CORPUS CHRISTI, Texas -- One year ago, while announcing his company's third-quarter 2009 earnings, Sam Susser announced that the recession had reached Texas. Unemployment spikes had Susser Holdings Corp. battening down the hatches to weather the storm. Yesterday, while announcing this year's third-quarter earnings for the convenience store chain, Susser gave every indication that the storm has passed.
"[Our] fuel margins were so strong [in third-quarter 2010], one could easily miss the magnitude of the improvements in merchandise sales, merchandise margins and expense control delivered by our leadership team," he said on a conference call with analysts.
"Our merchandise same-store sales increased by 3.4% compared with growth of 3.1% in the previous quarter and on top of 4% in the third quarter of 2009. For the second quarter in a row, we experienced very strong retail fuel margins, which helped drive stronger gross profit and EBITDA."
For details on Susser's earnings, see story in this issue of CSP Daily News.
About those impressive fuel margins, Susser added, "Our retail fuel margin averaged 22.8 cents per gallon, or 18.5 cents after deducting credit-card expenses. While that doesn't quite match the record margin we enjoyed in the second quarter of this year, it is significantly above our five-year, Q3 average of 19.5 cents. It was about 3 cents a gallon higher than a year ago in the same quarter."
And all that comes as Susser sees fuel volumes beginning to grow again. "Average retail gallons sold per store were up 3.9% year over year," Susser said. "This was driven by a healthy increase in diesel volumes, which are a pretty good indicator of overall commercial trade going through our region."
In the stores, all this added up to healthy growth, as well, said Steve DeSutter, president and CEO of Susser's retail division.
"Our 3.4% increase in same-store sales was the product of growth in both customer count and transaction size, with customer count being a stronger factor than it was in the last two quarters," he said. "Through the end of September, we sold 1 million more tacos in our legacy Laredo Taco Co. restaurants in South Texas than we did in the same period last year. This growth has helped drive our single-beverage and snack sales, which carry a higher-than-average margin."
The healthy growth means Susser will continue to invest money into growing the chain of 527 Stripes stores, according to CFO Mary Sullivan.
"We were being pretty conservative in our capital spending coming into 2010 because of the softness in our markets late last year," she noted, "but as Sam mentioned, with the rebound we started seeing in the spring, we accelerated new-store construction and also the pace of the Town & Country rebranding. As we're coming to the end of the Town & Country upgrade, we'll be redeploying that cash flow in a combination of new stores, PCI compliance, technology and environmental initiatives, as well as the normal replacement and enhancement capital expenditures we invest each year in existing stores."
By the end of 2010, Susser will have added 13 or 14 "big-box stores" to its lineup, Susser said. "While we're not ready to give 2011 guidance, I would expect to see us continue to ramp this number up a bit--more next year."
Corpus Christi, Texas-based Susser Holdings is a third-generation, family-led business that operates more than 525 c-stores in Texas, New Mexico and Oklahoma primarily under the Stripes banner. Restaurant service is available in 310 of its stores, primarily under the proprietary Laredo Taco Co. brand. The company also supplies branded motor fuel to more than 420 independent dealers through its wholesale fuel division.
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