CORPUS CHRISTI, Texas -- Susser Holdings Corp. has reported that its total fourth-quarter 2007 merchandise sales, including approximately seven weeks of contribution from Town & Country Food Stores, increased 54.1% to $136.7 million, versus $88.7 million a year earlier for the standalone Susser operation.
Total revenues increased 68.6% to a record $821.9 million from $487.6 million in fourth-quarter 2006. Gross profit, including the partial quarter's contribution from Town & Country, increased 61.6% to a record $77.7 million, compared with $48.1 million in the year-ago [image-nocss] quarter from the standalone Susser operation.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) increased 189% to $17 million, compared with $5.9 million in the prior year's fourth quarter, reflecting the Town & Country contribution, along with stronger results from the merchandise segment and sharply higher combined retail fuel margins of 14.1 cents per gallon, versus 9.2 cents per gallon realized a year ago.
The company recorded net income of $7.5 million in the fourth quarter, or 44 cents per diluted share, versus a net loss of $10.9 million, or 72 cents per diluted share, in the year-earlier quarter. The year-over-year improvement in what is typically a seasonally weak quarter reflects an 11.7% same-store merchandise sales increase, higher merchandise margins and significantly stronger fuel margins, as well as the contribution from Town & Country.
For full-year 2007, including the seven week contribution from Town & Country, merchandise sales increased 21.6% from a year ago to $444.2 million. Total revenues increased 20% to $2.7 billion, and gross profit increased 18.3% to $261.1 million.
"2007 was an outstanding year for Susser Holdings," said Susser President and CEO Sam L. Susser. "We saw very strong gains in our merchandise segment and higher-than-average retail fuel margins for the year. We doubled the size of our pro forma adjusted EBITDA through the acquisition of Town & Country Food Stores, which gave us a leadership position in attractive markets in West Texas and Eastern New Mexico as well as opportunities to realize operating leverage and cost synergies across the combined companies."
He added, "Looking at the fourth quarter of 2007, our merchandise segment continued to benefit from the marketing and store operations programs we began in early 2007, which drove customer traffic and transaction size. Same-store sales growth from Stripes stores was the highest we've seen in eight years. Retail fuel sales also benefited from the higher traffic, and retail fuel margins were roughly a nickel a gallon higher than they were a year ago. The contribution of Town & Country for the last seven weeks of the quarter further boosted our financial and operating metrics across the board."
During fourth-quarter 2007, the company opened nine new retail units, bringing the total number of stores built and acquired in 2007 to 186, including 18 new retail stores plus the 168 acquired Town & Country stores. Also during the fourth quarter, four retail locations were closed, bringing the total retail store count to 504 as of December 30. Three additional stores have been opened since year-end. The company also opened restaurants in 11 stores in the fourth quarter and closed two, which, combined with the 113 located in the acquired Town & Country stores, brings the total number of stores with restaurant operations to 282, or 56%, at yearend.
In its wholesale operations, Susser added 13 new dealer sites and discontinued three during the fourth quarter, for a total of 387 dealer sites in operation at the end of 2007. Similar to the retail division, new sites typically outperform sites that are closed or where fuel supply is discontinued.
This summer, Susser plans to rebrand two to three Town & Country locations in West Texas as Stripes locations as a test program in anticipation of rolling out a rebranding program for all Town & Country locations that is expected to commence in fourth-quarter 2008.
Susser said it expects to achieve combined annual cost synergies of $5 million through the integration of the Susser and Town & Country organizations. General and administrative expense synergies of $1 million are expected for 2008 and $2 million annually for 2009. Marketing synergies of $3 million annually are anticipated, with approximately $1 million to be realized in 2008, reaching the full $3 million of savings for 2009. Town & Country's motor fuel margins were several cents higher in 2007 than historical levels. Expected synergies in merchandise and operating expenses could be offset by a return to historical fuel margin levels.
Convenience store merchandise sales, including seven weeks of Town & Country's contribution, totaled $136.7 million during fourth-quarter 2007, an increase of 54.1% overall; approximately two-thirds of this increase in sales volume was attributable to Town & Country locations. On a same-store basis for Stripes stores alone, merchandise sales increased 11.7% for the quarter. This unusually strong growth in the retail merchandise segment was led by increases in cigarette, foodservice, packaged drinks, beer and snack sales. Cigarette sales increased in part due to the impact of a dollar-a-pack increase in the cigarette excise tax in Texas effective January 2007.
Total merchandise gross profit for the fourth quarter net of shortages increased 56.3% to $44.6 million; nearly two-thirds of this increase in gross profit was attributable to Town & Country stores. Net merchandise margin on a combined store basis was 32.7%—an increase of 45 basis points from a year ago—with both regions experiencing similar margins. The increase is due to the benefits of marketing and operations programs that began in early 2007, partly offset by the impact of the cigarette margin tax, which increases revenues but decreases margins.
Retail store fuel volumes increased 46.9% to 139.2 million gallons for the fourth quarter; approximately three-fourths of this increase in volume was attributable to Town & Country locations. Excluding the Town & Country contribution, average gallons sold per Stripes location increased 9.1% from fourth-quarter 2006. The favorable per-store comparison is in part the result of the rebranding of the company's fuel islands to the Valero brand during the year-earlier quarter, which impacted our fuel volumes during the conversion process, and in part due to investments back into our store base. Retail fuel sales increased 98.6% to $397.9 million, driven by the additional Stripes and Town & Country volumes and a 35.2% increase in the retail price of fuel. Gross margins increased to 14.1 cents per gallon from 9.2 a year ago, which resulted in a 126% increase in retail fuel gross profit, to $19.6 million.
Wholesale fuel volumes sold to Susser's 387 dealers and other third-party customers increased 5.3% to 116.2 million gallons in the fourth quarter. Wholesale fuel revenues increased 45.3% to $280 million as a result of both the volume increase and a 38% increase in average wholesale fuel selling prices. Wholesale fuel gross margin was 5.5 cents per gallon, versus 4.5 cents per gallon a year earlier. Wholesale fuel gross profit increased 28.1% to $6.4 million, reflecting higher wholesale fuel selling prices.
Of the new stores to be constructed in 2008, an estimated two-thirds are planned for the company's Southern Region, which includes the South Texas/Rio Grande Valley areas, and one-third is planned in the Western Region, which includes West Texas/Eastern New Mexico. The company said it expects to finance the majority of the cost of its new store construction program through sale/leaseback transactions of new locations.
Corpus Christi, Texas-based Susser Holdings operates more than 505 convenience stores in Texas, New Mexico and Oklahoma under the Stripes and Town & Country banners. Restaurant service is available in more than 280 of its stores, primarily under the proprietary Laredo Taco Co. and Country Cookin' brands. The Company also supplies branded motor fuel to more than 385 independent dealers through its wholesale fuel division.
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