By Ross Marowits, The Canadian Press

MONTREAL - Alimentation Couche-Tard (TSX:ATD.B) said economic conditions remain "fragile" in the United States as lower profits from fuel sales reduced the convenience store operator's profits by nearly 10 per cent.

The Quebec-based company, which reports in U.S. dollars, said Tuesday it earned US$88.2 million for the 12 weeks ended Oct. 11, down 9.6 per cent from $97.6 million in the year-earlier period.

Revenues decreased 16 per cent to US$3.8 billion from $4.56 billion a year earlier. The decrease was mainly the result of a $958-million drop in fuel revenues due to lower prices and $22 million related to a lower Canadian dollar. The lower revenues were partially offset by US$145 million in sales from acquisitions.

U.S. fuel margins decreased by 9.1 cents per U.S. gallon (3.78 litres) during the quarter to $15.78, causing a $65-million hit before taxes.

Last year, Couche-Tard enjoyed unusually high margins on motor fuels during the summer months, when crude oil and gasoline prices were near record highs.

Higher merchandise sales and fuel volumes, contribution from acquisitions and decrease in electronic payment costs were partially offset by a higher income tax rate and weakened Canadian dollar.

Chief executive Alain Bouchard said he was pleased with the results, which beat analyst expectations.

"(But) When I raise my head and look around I still see a fragile economy," Bouchard said. "This is why we are still seeking ways to improve our performance as well as our efficiency."

The company plans to continue to search more cost reductions, albeit ones that are less financially significant. The decreases will help improve results by tackling areas that the company can control, such as better supply terms, and improving its offer to customers.

Couche-Tard is awaiting word on additional acquisition bids it has submitted as it claimed to have taken advantage of opportunities to expand its empire.

Consolidation in Canada has seen many store closures in the country's two biggest markets. In Ontario, an average of 1.5 stores have closed daily over the last 18 months, while one store has shuttered daily in Quebec, Bouchard said.

Key indicators are improving in both the United States and Canada, such as merchandise sales for stores open at least a year, fuel volumes and margins and debt ratios, added chief financial officer Raymond Pare.

"Besides the U.S. fuel margins, all key indicators improved and we're pretty proud of it," he told analysts.

Martin Landry of Desjardins Securities said the results beat the consensus forecast of 38 cents per share.

He said strong U.S. merchandise and fuel revenues partly explain the better-than-expected results. Cost-cutting measures implemented by the company also delivered an impressive reduction in selling and administrative expenses.

Landry added that the 3.9 per cent increase in U.S. same store motor fuel volumes was positive.

"This is the second consecutive quarter of volume growth and marks a turnaround in gasoline demand," he wrote in a report.

Same-store merchandise sales increased 2.9 per cent in the United States and by 5.2 per cent in Canada. The American increase was largely due to higher federal tobacco taxes implemented April 1. However, the company refused to quantify the precise impact.

Total merchandise sales grew 5.3 per cent to $1.4 billion.

Lower fuel prices caused fuel revenues to decrease 25 per cent to $2.4 billion despite an increase in volumes as more Americans hit the roads.

On the Toronto Stock Exchange, Couche-Tard's shares - trading in which had been halted earlier in the day - closed up 87 cents, or 4.33 per cent to C$20.97 on the Toronto stock market.