Susser 'Solid' Despite Sac-N-Pac, Easter Shift, Wet Weather

Revenues up on merchandise, retail, wholesale fuel sales, offset by lower prices

Sam Susser (CSP Daily News / Convenience Stores / Gas Stations)

Sam Susser

CORPUS CHRISTI, Texas --For Susser Holdings Corp., which operates the Stripes convenience store chain, same-store merchandise sales increased 1.9% in the first quarter ended March 30, 2014, vs. growth of 4.2% in first-quarter 2013.

"Looking at our first-quarter performance, we delivered solid same-store merchandise sales growth despite the fact that Easter fell in the second quarter this year and we experienced unusually cooler, wetter weather patterns during the quarter," said Sam L. Susser, chairman and CEO. "Adjusted EBITDA was lower year-over-year due to lower retail fuel margins, although they still exceeded our average margin for the previous five years."

Average retail gallons sold per store increased 2% (4.2% excluding the impact of the recently acquired, lower-volume Sac-N-Pac c-stores) compared with growth of 4.1% in the first quarter of last year. Retail net merchandise margin was 33.9%, up from 33.1% in the prior-year's first quarter.

Retail fuel margin before credit-card expense averaged 13.0 cents per gallon, versus 16.6 cents in first-quarter 2013. That compares to an average first-quarter retail fuel margin of 11.2 cents per gallon over the previous five years, calculated as if the three-cent-per-gallon markup charged by Susser Petroleum had been in place for the entire period.

Net loss attributable to Susser Holdings was $1.8 million, vs. a net loss of $200,000 in first-quarter 2013.

First-quarter consolidated revenues totaled $1.7 billion, up 10.6% from a year earlier. The increase was the result of an 11.7% increase in merchandise sales, a 5.1% increase in retail fuel sales and a 19.6% increase in wholesale fuel sales to third parties. The positive revenue impact of higher fuel volumes sold was partially offset by lower per-gallon selling prices.

Susser Holdings opened two new large-format Stripes c-stores and acquired 47 Sac-N-Pac locations (see Related Content) during the first quarter. As of March 30, the company operated a total of 629 c-stores, of which 402 include a restaurant. It acquired two additional stores so far in the second quarter, and 17 are currently under construction. In addition to the purchase of the Sac-N-Pac locations, the company expects to open a total of 27 to 33 Stripes stores this year and continues to acquire additional land for future store development.

Also, it added 27 new contracted sites in the wholesale segment in the first quarter, including 19 acquired with the Sac-N-Pac/3W Warren Fuels acquisition, and it closed two sites for a total of 616 contracted branded sites as of March 30, consisting of 99 consignment locations and 517 other independent branded dealer locations. In 2014, in addition to the 19 acquired dealer sites, Susser currently expects to add 28 to 45 new wholesale branded dealers and consignment sites, it said.

Susser Holdings and Susser Petroleum Partners completed a sale leaseback transaction for seven new Stripes locations in the first quarter and two additional stores in early May for a total cost of $36.5 million. Since the initial public offering (IPO) of units in Susser Petroleum Partners in Sept. 2012, Susser has completed sale leaseback transactions for a total of 42 newly built stores at a cumulative cost of approximately $169.6 million.

Merchandise sales were $276.4 million in first-quarter 2014, up 11.7% from a year ago. Approximately $4.7 million of the increase came from stores that have been open a year or more, with the remainder from 74 stores that were opened or acquired during the last four quarters.

Sales from foodservice, snacks and packaged drinks were the biggest drivers of sales growth.

Net merchandise margin as a percentage of sales was 33.9%, up from 33.1% a year ago. Merchandise gross profit totaled $93.8 million, up 14.6% from first-quarter 2013. Gross profit growth was led by a $9 million contribution from new stores and by a $2.3 million same-store increase from food service.

Retail fuel volumes increased 12% from a year ago to 250.3 million gallons. Average gallons sold per store were approximately 31,700 gallons per week, an increase of 2%. Excluding the recently acquired Sac-N-Pac stores, the year-over-year increase was 4.2%. Retail fuel revenues totaled $822.9 million, up 5.1% from first-quarter 2013, reflecting the increase in gallons sold, partly offset by a 6.2% decline in the average selling price of motor fuel versus the first quarter of 2013.

Retail fuel gross margin averaged 13.0 cents per gallon, compared with 16.6 cents per gallon a year earlier. After deducting credit card expense, net fuel margin was 7.5 cents per gallon, compared with 11.1 cents in the prior-year period. Retail fuel gross profit was $32.5 million, down 12.1% from a year ago as a result of the lower margin per gallon, partly offset by higher volumes sold.

Susser's wholesale segment includes all of Susser Petroleum's operations as well as the consignment sales and transportation business that were not contributed to Susser Petroleum in the 2012 IPO. Wholesale fuel volumes sold to third parties--which includes all gallons except those distributed to Susser's retail stores--were up 26.9% vs. first-quarter 2013 to 186.1 million gallons. Wholesale fuel revenues increased 19.6% year-over-year to $543.7 million. This increase reflects the impact of higher volumes sold, partly offset by an 18-cent-per-gallon sales price reduction compared with the first quarter of last year.

Wholesale fuel gross margin from third parties was 6.1 cents per gallon, up from 5.9 cents in the year-earlier quarter. Wholesale fuel gross profit, including sales to Stripes and to Sac-N-Pac stores, increased by 23.1% year-over-year to $18.7 million. The gross profit increase was primarily the result of the increase in gallons sold, including the impact of the Gainesville Fuel acquisition completed in Sept. 2013, and a 3.4% increase in margin per gallon.

Susser Holdings is a third-generation, family-led business based in Corpus Christi, Texas. It operates c-stores in Texas, New Mexico and Oklahoma. Susser Holdings also is majority owner and owns the general partner of Susser Petroleum, which distributes approximately 1.6 billion gallons of motor fuel annually to Stripes stores, independently operated consignment locations, c-stores and retail fuel outlets operated by independent operators and other commercial customers in Texas, New Mexico, Oklahoma and Louisiana.

Part of CSP's 2014 Convenience Top 101 retailers