Susser Relies on Uncle Jerry's Gut
Increase in new-build activity keeps Stripes focused on organic growth
CORPUS CHRISTI, Texas -- An increase in ground-up convenience store construction in Texas and its surrounding states led Susser Holdings Corp. to recommit to a more aggressive new-build schedule.
During a fourth-quarter-earnings conference call on Wednesday, executives noted a marked increase in new-store construction across Texas. "Our robust economic climate, especially in Texas, is attracting new ground-up competition by a wide variety of retailers," said a cautious Steve DeSutter, president and CEO of retail.
At the same time, that attribute is proving to be an asset for Susser's chain of Stripes convenience stores.
"We delivered our 24th consecutive year of same-store merchandise sales growth, with a fourth quarter increase of 5.8% year over year, and an increase of 6.6% for the full year as compared to 2011," said Susser Holdings president and CEO Sam Susser. "We believe that our momentum in new-store growth, combined with a robust Texas economy sets us up with additional opportunities to grow shareholder value in the coming years."
Susser opened a record 10 new stripes stores in the fourth quarter ended Dec. 30, each store averaging 5,200 square feet with 10 fuel dispensers. It plans to open between 29 and 35 new stores this year. "We have 11 under construction. We have nine more that we expect break ground on and start construction before end of quarter," DeSutter said.
With the emphasis on new-store construction, Susser underscored the importance of the company's real-estate development team and its ability to find good locations.
"Our real-estate team, which is led by my uncle Jerry Susser, uses a handful of tools, works with some excellent real-estate development professionals that we have very strong relationships with," Susser said, "but at the end of the day the biggest driver is the view and the feeling in the gut that our team has when we're out looking at a site, assessing its growth potential over time, the competitive advantages or disadvantages that a particular site may have."
Today that team is primarily focused on growing the chain within its existing markets, but Susser said the chain could be entering some new markets in the near future.
"We're blessed to be in many communities that are experiencing strong growth, and we're trying to get out in front of where that growth is going to be three, five and seven years from now," he said. "There are a couple of areas that we're looking at and working on, but for competitive reasons, it would not be appropriate to comment further on that."
And with Susser's recent master limited partnership IPO spinoff of its petroleum arm, it finds itself flush with cash, further opening the opportunities for new-store growth.
"Part of why we executed the MLP IPO is we thought we would end up with a long-term lower cost of capital that we would be able to employ into a growing market, and we do expect to use that capital to be more aggressive organically as we build more stores, both in Stripes and our very valuable dealer network," Susser said. "The team [is also actively] considering different M&A opportunities. … We recognize that we have access to meaningful capital now. We're not going to be reckless; we've always been conservative and careful, but we do want to grow and we want to use the capital wisely."
For a detailed look at how organic new construction is expanding across the c-store industry, watch for the April issue of CSP magazine.