'The World Continues to Spin' for Susser
Seeing record organic growth, identifying "great assets, great teams" to join Susser network
CORPUS CHRISTI, Texas -- Susser Holdings Corp.'s number of store openings this year, "although slightly lower than we had hoped for, will still set a new record for organic growth," president and CEO Sam L. Susser said during the company's second-quarter 2013 earnings call on Wednesday. "We will remain aggressive as we explore markets looking for additional sites for future developments."
In the company's earnings release, he said, "We continue to be very bullish about the growth prospects for our markets, and we are pursuing additional growth opportunities to continue our store development program in 2014 and 2015."
Susser opened six new large-format Stripes convenience stores during the second quarter and closed one smaller store. It operated 567 Stripes stores as of June 30, 2013, of which 362 included an in-store restaurant. It has opened three additional stores so far in the third quarter, and 16 stores are currently under construction. The company expects to open a total of 28 to 30 Stripes locations this year and continues to acquire additional land for future store development.
The company adjusted the range of its new-store construction guidance announced with its first-quarter results, when it said it expected to build 29 to 35 Stripes stores. This high-end reduction is "a reflection of shaggy dog stories relating to real-estate development issues that have occurred on a handful of locations," Sam Susser said.
On a more hopeful note, he said, "We are looking every year ... to increase the number of new stores that we're building in our markets, working on the assumption that--as [executive vice president of operations Steve DeSutter] uses the phrase--'the world continues to spin.' In a steady-state sort of economy, we think we can accelerate our store growth a little bit. We think about trying to build about 5% or 6% net new stores each year and grow our business through same-store growth in addition to that on top of getting 5% or 6% net new stores, net of closures."
In terms of acquisitions, Sam Susser said, "We remain very positive that we're going to be able to identify great assets and great teams that we're going to be able to bring into our network and join the Susser family of companies here over the next year or two. We ... are seeing some opportunities that we think will make a lot of sense and fit in very nicely with our core business."
The company completed sale-leaseback transactions during the second quarter for a total of six new Stripes convenience stores for $21.2 million. It completed two more sale-leasebacks so far in the third quarter for $6.7 million. These sales by Susser Holdings to Susser Petroleum Partners bring the total number of new-build store "dropdowns" to 22 since the initial public offering of units in the partnership in Sept. 2012. The total cost of the stores sold to Susser Petroleum Partners was $89.7 million.
Meanwhile, same-store merchandise sales increased 2.2% in second-quarter 2013, compared with growth of 8% in second-quarter 2012. Average retail gallons sold per store increased 5.5% versus a year ago, compared with growth of 8% in the second quarter of last year. Retail net merchandise margin was 34.3% in the most recent quarter, versus 34.1% a year ago.
Retail segment fuel margin per gallon before credit card expense averaged 18.2 cents, versus a record 32.4 cents a gallon in the second quarter of last year.
Merchandise sales totaled $274.7 million in the second quarter, an increase of $21.6 million, or 8.5%, from a year ago. Approximately $5.5 million of the increase came from stores that have been open a year or more, with the balance from 28 stores that were opened during the last four quarters. Same-store merchandise sales increased 2.2%, compared with an increase of 8% in the second quarter of last year. Sales of foodservice, packaged drinks, smokeless tobacco and candy drove the majority of the growth.
Net merchandise margin as a percentage of sales was 34.3%, compared with 34.1% a year earlier. Merchandise gross profit was $94.1 million, up 9% from the second quarter of 2012. Gross profit growth was led by same-store dollar increases in foodservice, packaged drinks, candy and smokeless tobacco.
Retail fuel volumes increased 9.7% versus a year ago to 236.1 million gallons. Average gallons sold per store were 5.5% higher year-over-year, at approximately 32,500 gallons per week. Retail fuel revenues totaled $805.9 million, an increase of 4.1% compared with a year ago, reflecting the increase in gallons sold, partly offset by a 19-cent-per-gallon decline in the average selling price of motor fuel versus a year ago.
Retail fuel gross margin averaged 18.2 cents per gallon, compared with 32.4 cents per gallon last year.
For the six months ended June 30, 2013, Susser's same-store merchandise sales grew 3.2%. Revenues increased by 4.1% to $3.0 billion, driven by increases in merchandise sales and retail fuel revenue, partly offset by a slight decrease in wholesale fuel revenue to third parties. Merchandise sales totaled $522.2 million, up 9% from the year-earlier period. Merchandise margin was 33.7%, compared with 33.8% for the first half of 2012.
Retail fuel margin was 17.4 cents per gallon year-to-date, compared with 23 cents for the comparable period in 2012.
Corpus Christi, Texas-based Susser is a third-generation, family-led business that operates approximately 570 convenience 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 also is majority owner and owns the general partner of Houston-based Susser Petroleum Partners LP, which distributes more than 1.5 billion gallons of motor fuel annually to Stripes stores, independently operated consignment locations, convenience stores and retail fuel outlets operated by independent operators and other commercial customers in Texas, New Mexico, Oklahoma and Louisiana.