C-Store Earnings Report Preview

How much will the cold weather hurt the industry's public companies?

Steve Holtz, Editor in Chief, CSP Daily News

Cold weather thermometer

NEW YORK -- With most of the public convenience store chains scheduled to release earnings reports next week, an industry analyst is anticipating an overall negative impact from the cold weather in many parts of the country.

"Colder-than-usual conditions with less precipitation were prevalent across the United States in the fourth quarter," wrote analyst Bonnie Herzog of Wells Fargo Securities in a research note. "Texas was the notable exception where there was more precipitation vs. historical averages. As such, we believe weather was the key contributing factor to Susser Holdings and CST Brands's softer-than-expected Q4 merchandise same store sales (SSS)."

Herzog broke down how the weather might affect each of the public c-store chains.

  • Susser Holdings, Corpus Christi, Texas: Expecting solid execution.

"We believe Susser's fuel business could be better than expected; we estimate 16.4-cents-per-gallon (CPG) fuel margins. Although Susser pre-released Q4 merchandise SSS of 2.4%, mainly pressured by unfavorable weather, we continue to believe Susser is one of the most compelling growth stories in c-stores; however, we believe the risk/reward is slightly negative ahead of the quarter given the possibility fuel margins are weaker than we anticipate."

  • The Pantry/Kangaroo Express, Cary, N.C.: Expecting continued evidence of progress.

"We believe The Pantry is executing well and continues to refine/improve its merchandise initiatives. Further, we believe weather in the Southeast (15% less precipitation and 2% warmer temps in The Pantry's key markets vs. historical average) likely had a favorable impact on traffic. Our 4% merchandise SSS and 11.5-CPG fuel margin estimates imply sequential improvement. We believe The Pantry's valuation is compelling and the risk/reward is attractive."

  • Casey's General Stores, Ankeny, Iowa: Fuel and inside sales continue to deliver.

"Casey's reported November and December fuel margins in line with its 15-CPG goal and continued strong inside sales SSS. We believe investors should await more opportunistic entry points."

  • SteveCST Brands, San Antonio, Texas: Weather likely weighed on Q4 results

Herzog expects "weaker merchandise sales and fuel volume growth based on its preliminary results. We maintain our "market perform" rating on CST.

Steve Holtz, CSP/Winsight By Steve Holtz, Editor in Chief, CSP Daily News
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