ATLANTA -- In the first annual Wells Fargo Convenience Store Forum in conjunction with the 2013 NACS Show, Bonnie Herzog led discussions with three retailers she covers as part of her beat as senior c-store, beverage and tobacco analyst at Wells Fargo Securities LLC. In a research note, Herzog shared highlights of the "fireside chats" with execs from Susser Holdings Corp., Corpus Christi, Texas, Casey's General Stores Inc., Ankeny, Iowa (Part 2), and The Pantry Inc., Cary, N.C. (Part 3).
Representing Susser (SUSS)--which Herzog rates at "outperform"--was CEO Sam Susser. He was bullish in his operations outlook for Susser's Stripes c-store chain, thanks to a strong Texas economy and an increase in traffic and customer count. Stripes' market share in Texas is "important but small and growing." While Susser could expand into nearby states, the company appears content to stay in Texas.
The actual size of Stripes stores is expanding to 7,000 square feet--twice the industry average--to provide more room for its Laredo Taco foodservice program. Susser has introduced in-store sampling and TV advertising to help grow breakfast sales in markets that lag the chain average.
To drive afternoon sales, the retailer has introduced expanded hours at 20% of its Laredo Taco locations. "SUSS believes leveraging the Laredo brand and experience within the wholesaler/dealer business could be an opportunity someday, but is not really on the front burner right now," Herzog shared.
There is great opportunity to grow share in existing markets, which would not only help the topline but also grow efficiencies of scale. Some of Susser's highest volume taco stores, for example, are in markets with a smaller Hispanic consumer base. "This speaks to the opportunity and potential of Laredo and its broad appeal across demographic groups," said Herzog.
Susser also discussed the role of its master limited partnership (MLP), Susser Petroleum Partners LP (SUSP), in the growth of the overall business. Herzog described Susser Petroleum Partners as under-levered, and that "in a dream world," it would have 1.5x to 2x the leverage of Suusser Holdings. "SUSP will very likely be raising additional capital (debt) to help fund growth," she observed. "SUSP will probably issue additional equity at some point but that would be farther into the future."
Susser Holdings has also invested in training and retention to slow the rate of turnover, and been tapping tools such as introducing more pricing variation by region and even by store to maximize profitability, Herzog said.
"We believe Laredo will continue to drive SUSS's topline and further efficiencies of scale as it expands its share in existing markets," said Herzog in her research notes, where Susser Holdings is Wells Fargo's top stock pick.
Susser Holdings is a third-generation, family-led business based in Corpus Christi, Texas, that operates approximately 570 c-stores in Texas, New Mexico and Oklahoma under the Stripes banner. Restaurant service is available in approximately 365 of its stores, primarily under the proprietary Laredo Taco Co. brand. Susser Holdings also is majority owner and owns the general partner of Susser Petroleum, which distributes more than 1.5 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.
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