Fast, Friendly, Delicious'

Wal-Mart's bigger stores prove a benefit to Susser Holdings

By 
Linda Abu-Shalback Zid, Senior Editor

NANTUCKET, Mass. -- Sam L. Susser, president and CEO of Susser Holdings Corp., is gaining comfort about his company's position in the convenience store market from an unlikely source: Wal-Mart.

"In the backdrop of retailing is Wal-Mart," Susser told attendees at the Jefferies 2010 Consumer Conference yesterday. "Wal-Mart is forcing grocery chains to build bigger boxes so they can sell items at lower prices, more efficiently. We operate at the absolute opposite end of the spectrum." Instead, Susser focuses on selling "fast, friendly and delicious" convenience.

"And the bigger the [image-nocss] Walmarts become and the other stores that are having to kind of follow form, the more opportunity there is for small-box retailers to specialize in that niche of convenience and speedand that's where we deliver the value."

He added, "We're not trying to out-Wal-Mart Wal-Mart; we're trying to be a superior convenience and restaurant operation."

Noting the Corpus Christi, Texas-based company's 21 consecutive years of same-store sales growth, Susser outlined his company's plans for continued growth, with a three-pronged approach: continued same-store sales growth every year, selective acquisitions and greenfield development.

Susser noted that with the c-store space being fragmented and unconsolidated, and with the large quantity of c-stores in the Texas, Louisiana and Oklahoma markets, prospects abound for his Stripes chain. "There's an opportunity within our region to build a much, much larger company, and that's our goal and we are on that pathway."

CFO Mary Sullivan announced at the conference that the company's new-build plans will include 10 to 15 stores this year. Sullivan also said the company sold off seven non-core Village Market grocery stores to focus on core convenience stores; the stores were acquired in 2007 as part of Susser's purchase of the Town & Country convenience store chain. The company has also rebranded 92West Texas stores from Town & Country to Stripes/Laredo Taco Co., with 66 units left to go.

Other highlights of the presentation included: Gasoline. Susser said fuel margins on an annual basis have been stable, but that the company saw quarterly swings to a low of 8.8 cents per gallon in the last 5.5 years and a high of 22 cents, with the average being 14 cents to 15 cents. He said each penny per gallon is worth about $8 million in EBITDA for the retail division and $1 million dollars for the wholesale division. Merchandise. Susser said that more than 70% of the company's gross profit comes from retail. Last year, despite the recession, same-store merchandise sales were up every quarter, except when they fell 1.2% in the fourth quarter. Susser said the company "battened down the hatches" and brought same store sales up 2.5% in 1st quarter 2010. Tobacco. He said the company has invested a lot of capital in bigger stores and upgrading to become less reliant on cigarette sales, and that with 9.6% of merchandise gross profits coming from cigarettes, the company's reliance is only about half of the industry average. Foodservice. This will continue to be a focus for Susser Holdings, with foodservice having grown to about 17% of merchandise gross profit vs. about 12% for the industry. Corpus Christi, Texas-based Susser Holdings Corp. is a third-generation, family-led business that operates more than 520 convenience stores in Texas, New Mexico, Oklahoma and Louisiana primarily under the Stripes and Town & Country banners. Restaurant service is available in more than 300 of its stores, primarily under the proprietary Laredo Taco Co. and Country Cookin' brands. The company also supplies branded motor fuel to approximately 390 independent dealers through its wholesale fuel division.