CORPUS CHRISTI, Texas -- It's a sure sign that businesses are in the midst of a tough year when they make the previous year-one fraught with record high gasoline prices and depressed consumer demand-a goal for themselves. Such is the case for Susser Holdings Corp., which reported yesterday that "2008 was the best year in our history."
"Even though we faced headwinds throughout last year...we achieved near record growth across most of our categories," president and CEO Sam Susser said on a quarterly earnings conference call yesterday. "I'm very proud of our entire team [image-nocss] for keeping their focus on our customers despite the challenges and despite the unexpected twist and turns."
Among the challenges outlined by Susser:
Challenges associated with the integration of Town & Country. The start of a national recession that depressed commercial activity and consumer demand. Record-high gasoline prices that reduced demand for gasoline and diesel, especially along the U.S./Mexico border. Hurricane Dolly and Hurricane Ike, which directly hit Susser's Gulf Coast area in the third quarter and required the company to temporarily close a number of stores. Hurricane Ike further interrupted fuel supply by nearly shutting down most of the Houston-based refining and pipeline distribution system for several weeks. Fuel supply was also challenged earlier in the year by an explosion as a significant West Texas refinery that Susser had relied on for supply. And yet, Susser still concluded, "We're doing everything we can to make 2009 feel like 2008. It's as good a year as we've ever had."
Susser Holdings reported that for its fourth quarter ended Dec. 28, 2008, same-store merchandise sales increased by 6.5% on a reported basis and by 7.3% comparing year-over-year results as if the company's November 2007 Town & Country Food Stores acquisition had taken place on Jan. 1, 2007.
Retail merchandise margin increased to 34.6%, from 32.7% a year ago. Fourth-quarter convenience store merchandise sales totaled $183.9 million, up 34.6% from the year-earlier quarter.
Total company revenues for fourth-quarter 2008 were $795.0 million, which is down 3.3% from a year ago due to a substantial drop in fuel prices year-over-year. Fourth-quarter adjusted EBITDA totaled $30.5 million, up 79.1% from a year ago on a reported basis and up 42.4% comparing year-over-year results as if the Town & Country acquisition had taken place on Jan. 1, 2007.
Gross profit increased 44.0% to $113.4 million, driven by higher gasoline margins and sharply higher merchandise margins from the company's Stripes and Town & Country branded convenience stores.
Net income was $6.3 million in fourth-quarter 2008, or 37 cents per diluted share, vs. $1 million, or 5 cents per diluted share in fourth-quarter 2007, excluding a non-recurring tax benefit of $6.6 million, or 39 cents per diluted share, related to the release of the company's remaining tax valuation allowance. Reported net income-including the effect of the tax benefit-was $7.5 million, or 44 cents per diluted share, in the year-earlier quarter.
Comparing full-year results, same-store merchandise sales increased by 6.6%, or 7.8% comparing year-over-year results as if the Town & Country acquisition had taken place on Jan. 1, 2007. Merchandise margin increased to 34.3% from 32.5% in 2007. Total merchandise sales increased 64.3% from 2007 to $729.9 million.
Total company revenues were up 56% to $4.2 billion. Gross profit increased 66.3% to $436.6 million for 2008. Adjusted EBITDA was $110.6 million, up 89.8% from a year ago on a reported basis and up 10.9% comparing year-over-year results as if the Town & Country acquisition had taken place on Jan. 1, 2007.
Net income in 2008 was $16.5 million, or 97 cents per diluted share, vs. $6.4 million, or 39 cents per diluted share, excluding the nonrecurring tax benefit of $9.8 million, or 58 cents per diluted share, related to the release of the tax valuation allowance. Reported net income for 2007 -including the effect of the tax benefit-was $16.3 million, or 97 cents per diluted share.
"Although the national recession has dampened overall consumer spending, merchandise sales in our stores have continued to increase. And with gasoline prices returning to more normal levels, fuel gallons rebounded in the fourth quarter," Susser said. "While our business is not entirely recession-proof, we believe the high quality and strong value pricing we provide our customers has helped insulate us from the national trend. Customers who are 'trading down' in their consumption habits are discovering better values at our Stripes and Town & Country stores for beverages, snacks and the delicious tacos made to order in our Laredo Taco Co. kitchens."
Meanwhile, Susser is being relatively conservative in estimating results for 2009.
"We have provided guidance on same-store sales growth of 3% to 5.5% and retail fuel margins of 12.5 to 16.5 cents per gallon, just slightly lower than the prior year's performance," he said. "This is not because we are seeing significant weakness in either of our geographic regions, but because we think it's smart to be a little more conservative in our planning given the recessionary pressures and the credit crunch impacting the global economy."
During fourth-quarter 2008, Susser Holdings opened five new retail units, bringing the total number of stores built in 2008 to 12. The company also had planned closings of two smaller retail locations, bringing the total retail store count to 512 as of December 28. One additional store has opened since year-end in the Rio Grande Valley, and two more are under construction in West Texas. The company also added three Laredo Taco Co. restaurants to existing stores in the quarter, which brings the total number of stores with restaurant operations to 294, or 57%, at year-end.
In its wholesale operations, Susser added 14 new dealer sites and discontinued 17 during the fourth quarter, for a total of 372 dealer sites in operation at the end of 2008. For the full year, the company opened 27 new dealer sites and discontinued 42 lower-volume sites.
C-store same-store merchandise sales increased 6.5% from the fourth quarter of last year on a reported basis and 7.3% comparing year-over-year results as if the Town & Country acquisition had taken place on Jan. 1, 2007. Total merchandise sales were $183.9 million during fourth-quarter 2008, up 34.6% from a year ago. This strong growth in the retail merchandise segment was led primarily by same-store sales increases in cigarettes, packaged drinks, beer, food service and snacks.
Merchandise gross profit for the fourth quarter, net of shortages, totaled $63.6 million, up 42.4% from a year ago. Net merchandise margin was 34.6%, vs. 32.7% a year ago. The strong margin increase reflects the benefits of operating synergies realized from the integration of Town & Country into the Susser organization and related procurement savings, an increase in higher-margin foodservice sales and improvements in the merchandise mix in Town & Country stores.
Retail store fuel volumes increased to 179.5 million gallons for the fourth quarter, up 28.9%. Average gallons sold per store were 357,775, an increase of 6.2% from the fourth quarter of last year, or 4.8% comparing year-over-year results as if the Town Country acquisition had taken place on Jan. 1, 2007.
Retail fuel sales totaled $393.2 million, down 1% due to lower gasoline prices at the pump, mostly offset by higher sales volumes vs. year ago. Retail fuel gross margins increased to 17.7 cents per gallon in the fourth quarter, from 14.1 cents per gallon a year ago. This drove retail fuel gross profit 61.1% higher, to $31.7 million, reflecting a significant drop in wholesale fuel costs, partly offset by lower selling prices at the pump, and the increase in retail gallons sold.
Wholesale fuel volumes sold to Susser's 372 dealers and other third-party customers increased 8.3% to 125.8 million gallons in the fourth quarter. Wholesale fuel revenues decreased 25.4% to $208.8 million as a result of the sharp fall in fuel prices. Wholesale fuel gross margin was 7.2 cents per gallon, vs. 6.4 cents per gallon a year earlier, which increased wholesale fuel gross profit by 21.5% to $9 million.
Corpus Christi, Texas-based Susser Holdings Corp. is a third-generation family-led business that operates more than 510 c-stores in Texas, New Mexico and Oklahoma under the Stripes and Town & Country banners. Restaurant service is available in more than 290 of its stores, primarily under the proprietary Laredo Taco Co. and Country Cookin' brands. The company also supplies branded motor fuel to approximately 370 independent dealers through its wholesale fuel division.
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