CST Brands in 'Network Optimization' Mode

Corner Store retailer selling 100 locations that don't fit core strategy

Greg Lindenberg, Editor, CSP

CST Brands Corner Store Convenience Store

SAN ANTONIO -- CST Brands Inc., which Valero Energy Corp. spun off in May 2013, said that it continues to assess its asset base and close convenience stores that are no longer core to its ongoing strategy. As part of this network optimization, it announced on Thursday that it has identified approximately 100 stores that are candidates for sale.

Most of these sites could potentially be added to the company's growing wholesale distribution business in the United States, it said.

It identified the stores based on several criteria, and while many of them may be smaller in square footage and below the company store average from an inside sales and EBITDA perspective, the 100 locations still average more than 3,000 gallons of fuel sold per store per day, which makes them an attractive location for sale and good dealer candidates for its wholesale business.

As reported in a 21st Century Smoke/CSP Daily News Flash, the company said that it has engaged NRC Realty & Capital Advisors, Chicago, to sell these properties and go to market by the middle of April.

New York City-based Wells Fargo Securities LLC c-store analyst Bonnie Herzog wrote in a research note that "a 100-store sale could raise around $80 million to $100 million."

Kim Bowers, chairman and CEO of CST Brands, said during the earnings conference call, "We closed seven locations in the U.S. in the fourth quarter, ending the year with 11 closures overall. The average square footage of these 11 stores was less than 1,800 square feet and they had lower cash flow levels when compared to our remaining store portfolio. Seven of the 11 stores were expiring leased sites and, based on economic reasons, we decided not to renew upon lease expiration."

She said CST brands "met its store targets for 2013 as it opened 22 new stores with plans to build more in 2014. During the fourth quarter, the company opened two new stores in the U.S. and five in Canada. The company currently expects to build 30 new stores in the U.S. and eight new stores in Canada during 2014. These new stores provide more product variety and enhanced offerings such as foodservice.

Bowers added, "Our real estate and construction teams continue to be very busy as we achieved our 2013 goal of building 15 new stores in the U.S. and seven in Canada. And with the opening of three stores and nine stores already under construction this year, we are well on our way to accomplishing our 2014 goal of opening 30 stores in the U.S. and eight in Canada. Our construction team has not only been busy with building new stores, in the U.S. last year, they also remodeled 34 stores, including four raze-and-rebuild sites, and upgraded 16 car wash facilities at existing locations. In Canada, they completed the year with 20 store renovation projects and acquired two dealer locations that were converted to company-operated sites."

Fourth-Quarter, Full-Year Financials

For the three months ended Dec. 31, 2013, the company reported net income of $34 million, compared to net income of $60 million, for the comparable period in 2012. Revenues totaled $3.1 billion for fourth-quarter 2013 compared to $3.2 billion for the same period of 2012.

Part of CSP's 2014 Convenience Top 101 retailers