PHOENIX -- One sensed that Dick Meyer was waiting, just waiting to deliver his WOW.
As he wound down surveying the convenience channel's performance through the first three quarters of 2006, program moderator, CSP president and editorial director Paul Reuter asked Meyer, a principle of convenience store industry intelligence firm CSX LLC, what everyone in the attendance was waiting for. So, what's your forecast for the year end?
Meyer recalled how last year's hurricanes delivered unprecedented per-gallon profits. Those months [image-nocss] helped our industry a lot, he said. Are your [final] four months in 2006 going to be as good as last year? And if not, how far off are you going to be?
Then, drum roll, Meyer made his call. I predict pretax store profits to be down 20 to 25% by year's end.
Meyer's prediction, offered exclusively at the 2006 Leader Outlook Conference produced by Leadership Network Corp. in partnership with CSP Information Group, should not be seen as a slight against the industry. Indeed, he was emphatic that today's convenience channel operates significantly smarter and with more sophistication than five years ago, when the industry slumped and seemed unable to resist incursions by big-box and drug chains. Rather, last year's record was an aberration, abetted by natural disasters. Otherwise, the difference between the sector's performance in 2006 and last year is minimal.
On the expenditure side, credit-card feesthe nefarious grim reaper dampening hard-earned profitsare gobbling $3,700 a month per store, according to Meyer, citing the CSX proprietary benchmarking database. Meyer is one of four founders of the month-by-month benchmarking group.
Joining credit cards, utilities are also scraping into c-store profits. But there is good news too. Several categories are showing vigor through August, buoyed by Total Foodservice, +12.1% sales; Dispensed Beverages, +10.6%; Packaged Beverages, +9.2%; and Other Tobacco Products, +8.8%, all according to CSX data.
We're seeing a good rise in sales in the store and that's exciting, Meyer said. Unfortunately, he followed, increased sales and gross-margin dollars are being offset by credit-card fees and utilities, which he said, is something we really have to focus on now.
In another interesting spotlight, Meyer compared the top and bottom-quartile performers in the CSX database. The top quartile required a breakeven pool margin of only 8.3 cpg while bottom quartile required nearly double. Not surprisingly, the top 25% were enjoying $9,000 in pretax profits per store per month through August, while the bottom 25% had lost $3,000 in pretax profits a month for the same period.
That, noted Meyer, represented a $144,000 full-year swing. Rather dramatic.
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