Frank Paci, executive vice president and chief financial officer touched on some of the company's plans to build that growthincluding foodservice, information systems and return optimizationin a presentation at the 12th annual ICR (Integrated Corporate Relations Inc.) XChange Conference.
Currently, foodservice represents only 9% of the [image-nocss] chain's mix of total inside sales. Paci compared this with NACS data, showing an industry average of 17%.
"It would show that we're underpenetrated vs. average convenience stores, and we think this is where we've certainly got an opportunity to grow our business," Paci said, adding one way such growth would come is through improvements in The Pantry's core store foodservice offering. "We believe there are opportunities as we reimage stores to even do a better job on focusing dayparts. And we also think there are opportunities to expand beyond the core hot dogs in the convenience store business and do a better job with fresher and healthier offerings."
Branded foodservice also presents an opportunity, according to Paci, who said he doesn't see the two offerings as being "mutually exclusive," with each appealing to different occasions. As an example, he said that Subway is not known for breakfast. The company is a large Subway operator, with 126 Subway locations, and plans to add 25 Subways to the portfolio in fiscal year 2010.
"And typically when we put a Subway in, we're getting roughly $300,000 of additional sales in a unit, he said. So it's a great opportunity for us to build sales and increase the return on investment from the assets we already own. Obviously, we don't really have any additional real estate costs, and it's really just adding the operations." (The company also currently has eight Dairy Queen and 65 proprietary chicken locations.)
The company also plans to invest in information systems to analyze the business and find opportunities down to the store level. "We're building the infrastructure and the capabilities to be able to analyze that information," Paci said. The company placed Paul Lemerise in a new chief information officer position in November 2009 and plans to build business intelligence capabilities, upgrade point-of-sale equipment and implement a wide area network across the store base.
Another area the company is looking at is being disciplined with cash deployment. As Paci put it: "How do we balance between adding stores through acquisitions and investing in existing stores, and weight the options between investing for growth and picking opportunities to reduce our debt?"
Paci said the company reduced its debt by $52 million last year through prepayments and purchasing debt at a discount. "So we believe that these actions are going to better position us to drive growth when the market environment improves."
Regarding acquisitions, Paci said there are ample opportunities in the Southeast. "This segment remains very fragmented, and there are opportunities to continue to grow through consolidation here," he said.
In Florida, North Carolina, South Carolina, Tennessee, Mississippi and Alabama, more than 50% of c-store operations are run by single-store operators, he said, while The Pantry holds 3% to 10% of the stores. "We think that gives us a strategic competitive advantage, in terms of being able to use our scale and our sophistication to perform better than a lot of our competitors."
Based in Cary, N.C., The Pantry is a leading independently operated convenience store chain in the southeastern United States and one of the largest independently operated c-store chains in the country. The company operates about 1,650 stores in 11 states under select banners, including Kangaroo Express, its primary operating banner.
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