WESTLAKE, Ohio --TravelCenters of America's recent moves toward more convenience-store locations resulted in a significant change in the company's earnings. Stand-alone convenience-store revenue in the 2016 first quarter represented 13.6% of total nonfuel revenue vs. 5.2% in the 2015 first quarter.
"During the first quarter of 2016, we continued progress in the integration of our new sites, principally the 148 convenience stores we acquired during the last half of 2015 and the first quarter of 2016," CEO Thomas O'Brien said.
The growth in nonfuel c-store revenue comes as fuel prices increased, causing a marked drop in same-site volume for TravelCenters of America (TA).
"In addition to lower fuel gross margin per gallon in 2016 as compared to the first quarter of 2015, we also experienced some negative impact on fuel volumes at certain locations due to reduced demand from customers involved in the energy sector," O'Brien said.
TravelCenters of America is No. 23 on CSP's 2016 list of the Top 101 largest c-store chains in the United States and Canada.
During the quarter, which ended March 31, 2016:
- Fuel sales volume increased by 40.4 million gallons, or 8.1%, compared to the 2015 first quarter (a 48.6-million-gallon increase from sites acquired since the beginning of 2015, offset by an 8.2 million gallon decrease in same-site volume). Fuel revenue declined by $293.6 million, or 29.3%, due to significantly lower market prices for fuel compared to the 2015 first quarter.
- Fuel gross margin declined $20.7 million, or 5.5 cents per gallon, to $91.7 million, or 17 cents per gallon, primarily due to a favorable purchasing environment in the 2015 first quarter that did not recur in 2016 first quarter.
- Nonfuel revenue for the 2016 first quarter increased $49.1 million, or 12.2%, compared to the 2015 first quarter. Of this increase, $42.7 million was due to sites acquired since the beginning of 2015 and $6.4 million was due to an increase in same-site revenue.
- Nonfuel gross margin for the 2016 first quarter increased by $21.2 million, or 9.5%, compared to the 2015 first quarter. Of this increase, $14.0 million was due to sites acquired since the beginning of 2015 and $7.2 million was due to an increase in same site nonfuel gross margin.
- Nonfuel gross margin as a percentage of nonfuel revenue for the 2016 first quarter was 54.2%, a 1.4-percentage-point decline compared to the 2015 first quarter. This decline was due to the inclusion of additional stand-alone convenience stores in the 2016 first-quarter results. Nonfuel gross-margin percentage in TA's standalone convenience-store operations is typically lower than the nonfuel gross-margin percentage for TA's travel-center operations, the company said.
Travel-Center Segment
Revenues from TA's travel-center segment for the 2016 first quarter decreased by $337.3 million, or 24.9%, compared to the 2015 first quarter, due to decreases in fuel revenues as a result of lower market prices for fuel, the company said. These decreases were partially offset by increases in nonfuel revenues as a result of three sites acquired since the beginning of 2015 and a 1.5% increase in nonfuel revenues on a same-site basis.
Site-level gross margin in excess of site-level operating expenses for TA's travel-center segment for the 2016 first quarter decreased by $29.2 million, or 22.4%, compared to the 2015 first quarter. This decrease principally reflects a $29.1 million decline in same-site fuel gross margin primarily as a result of the favorable purchasing environment in the 2015 first quarter that did not recur in the 2016 first quarter.
Convenience-Store Segment
Revenues from TA's convenience-store segment for the 2016 first quarter increased by $92.0 million, or 217.8%, compared to the 2015 first quarter, due to increases in fuel sales volume from sites acquired since the beginning of 2015, partially offset by decreases in market prices for fuel and a 2.3% decrease in same-site fuel sales volume. Revenues also increased as a result of increased nonfuel revenues primarily from sites acquired since the beginning of 2015.
Site-level gross margin in excess of site-level operating expenses for TA's convenience store segment for the 2016 first quarter increased by $2.7 million, or 169.2%, compared to the 2015 first quarter. Of this increase, $2.3 million is from sites acquired since the beginning of 2015 and the remaining $0.4 million is primarily from a same-site increase in fuel gross margin.
Investment Activity
TA's 2016 first-quarter activities included the acquisition of 24 stand-alone convenience stores for an aggregate purchase price of $35.1 million, as well as $4.9 million of investments to improve these and other recently acquired locations.
Since its acquisition program began in 2011 and through the first quarter of 2016, TA has acquired 37 travel centers and 224 stand-alone convenience stores. As of March 31, 2016, TA's investments, including improvements, in the 37 travel centers and 224 stand-alone convenience stores acquired totaled $315.6 million and $424.2 million, respectively. TA estimates that it will invest an additional $19.8 million to complete the expansion and renovation of certain of these travel centers and $17.4 million to complete the rebranding, expansion and improvements of certain of these convenience stores. These 261 locations generated revenues in excess of cost of goods sold of $69.5 million in the time TA owned them during the 12 months ended March 31, 2016.
"Despite the disappointing year-over-year comparative results, we remain positive about the future and the several initiatives that we are in the process of executing," O'Brien said.
TA's nationwide business includes travel centers located in 43 U.S. states and in Canada. TA's convenience stores operate principally under the Minit Mart brand name and offer gasoline fueling and nonfuel products and services such as coffee, groceries, fresh food offerings and other convenience items.
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