NEW YORK -- NACS reported record year 2005 sales and profits for the convenience store industry during the 2006 State of the Industry Summit in partnership with CSP. And as we hit midyear 2006, it's worth asking: Will those same trends continue for a second year?
Though too soon to predict how 2006 will shape out as a whole, the first quarter of 2006 provides early signals that last year's performance could be very hard to match. For example, pre-tax profits per store for the three months ended March 31, 2006, are $1,000 per store/per month less than 2005 [image-nocss] based on CStoreXchange's (CSX's) same-firms' trends of 79 convenience chains operating 3,666 stores across the country. [To view an OnDemand replay of the CyberConference ($49), click here.]
I think we might have to work even harder this year to remain a reasonably profitable industry, said Dick Meyer, co-founder of monthly benchmarking specialists CSX LLC. Meyer and Andrew Bowman, vice president at 38-store Stop-N-Go of Madison, Wis., headlined Thursday's CSPNetwork CyberConference How's Business? report called: Where are 2006 Profits Headed? The conference was sponsored by BIC and McLane Co.
Historically, the first quarter is the industry's slowest period, when per-store profits are minimal at best and oftentimes slightly negative. The telling signs will be the results of the next two quarters, when sales and profits are typically, seasonally higher.
Touching on some key highlights, Meyer indicated the following:
Fuel margins improved by six-tenths of a penny compared to Q1 2005; however, credit-card sales essentially ate any gains. Also premium gallons per store are down nearly 15% with consumers trading down as fuel prices rose. Total inside sales climbed 6.7%, but in-store gross profit dollars per store increased only 4% in CSX's same-firms' per-month/per-store trends. Concerns: Costs are up; notably credit card fees have skyrocketed more than 25%. Utilities and property taxes are also up significantly.
Roger Grogman of McLane Co. Inc. delivered a report, tracking wholesale product movement into the convenience channel through May. Overall, shipments are up nearly 8%, perhaps portending a strong spring and summer for the industry.
While frozen food and perishables are down, Grogman said other tobacco products and packaged beverages continue to drive growth for most operators. And cigarettes, ostensibly due to higher excise taxes, also showed an approximate 7% spike in dollar revenue.
In other items, Bowman, a new subscriber to CSX, shared how monthly benchmarking has improved his chain's overall performance, specifically by pointing to opportunities in basic operations and dispensed beverages. By comparing his chain to trends of CSX's data population of more than 100 other chains, Bowman said he has a better sense of where Stop-N-Go stands. It helps validate what we're doing well and tells me where can we improve, what can we do differently and then take that back to the store level, he said.
Steve Burkhart, BIC vice president and assistant general counsel, underscored the importance for retailers to understand their risk liability concerning cigarette lighters. He noted that retailers, including Wal-Mart, have faced nearly $12 million in fines from the federal Consumer Product Safety Commission for failing to report information concerning dangerous products.
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