SANFORD, N.C. -- As the market provides more opportunities for consolidation, officials with The Pantry Inc., spoke of criteria they use to evaluate potential purchases. Speaking on a webcast for Chicago-based William Blair & Co.'s Growth Stock Conference yesterday, the chain's CFO Frank Paci said the company is interested in major-oil divestment opportunities and hunts for buys where its model could improve profits.
Speaking exclusively to CSP separately, Paci, the chain's executive vice president of business operations and CFO, and Peter Sodini, chairman [image-nocss] and CEO, discussed a wide range of topics, including the state of the economy, the long-term outlook for The Pantry, and Sodini's announced retirement this September, as well as his legacy as a successful consolidator.
While Sodini's comments can be found in the June 2009 issue of CSP magazine, Paci touched upon processes the chain used to evaluate potential buys during yesterday's webcast. Historical volumes and pricing are a start. For chains in areas where they have yet to market, they use numbers from their stores in areas with similar demographics.
"Building a pro forma on those stores, we start thinking how we're going to run them," he said, noting how they can calculate the potential profitability "based on how our business runs and what we're able to produce from that [property]."
Often times The Pantry can improve upon store performance by putting in its established fountain, coffee, roller-grill, candy or proprietary-beverage programs. There may also be opportunities to expand that work with national quick-serve-restaurant brands.
In terms of potential purchases from oil-company divestments, Paci said, "We've expressed interest in certain markets where we operate. There are attractive [properties] out there."
The oil companies have yet to release what the packages in particular markets will be. "It's still unclear as to who is bidding or how the oil companies will want to do itone big deal or smaller deals."
Paci added that while The Pantry has several key fuel suppliers, they always review the gasoline brands of their acquisitions. The chain considers the credit-card base in the area before deciding to switch or stay with the brand already established.
Paci also provided a few chain updates:
SCHIP tax increases. Paci said The Pantry has seen 20% inflation in the cigarette category due to hikes in federal taxes this spring and is anticipating as a result a double-digit decline in volume. Every 10-cent pack increase equals a 1% drop in volume, he said, but "after the initial shock, over time, the market tends to normalize."
Gasoline prices. At this point, street postings are moving up but not moving as quickly as they did last year. In many areas, prices are "sticking" despite rising wholesale prices.
Fountain additions. The Pantry will be going to a dual-branded fountain at all of its stores.
Quick-serve update. The Pantry opened its 110th franchise of the Milford, Conn.-based Subway chain, with the "$5 sub" having "worked well for us."
Rise in 12-pack prices. Last year, The Pantry was aggressive in pricing 12-packs of packaged beverages. But this year, prices have increased. Based in Sanford, N.C., The Pantry Inc. is one of the largest independently operated c-store chain in the country. As of Sept. 25, 2008, the company operated 1,653 stores in 11 states under many banners, including Kangaroo Express, its primary store brand.
For more perspective from Sodini and Paci on the chain's long-term outlook, watch for the June 2009 issue of CSP magazine.
Click herefor a CSPTV video tour of the chain's latest store design and an interview with Brad Williams, The Pantry's senior vice president of field operations.
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