Lottery, Weather, More Slow Convenience Store Traffic in Q1

Key categories, including tobacco, likely suffering

NEW YORK -- Several factors may have led to a slowdown in customer traffic in convenience stores, according to a report from analyst Nik Modi of UBS Investments.

In a recent research note, Modi said weather, gas prices, the payroll tax and the lottery have all been factors in likely recent traffic declines.

“Per conversations with our industry contacts and an assessment of the relative data points, convenience store traffic during this March quarter is likely down from a year ago,” he wrote. “The biggest factor is that c-store consumers have less discretionary income between the payroll tax and higher gas prices, which are up 8% year to date and 22% from fall 2012 lows.”

Other factors limiting c-store traffic include weather, with average U.S. temperatures down 16% this quarter compared to a year ago--First quarter 2013 average temperature was 37 degrees compared to 44 degrees in 2012, including last year’s March, which was one of the warmest on record.

The fourth factor is the lottery, where last March there was a $640-million Mega Millions drawing that involved c-stores across 42 states and was the largest in Mega Millions history.

“The observations above indicate key c-store categories, including tobacco, have likely seen volumes come under pressure during in the first quarter of 2013,” Modi concluded. “However, we do reiterate our expectation for improved tobacco pricing in the March quarter due to a stabilization of promotional activity.”