Delek began a multi-year campaign to reimage its convenience stores with "upscale imagery" and bring the company's MAPCO Express, MAPCO Mart, East Coast, Discount Food Mart, Fast Food & Fuel [image-nocss] and Favorite Markets banners under the umbrella of a single MAPCO brand name, according to the company's website.
"Throughout the past year, the reimaged locations have significantly outperformed the legacy stores based on a number of operating metrics, including same-store sales of fuels and merchandise," CFO Mark Cox said during Delek's first-quarter 2010 earnings call yesterday.
Same-store merchandise sales in the company's 59 reimaged stores opened more than one year increased "an impressive 8.9%" in the three-month period ended March 31, compared to an increase of 1.2% for the entire 434 stores opened in the same period. Last year, same-store numbers for the first quarter showed a 4.4% decline. "Increased gains within our fresh grab-and-go food business, combined with higher sales of snacks, candy and cigarettes contributed to sales growth for the period, particularly in our reimaged MAPCO locations," Cox said.
Fuel told a similar story, with same-store fuel gallons sold in the reimaged stores increasing 0.6% vs. a same-store decrease of 0.3% for the entire network.
"Severe winter weather throughout the Southeastern U.S. reduced the total miles driven in the region during the first quarter of this year, which adversely impacted our same-store fuel sales in the period," Cox said. "However, our retail fuel margin increased in the first quarter of this year, compared to the same period last year." The retail segment contribution margin increased to $7.4 million in the first quarter this year compared with $7.3 million in the first quarter of last year.
Going forward, the company plans to step it up in food and beverage.
"As we continue to roll out more quick-service restaurants and private-label products, we believe our reimaged locations are well-positioned to continue to generate food and merchandise sales at levels that outpace the legacy store base," Cox said. As of March 31, about 15% of store locations included Quiznos, Subways or Blimpies. The company plans to add six Quizno's locations during the second quarter.
The company also plans to increase dairy efforts, which, along with cigarettes, was considered a contributing factor to the company's merchandise margin decline to 30.8% in the first quarter vs. 32% first quarter 2009.
"Dairy is a category we're changing dramatically," Uzi Yemin, president and CEO. "We're putting a lot of pressure in that category to initiate several private-label SKUs. So going toward the summer, we expect dairy to exceed or overcompensate what we saw in the first quarter."
Delek US Holdings is a diversified energy business focused on petroleum refining, marketing and supply of refined products and retail marketing of fuel and general merchandise. The refining segment operates a refinery with a design crude distillation capacity of 60,000 barrels per day in Tyler, Texas. The marketing and supply segment markets refined products through its terminals in Abilene and San Angelo, Texas, as well as other third-party terminals. The retail segment markets gasoline, diesel and other refined petroleum products and convenience merchandise through a network of company-operated retail fuel and convenience stores, operated under the MAPCO Express, MAPCO Mart East Coast, Discount Food Mart, Fast Food & Fuel and Favorite Markets brands.
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