Earnings season looks to be in full swing, so the newsletters for the next while will primarily be my thoughts and opinions on how the companies we feature here at Stocktrades Premium have performed.
As always, I include a limited number of companies in each newsletter, simply for the sake of keeping the content a reasonable length. However, in the midst of earnings season, there might be a dozen reports updated every week on the website. Make sure you log in and check these out! There are hours and hours of research and commentary on what I feel are the best companies in the country, all compiled for you to digest in a fraction of the time.
As mentioned, I have not been making routine purchases because of a basement development project I am running. I plan to continue purchases in late July. In addition to this, you might notice my cash position over the next week or so here will go to 0%.
Because I am expecting twins in November, I’ve had to (reluctantly) go out and buy a larger vehicle. With auto loans at the rates they are, paying cash was the only feasible option.
Let’s dive into earnings this week. First, I want to speak on some notable news for Couche-Tard and then I will get into its individual earnings.
As always, make sure your email browser has images enabled, as there are plenty of valuable charts inside the newsletters!
Couche-Tard’s deal with Seven and i is dead
I felt this was worth the discussion this week because I had highlighted how I believe Couche-Tard was trading at relatively attractive valuations in my previous newsletter. If you missed that one, I spoke on 3 cyclical stocks that I believe are at lows right now, and it was a popular read among Premium subscribers. You can click here to read the newsletter.
Couche‑Tard withdrew its ¥2,600-per-share (US $46B) offer on July 16 to purchase Seven and i Holdings. These negotiations have been in the media for the better part of 6 months now, but it finally seems like the deal is officially dead.
Couche-Tard was still interested in acquiring the assets of Seven and i Holdings, however, the company stated that Seven and i management performed a “calculated campaign of obfuscation and delay” in order to make Couche-Tard walk away.
In the simplest terms possible, Seven and i management was doing everything possible to make this deal as tricky as possible for Couche-Tard. Stalling tactics, executives not showing up for meetings, lack of transparency, etc.
My thoughts on the rejected deal
If you’ve been a Premium member for a while, you know that I was not a big fan of this deal at all. It was simply too large.
At $46B USD, the acquisition would have nearly doubled the size of Couche-Tard overall. However, the bulk of the money would have come from equity issuances and debt.
With transformational acquisitions like this, there is a high level of risk and a high level of reward. In theory, Couche-Tard could have acquired Seven and i holdings, improved the overall margin profile and efficiency of the gas stations themselves, and shareholders would have realized extensive returns.
However, on the flip side, the risk is material. If there were to be synergy difficulties or larger-than-expected integration costs, it could have fundamentally impacted the company for many years.
Couche-Tard has done one thing extremely well over the last couple of decades. That is, making smaller, more tuck-in acquisitions in a highly fragmented market. There are plenty of acquisitions it can make at smaller scale in a fragmented industry that pose lower risk. When you acquire a basket of 200-300 gas stations and synergies don’t work out, we’re talking a small amount in the grand scheme of things.
A $46B USD deal, though? Disastrous if there are issues. I’m glad the company backed out of the deal, and I’m hoping this is the end of it. But, I wouldn’t put it past the company to re-engage. They seem especially interested.
With that out of the way, let’s move on to Couche-Tards earnings.
Alimentation Couche-Tard (TSE:ATD)
Couche-Tard continues to struggle, but the struggles are largely expected. The company missed on both the top and bottom line estimates, and the lack of discretionary spending south of the border is starting to weigh on the company.
Earnings are down by 3.6% and overall sales are down 7.5%. On the merchandise side of things, the company increased same-store sales by 3.5%. The main difficulty here is the United States, which is the company’s biggest market, is still seeing same-store sales decline and margins contract.
They will need a turnaround in the United States on a macroeconomic basis before they see a turnaround in the business. Which I believe will happen, but investors will just need to be patient.
They mention one of the main drivers in Canada has been alcohol sales in Ontario due to the change in legislation (you can now buy alcohol at convenience stores). They mention that nicotine sales are softening due to some weakness and “removal of popular products”. I would imagine this is the popular Zonnic nicotine pouches, as they are exploding in popularity among many of the major tobacco players. Back in August of 2024, these were removed from gas stations and moved to pharmacies.
On the fuel side, struggles exist all around, which makes sense considering the current economy. US fuel sales declined by 1.9%, Europe by 0.6%, and they increased by 3.6% in Canada. Margins were a bit stronger, which did help offset some of it, but again, the US is this company’s biggest market, and when we see results struggle there, the entire company will struggle. Look below to the chart of fuel margins and you’ll see what I mean.
Of note, the US fuel margins are “higher” on the chart because they operate in gallons, not liters.
The company opened 110 stores on the year and has around 1000 in the development pipeline, and in terms of shareholder returns, the company spent over $518M on the year, purchasing a total of 8.7M shares and raised its dividend by 14.3%. So, it’s aggressively pursuing buybacks and dividend growth during this time. The buybacks make sense, as we’re in a bit of a cyclical low here. Better to buy back now than when the stock was at $80+.
Aritzia (TSE:ATZ)
What an exceptional turnaround story Aritzia has been. I’ve covered this company since it was one of the first stock calls ever at Premium back in late 2018, and as a shareholder it’s been great to see this company navigate through some exceptionally difficult macro environments.
The company beat on top and bottom lines again, and although same-store sales are not at the levels we witnessed during the pandemic, they still sit at 19.3%, a meaningful improvement over 2022/2023.
Overall revenue grew by 33% year-over-year, and the bulk of that growth is within the market that is vital to my overall investment thesis, the United States.
US revenue grew by 45% year-over-year, and Canada grew by 17%. Overall earnings per share have more than doubled on a year-over-year basis.
If you look to the KPI chart I’ve added below, you will notice that Aritzia’s boutique expansion is accelerating. The company is typically known for adding anywhere from 5-8 boutiques on an annual basis. This has now increased to 12 from 2024 to 2025, with the bulk of them being in the United States.
As I had mentioned prior in the report, this is going to be the best way for Aritzia to spend its capital. Instead of buying back shares or issuing a dividend, the company is expanding in its fastest-growing market.
Although the Canadian end is not growing as fast as the US end, it is picking up steam. If both of the company’s geographical segments start to post accelerated growth, it will no doubt be hard to stop this company.
On the margin front, the company is posting significantly higher margins. Gross margin now sits at 47.2%, which is 320bp (3.2%) higher on a year-over-year basis.
This is largely due to the company clearing out old, stale inventory that was resulting in large markdowns last year. They expect margins to take a 150bp hit due to tariffs this year. This is lower than the 400bp they had initially expected. However, I put zero weight into these estimates, as the tariff environment seems to change on a daily basis.
Regarding tariffs, the company is adapting somewhat to tariffs. They realized how exposed they were to Chinese production, and now plan to reduce that overall production to the mid-single-digits by the end of 2026.
The company issued their FY26 and next quarter outlook. They expect 19-22% top-line growth for next quarter, which should translate into low double-digit comparable sales growth. For the year, they expect 13-19% top-line growth. They mentioned their EBITDA margins should come in at 15.5-16.5%, but also that without tariffs, this would be closer to 18%.
Overall, it was a great quarter from the company, and the thesis is well intact. This is a mid-tier fashion company operating extremely well in a tough macro-environment, and despite growing as fast as it is in the US, the market is still relatively untapped. Its debt-free position will allow it to utilize free cash flow to expand to new areas in the United States and continue to accelerate revenue growth.
ASML Holdings (ASML)
ASML reported a double-digit beat on earnings expectations, and overall, it was a strong quarter from the company. However, what you may have noticed is that the company’s share price fell by nearly 9% on earnings day.
This was primarily related to the guidance, which is being impacted heavily by Trump’s back-and-forth attempts at tariffs.
When we have companies laying out substantial amounts of capital expenditures to further expand into artificial intelligence, they want to do so when the economic environment is stable and predictable. At this point in time, not much is predictable.
However, this will primarily impact new unit sales. If we look to service revenue (see chart below) the company is growing revenue at an exceptional pace. Remember, these units are so niche that it is ASML that will be servicing them, creating a rock-solid moat in this regard.
In terms of overall results, the company’s revenue came in at the high end of its guidance and gross margins of 53.7% came in well ahead of guidance.
The company’s backlog was impacted by $1.4B on the quarter to now sit at ~€33B. This drop was mainly due to debookings in China, again because of the tariff uncertainty. Bookings remain relatively soft as well, which is ultimately a result of caution among businesses in terms of capital expenditures.
Because the bulk of the questions coming from members will be related to tariffs and forward guidance, this is primarily what I will focus on. The actual financial results for the company itself were outstanding, and the thesis remains well intact here.
The company mentioned that the tariff impact this quarter was less than expected, which is a good sign. However, the company mentions with the volatility in terms of which tariffs will be implemented on which countries and to what degree is causing a lot of uncertainty.
As a result, capital expenditures from the major clients of ASML, as I had mentioned prior, are being temporarily reduced. The company mentions that if these tariffs do lower overall global GDP, it will directly impact ASML as capital expenditures will scale back.
Because of this, the company is no longer guiding to growth in 2026. There is just too much uncertainty at this point. I view this move as prudent. I like the company’s idea of under-promising and over-delivering. Or, in the instance that tariffs stick around and growth does stall, the company has warned about it well ahead of time, and the shock will be absorbed now rather than an amplified shock later.
My overall thesis on ASML is, at minimum, a 10+ year timeframe. Geopolitical uncertainty at this point in time will simply allow me to accumulate more shares at discounted prices. The Trump tariffs might stick around for a while, however, I cannot see them sticking around long-term, as the world is too interconnected to kill international trade with senseless tariffs. Once resolved, I believe companies will open up their wallets again and start to spend on infrastructure. ASML has a monopoly on some of the most critical infrastructure in the AI space, and that won’t be changing anytime soon.
