperformed OPUS by a wide margin. The model we've built, which we've gone up the supply chain a bit in certain key areas and certainly develop the supply and trading capabilities really does and outperform when we've got periods of volatility that we can take advantage of, whether that be location arbs, things like that, sort of buying in multiple different contracts or basis. And it was just a boring quarter, candidly. We didn't have any disruptions in any significant refining pads either or the US. And so this can happen. Our margins are not linear or flat. They do us some volatility. But we feel good about the levels we're at. And we see no consumer or excuse me, competitive behavior changes that would lead us to believe that the margin profiles we've had over the last couple of years won't continue. On the consumer side, on the convenience side, specifically, it's really that lower-income consumer that we're seeing strain today. One example would be our EBT or SNAP, which is a US federal government program for loan core consumers, our SNAP volume of revenues were down 40% over the same period last year. And that's just a sign that consumers be more value conscious, and we're seeing that show up in trip consolidations. The center stores. So if you think about salty confectionery grocery and certainly the softest part of our business, while the beverages, which we think is a continued opportunity for both our industry and Couche-Tard Win continues to perform fairly well. It was plus 2% in the US as an example. So again, it's that low-end consumer and we can look geographically and see that where we've got lower income consumers. Our results are worse where we've got higher income consumers, the results are pretty stable.

That's great. Thanks.

Your next question comes from the line of Mark Petrie with CIBC. Please go ahead.

Yeah. Thanks. Good morning. I wanted to ask about the gross margin performance specific to the US merchandise business. Sales mix had been a tailwind in previous periods. And obviously, that didn't net out at least to a benefit this period. If you could just talk about sort of the drivers on the US merch gross margin number and specifically the impact of sales mix. Thanks,

Yes. Thanks, Mark. Really, we signaled last quarter that we were going to make some investments towards the nicotine consumer, and that's really what you're seeing here. We've been pleased with our results. We were really mirroring the industry. If you look at Altria and Reynolds results, our volumes were very similar. This quarter, with, I think, some very strategic investments, we've performed significantly better than overall industry in terms of tobacco units, but that has come with some investment in that category. So that's really been the driver. On the positive side, our beverage margins continue to be solid and the food margins are up almost 600 points over prior years. So again, we're very much still in our infancy in the food journey, but pleased that the profitability continues to improve dramatically. So you combine all that, but cigarettes is the biggest factor to your question, Mark.

Okay, perfect. I'll pass the line. Thanks a lot.

The next question comes from the line of Michael Van Aelst with TD Cowen. Please go ahead.

Yeah, thanks. Brian, in your other comments you talked about your diversified business and how you feel good about its resilience. And I'm wondering, I guess, how long you expect this some of this softness to last at this point and affecting some of that leverage that you've been getting, particularly with the strong operating cost performance. And then, I know it's early in the five-year program, but at what point does the softness in consumer spending raise concerns about the organic growth components in that plan? And do you have some buffer in the cost savings or margin side to offset that shortfall, if any?

Yeah. I'll let Filipe talk about the cost programs. We've been very pleased with that, but he can go into more detail. In terms of the consumer, we absolutely believe it's transitory. We've got a segment of our consumer base that is strained and our focus is on providing them value and ease. That's why we're excited about our inter-circle loyalty program that allows us to be very targeted, providing value to our most valuable customers on a very targeted basis, both in fuel and merchandise. And we think it's differentiated from a lot of the points or earn and burn programs that are out there. So we think that's going to help us gain share and gain traction. If you look across the categories and I'm focused on the US right now, but the story is really the same in Europe and Canada. We gain share in the majority of our categories. And so, as we emerge and cycle that, when we say cycle, I would say late Q1, early Q2, we'll really cycle some of the pressures that not only we, but you look at our public imperators or really adjacent retail channels have shown the same weakness in that low-end consumer. We think we largely cycle that again, end of Q1, early Q2 in our fiscal year. But again, gaining share of fuel, gaining share of merch, and we'll help the consumers get through this. Filipe, do you want to comment on the cost side?

Yeah. So, on the cost side, yeah, we feel good about what's happening across the organization. As I pointed out in my comments earlier, normalized expenses have been going down by 1.6%. We see good productivity traction in stores, 2.8% lower hours compared to last year, again, across the regions. Coming to the feed-to-stock program, you know that we have announced an $800 million program over the five years. I'm happy to say that we have done significant progress in identifying and feeling comfortable about achieving this $800 million sooner than the five years that we announced. Just on the G&A, we had an ambition to find $50 million savings. I can tell you already that we already achieved that. So we are really doing very strong progress on the cost program. And to your question, yes, we feel that we will be able to continue to see a good performance on the expenses side over the next quarters.

So, no concerns on the five-year plan at this point despite the short-term weakness in the consumer?

No, I think the key initiatives that we're focused on, we believe in and again, we think that this is transitory. We don't think this weakness in that consumer base will persist over multiple years and our focus is on continuing to build the advantages that we think we have today and widening them. And I'd remind, too, this is probably, I think, the second quarter in my entire career that we've ever had negative comps. So, we're certainly taking this very seriously and focused on how do we help this customer. If you look at a two-year stack, we had a strong quarter last year. So, a two-year stack is still -- I'm talking U.S. specifically, is still plus 3.3%. So, again, I think we'll cycle this and continue to gain share in our key categories.

Great. Thank you.

The next question comes from the line of Chris Li with Desjardins. Please go ahead.

Good morning everyone. Hi Brian. Just I think you've sort of answered this a bit earlier, just maybe going back to the U.S. fuel margins. If you look at some of the industry data, I think late January and February and March, so far, they have kind of tapered down and I -- just wondering if you can share with us your thoughts on what's driving that softness? Is that just, again, lack of volatility in the market? Or is there anything sort of more structural within the industry? Thank you.

Yes. Again, I don't see changes in competitive behavior that would make me believe that something is changing. Industry, it's no secret. We get compressed when prices go up, we benefit when prices come down, price when underlying don't do anything, eventually that margin gets compressed. And that's just been the way it's been my entire career. And this has just been a very flat quarter, no hurricanes, no major refinery issues in many parts of our geography. And so -- and again, that differentiated margin that we've been able to deliver quarter-after-quarter does have some volatility. So, I've got no concerns. I think short-term, we've got some pressures, but I don't think they're structural. I think it's more just the nature of the behavior of the market in recent quarters -- or recent months.

Okay. So, you're still very happy with sort of, I think, your low $0.40 long-term target--?

I think $0.40 is a really solid number. And again, I think our opportunities to outperform the industry more in those periods where we've got volatility. So, -- and that will happen. That will happen. I'd call it more unusual, but not to have something as boring as this quarter has been candidly.

Okay, great. Thank you.

Thanks Chris.

Your next question comes from the line of Tamy Chen with BMO Capital Markets. Please go ahead.

Hi. Thanks for the question. Brian, there's one thing that we've been looking at and we're just trying to wrap our heads around it is -- you even got a slide on it on your quarterly presentation is the industry breakeven point has come down quite a bit compared to fiscal 2021, but the industry's actual gross profit on a cents per gallon basis has really improved over that same time period. So, whereas before, the industry's breakeven point was worse than the actual gross profit, it's now reversed. And we're just wondering what you think about that with respect to how much other operators are leaning in on fuel margin or maybe less so now. I do understand that fuel volume in the cigarette category is still weak. So maybe that suggest what you're seeing out there, people are still somewhat relying on fuel margin. But define that reverse of breakeven to actual gross profit interesting. And so I just wanted to hear how you're thinking about that and if you're seeing anything different with respect to this dynamic? Thanks.

Thanks, Tamy. I'd be cautious about looking at that industry breakeven data on a quarterly basis. I think about it in terms of longer-term structural components. And when I think about the industry having fairly soft cigarette demand and some players not being as active in the public space, that's pressure. When I look at overall performance or inflation, you can call it 3.5%, you can call it 4% depending on the market. We've been proud that our performance, I think we've underperformed -- we've outperformed inflation significantly. I don't think the industry has done that. So when you look at those two big components and then I'll just overall weakness in that low-end consumer, my belief is that industry needs on fuel DPG are actually continuing to go up. And to that extent, we're focused on just making sure that we leverage both the scale that we have, the diversified geographic footprint and creating a better consumer experience for our customers in our stores and gaining share in that category. We feel good about our long-term prospects to gain fuel market share.

Okay. And so I'm pivoting here. That's helpful. On the merchandise, so gathering from your answers to other questions, would it be fair to say that the sequential deterioration in the US merch comp is from that income group, whereas the challenges you've been experiencing on cigarette, given some of the investments you did this quarter, would you see that dynamic is somewhat stable or maybe you got a little bit better volumes on cigarettes this quarter versus previous seasons? Thanks.

Yes. Certainly, when you look at our tobacco category, we feel good about the trends we have in units, which equates to tricks, right? And that also equates to basket. We're not done with that journey. We're excited to be rolling on to Altria's personalization program, which allows us to distribute electronic coupons to millions of our customers that are funded by the supplier -- that's something that is really available to only change some scale. So we think we can continue to do significantly better than the industry on units. But Tammy, that certainly puts some deflation into that category. So when you look at our same-store performance in the US, if you took out tobacco or took out cigarettes, specifically, it would be better than that. But again, we're building basket, we're working on traffic. So we think it's the right investment to make.

Thank you.

Your next question comes from the line of Vishal Shreedhar with National Bank. Please go ahead.

Hi. I was wondering if you can talk to us about what you're seeing in the M&A market, what you're seeing about multiples. And if you can remind us again, what your focus is on in terms of M&A?

Yes, thanks, Vishal. We continue to say that we'd love to do more in the US, which is probably our best market for synergies and then being opportunistic in Canada and Europe. Without going into detail, I would say that the deal flow has been good, probably the best I've seen in four or five years in terms of the number of opportunities that are out there in front of us. There's not been a lot that's closed. A lot of this has been newer. So in terms of price, I'll refrain a bit. I certainly feel less competition from the private equity space than we had over the last three or four years. Yes, I think there's an opportunity to get some things done at a better price. And some of that just has to happen with the interest rates being where they're at, and that's why we continue to be pleased that we're investment grade and have a balance sheet that's really for almost any opportunity that's out there in front of us. So our appetite is there, and we're actively looking at some things.

Okay. And maybe just in terms of the cadence of the investment that is made in order to accelerate that tobacco customer and just reinvigorate the merchandising business. Is that complete? Or do we expect more of that to heighten into the next quarter before you anniversary that?

I don't think that we go deeper. So if the question is around margins. I think the investment level we're making today and then the partnership that we have with Altria, which is Marlboro in the U.S., which is largely funded by them that the activity we have out there, combined with our Innercircle program that allows us to be even more targeted, I feel pretty good that the investment level we're at today will allow us to continue to significantly outperform industry and boost traffic in that category. Again, that's a great basket that's just a great customer to have.

Thank you.

The next question comes from the line of Bonnie Herzog with Goldman Sachs. Please go ahead.

All right. Thank you. Good morning. So I had a question on how you're balancing pricing at the pump in the U.S. to drive traffic and then share, while at the same time, trying to continue to capture these strong fuel margins, I guess when looking at the quarter, it seems like you were more aggressive with pricing at the pump. So hoping to hear a little bit more color on your strategy with that? And then could you touch on any changes you're seeing with conversion inside your store in light of some of the negative inside same-store sales. And I'm just wondering, are you seeing conversion moderating? And if so, are there any other initiatives you might have to implement to maybe drive better conversion going forward? Thank you.

Yes. Thanks, Bonnie. Fuel pricing, we strive to be very consistent and provide a very consistent value message to our consumers every day. So we measure our deltas to our competitors, both near and far on a very systematic basis and we've remained very constant. And when we look at competitors, we -- again, we don't see a big change in behavior. And certainly, we don't think we've changed our behavior and again, it's around providing very consistent value. In terms of the pump experience, it's kind of a tale of two cities, that low-end consumer two worlds, if you will, that low-end consumer certainly reduction in trips, so less frequency, less traffic. And I think that's showing up inside the store to particularly center store, I said earlier. But then we've got a broader consumer base, which is the fill per trip is actually up pretty significantly, which means there's a segment of that consumer base that is feeling pretty good or feeling normal. And so our fill has gone up almost a gallon per stop. So that's a positive, and premium has also gone up. So our premium penetration in Europe and the U.S. has increased year-over-year. So again, that's a strong consumer sign. But again, more fills, more gallons per stop, or more liters per stop does equate to less stops. And so that's also maybe pressured the inside store a little bit, but I don't think it's material. I really think it's that low-end consumer that we're feeling today.

All right. Thanks for the color.

Sure. Thanks, Bonnie.

The next question comes from the line of George Doumet with Scotiabank. Go ahead.

Yeah, good morning. Brian, I know it's early days, but can you give us an update on TotalEnergies? What are some of the learnings in the first months of operation? How's the integration going? And do we see some upside or perhaps quicker realization on the $170 million synergy year-old target?

Yeah, thanks. We're pumped about it. We've met great people. You always wonder what their culture is going to be like and how will this work with new countries. But I think we've got a team that's just happy to be a part of a family that's focused on their business. We've done a couple pilots. We'll call them technical pilots, but including the brand. We've got Circle K fully branded at two sites, but we've got more sites where we're testing coffee, we're testing beverages, we're testing some of our food offers and we're very pleased with the early results. Like most acquisitions, it's 1,000 different things, 1,000 different opportunities. We've got them documented. We've got action plans prioritizing the big ones. And I'd signal today that the synergy target that we've got out there, we think we can front load the majority of that in the two to three-year period versus the five. So again, very pleased with the start and just thrilled to have the talent that we found there over the last 90 days.

Thanks. Maybe to complement Brian on the total energy and on the synergies that we -- and to add on the confidence that we have on the synergy completion, we see great potential on the COGS side, so leveraging our scale on negotiating with vendors and also on the operating cost side as well. We can confirm that here we see a lot of potential there. So yes, very confident on the synergy side?

Thanks, guys.

[Operator Instructions] Your next question comes from the line of Martin Landry with Stifel. Please go ahead.

Hi. Good morning. I would like to dig a little bit more into the US merchandise sales and more on the tobacco category. Just to be clear, is the entire tobacco category down on a year-over-year basis this quarter?

Yeah, Martin. Thanks for the question. Yeah, I mean, both Altria and Reynolds via BAT are public companies. You can see the industry results. Minus eight, minus nine, I think, would be a fair number in terms of units. And it's been triggered, I think by some pretty active price increases by key suppliers in the industry and at the same time a pressured lower-income consumer. And I think in some cases we've hit a tipping point there that's really driven that. And so as we've invested in that category, we're doing it at a very targeted basis. Our performance in recent weeks and months have been significantly better than industry. And this is on combustibles. The poly side is a good story. We continue to see strong conversion and positive unit and sales growth on the new nicotine categories. And so, we think about whether it's white nicotine or vape or things like that, they continue to be strong growth. And those are higher margin and higher ring categories for us. And so, that's not all bad that we see, the combustibles decline because, again, there's a big part of that's converting to other ways healthier ways to consume nicotine. So, again, we're trying to balance the investment into both sides and our commitments to outperform the industry, our internal commitments to outperforming the industry on units and make sure they are providing value to those customers.

Okay. Thank you.

The next question comes from the line of Anthony Bonadio with Wells Fargo. Please go ahead.

Yeah. Hey, good morning, guys. Thanks for taking our question. So I just wanted to ask about fuel margins in Europe, given those came off quite a bit sequentially. I know you guys have some upstream commodity exposure, and we've now got TTE layering into that number. But can you just talk a little bit more about what drove that and how we should think about modeling?

I'd say Europe has been pretty stable. When you see volatility, it largely is inventory gains and losses. The Street margins that we've experienced in Scandinavia, Ireland, being our largest markets and pretty consistent. Bio is a component that's different this year. We had a couple of large countries, particularly Sweden back off of their biomandates, -- so HVO100, things like that, renewables. And so that's an area that, again, when there's market volatility with our supply capabilities, we tend to benefit more than most in those periods. And so that's been a factor in Europe, the HVO being a smaller part of the business. But again, I'd say most volatility you see would be just the fact that we hold more inventory. We've got -- we own our own terminals and supply chains, and I think every country we have. So that's what you're seeing there. The competitor dynamics have been very consistent.

All right. Thank you, guys.

Next question comes from the line of Luke Hannan with Canaccord. Please go ahead.

Thanks. Good morning, Brian, you touched on in your prepared remarks that you witnessed some softness in the alcohol category as well. Just curious, is that related to category-specific dynamics? Or is that stemming from the weakness in the overall consumer?

It's the latter, Luke. And again, you can look at AB or Constellation's results. We see continued strength in Mexican imports, things like that. But there's certainly a trade down happening in that lower income consumer base and probably some value seeking. We see -- in our own business, private label continues to grow at double-digit rates. So those things are signals that there's just -- there's a trip consolidation happening. You're seeing, I think Walmart benefits from some of the large take-home categories in that space. Our focus is on continuing to provide the right level of value, but then also our industry is just unparalleled in its ability to deliver assortment to our consumers. And that's really our focus. We've just got to continue to act more local and make sure that we've got what the customers need there in that category.

Got it. Thank you.

Your next question comes from the line of John Royall with JPMorgan. Please go ahead.

Hi. Good morning. Thanks for taking my question. So I had a follow-up on Europe. Can you talk about how fuel demand has compared in the Benelux and Germany regions that you just picked up from Total relative to the legacy Europe, another region where you've had some, I think, declining same-store gallons or I think for seven quarters. Is the dynamic similar in these new regions in Europe? Or should we expect any mix impact kind of one way or the other?

Yes, it's a good question. I would say that I think about these countries being very similar to our Scandinavian Ireland business. We've got Eastern Europe from the Baltics, Poland. Just more stable, EV penetration is negligible. We're starting to see lead penetration in certainly CM&A [ph], which is not new. And then also if you think about Germany or Belgium, they're on a not the same curve, but they're on an EV curve as well. So, I think our expectation between fleet efficiency and EV at the curves in those new countries will be very similar to what we see in our Western European countries. So, to that end, we're focused on making sure that we're rolling out chargers with the best possible experiences to those customers and winning share. We were very pleased with our EV business in Scandinavia and look forward to rolling out similar consumer offers and loyalty programs to our new countries.

Thank you.

[Operator Instructions] Next question comes from the line of Greg Badishkanian with Wolfe Research. Please go ahead.

Hi, this is Scott Stringer from Wolfe Research on for Greg. I was wondering if you could provide any commentary on how you expect fuel gallons to trend through the remainder of the year, just given the weakness in the consumer here?

I think near-term, we would expect what you see now then to continue. Diesel demand continues to be weak and to me, that's a leading indicator of some softness in sectors of the economy. As I said earlier, I think when we think about cycling this late Q1, early Q2, we would cycle some of this weakness and expect to get back to more normal trend. But again, in the near-term, I think the trends you're seeing are consistent. But again, we're pleased with our fuel volume performance in both Europe and in North America compared to our public competitors compared to what we're seeing on government data. So, we continue to take share and we'll continue to focus on doing that over -- ratably over a long period of time.

Great. I'll leave it at that for now. Thanks.

All right. Thanks Scott.

At this time, there are no further questions. I'll now turn the call back over to Mathieu Brunet for closing remarks.

Thank you, Brian, and thank you, Filipe. That covers all the questions for today's call. Thank you all for joining us. We wish you a great day and look forward to discussing our fourth quarter results in June.

Thank you. Have a good day. Thank you.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.