While strong fuel margins buoyed the entire industry, the channel’s top-performing operations held an unyielding dominance over bottom-quartile stores. And one gold standard—cents-per-gallon (CPG) break-even—separated the groups by more than a dime.
“That’s a dime I can play with on the street for parity,” said Billy Milam, president of RaceTrac Petroleum, Atlanta.
The “best of the best” and “struggling” stores are operating at an 8.5x difference, with store operating profit for the top-performing 25%, or quartile, of operators at $42,314 per store per month. Bottom-quartile retailers brought in only $4,977.
Of course, top-performing stores are often bigger, have more profit centers and can accommodate higher traffic volumes. With that in mind, the CPG metric becomes even more telling. The closer to zero the metric is, the less reliant an operator is on profits from gasoline sales, which can be a feast-or-famine death spiral. With 8.2 cents for top-quartile firms and 18.34 cents for the bottom, the figures assert that not only are lower-performing stores less profitable, but they also are heavily reliant on fuel margins, are riskier endeavors and essentially are more costly to run.
Labor numbers back these assertions, with in-store gross profit per labor hour 29.0% less at bottom-quartile stores ($23.07) than top-quartile stores ($32.50). In-store sales per labor hour were also lower, with bottom-quartile stores making 14.2% less ($80.05) than top-quartile stores ($93.35). Stores in the bottom quartile did manage to pay less in labor costs per hour: $14.86 vs. top-quartile stores’ $15.21.
Another critical measurement, Milam said, is return on capital employed. For top performers, their investment reaped a 15.27% return last year. At 13.31 points behind, bottom-quartile firms averaged only 1.96%. “The bottom quartile is struggling, barely keeping pace with inflation,” he said.
Still, Milam acknowledged the breadth of business models within the fragmented c-store channel. He called for a rationalization of underperforming assets, at the same time citing the role of the single-store independent who is willing to run legacy assets and is capable of doing so at a profit.
The Gaps Within the Aisles
Taking the comparisons down to the category level, sales and profit figures showed both wide gaps and near parity between the quartiles. Andy Jones, president and CEO of Sprint Food Stores, Augusta, Ga., led summit attendees through category numbers and quickly pointed out that foodservice and dispensed beverages showed the furthest distance between top and bottom.
“Top-quartile companies are killing it in prepared food,” he said, with sales numbers showing a 3.9x difference and profit a 4.6x differential. There was another big gap in hot-dispensed beverages, where the difference in sales was 5.3x and profit was 6.6x.
Jones also pointed to packaged beverages, where the profit difference was almost $10,000 per store per month. The top quartile had a 2.8x differential from the bottom.
The quartiles reflected more parity in areas of beer, other tobacco products and candy, which roughly saw differentials of 1x to 2x for both sales and profits.
Turnover Fears
All segments of the channel face the common challenge of mounting operating costs—particularly labor, said Milam. Referencing a chart tracking percent increases in operational costs vs. inside gross profit, he said operational costs grew faster every month in 2015 “by a long shot.” Also, the downside of an improving labor market is increased turnover, because employees are enticed by more job options.
Overall, at 7.3%, wages and benefits showed the greatest increase of all direct-store operating expenses, with repairs and maintenance coming in second at 6.9%. Fortunately, credit-card fees dropped a promising 11.5%.
Capital Productivity
| 2015 | Top quartile | Bottom quartile | Difference |
|---|---|---|---|
| Store operating profit | $42,314 | 15.27% | 8.5x |
| Store operating profit per square foot | $11.98 | $1.79 | 6.7x |
| Break-even CPG* | 8.20 | 18.43 | (10.14) |
| EBITDA** | $41,198 | $5,718 | 7.2x |
| EBITDARL*** | $48,396 | $11,860 | 4.1x |
| Net profit margin (pretax/sales) | 4.31% | 0.07% | 4.24 points |
| Return on capital employed | 15.27% | 1.96% | 13.31 points |
People Productivity
| 2015 | Top quartile | Second quartile | Third quartile | Bottom quartile |
|---|---|---|---|---|
| Nonmanager turnover (annual) | 73.9% | 104.0% | 115.9% | 97.6% |
| Manager turnover (annual) | 17.7% | 24.6% | 32.0% | 22.5% |
| In-store sales per labor hour | $93.35 | $96.20 | $77.95 | $80.05 |
| In-store gross-profit dollar per labor hour | $32.50 | $28.69 | $22.86 | $23.07 |
| Labor cost per hour | $15.21 | $15.90 | $13.05 | $14.86 |
* Cents per gallon break-even
** Earnings before interest, taxes, depreciation and amortization
*** Earnings before interest, taxes, depreciation, amortization, rentals and leases
Sources: NACS preliminary figures—final data to appear in the NACS State of the Industry Report of 2015 Data; CSX LLC
Core Category Sales by Quartile
| 2015 | Top quartile | Bottom quartile | Difference |
|---|---|---|---|
| Cigarettes | $69,380 | $34,038 | 2.0x |
| Packaged beverages | $34,432 | $13,071 | 2.6x |
| Beer | $16,183 | $14,834 | 1.1x |
| OTP | $9,880 | $5,650 | 1.7x |
| Candy | $5,308 | $3,489 | 1.5x |
| Salty snacks | $10,971 | $4,614 | 2.4x |
| Prepared food | $44,271 | $11,361 | 3.9x |
| Hot-dispensed beverages | $11,788 | $2,239 | 5.3x |
| Cold-dispensed beverages | $6,549 | $2,206 | 3.0x |
Core Gross-Profit Dollars by Quartile
| 2015 | Top quartile | Bottom quartile | Difference |
|---|---|---|---|
| Cigarettes | $8,498 | $4,167 | 2.0x |
| Packaged beverages | $14,167 | $4,985 | 2.8x |
| Beer | $3,019 | $3,301 | 0.9x |
| OTP | $2,724 | $1,612 | 1.7x |
| Candy | $2,513 | $1,712 | 1.5x |
| Salty snacks | $4,403 | $1,625 | 2.7x |
| Prepared food | $24,972 | $5,450 | 4.6x |
| Hot-dispensed beverages | $7,613 | $1,149 | 6.6x |
| Cold-dispensed beverages | $3,297 | $991 | 3.3x |
Core Category Gross-Margin Percentage by Quartile
| 2015 | Top quartile | Bottom quartile | Difference |
|---|---|---|---|
| Cigarettes | 12.25% | 12.24% | 0.01 points |
| Packaged beverages | 41.14% | 38.14% | 3.00 points |
| Beer | 18.66% | 22.25% | (3.59 points) |
| OTP | 27.57% | 28.54% | (0.97 points) |
| Candy | 47.35% | 49.07% | (1.72 points) |
| Salty snacks | 40.13% | 35.22% | 4.91 points |
| Prepared food | 56.41% | 47.97% | 8.44 points |
| Hot-dispensed beverages | 64.58% | 51.33% | 13.25 points |
| Cold-dispensed beverages | 50.35% | 44.89% | 5.46 points |
Direct-Store Operating Expenses (DSOE), All Quartiles
| Per store per month | 2014 | 2015 | Difference |
|---|---|---|---|
| Wages and benefits | $24,508 | $26,297 | 7.3% |
| Card fees | $7,449 | $6,595 | (11.5%) |
| Utilities | $3,331 | $3,370 | 1.2% |
| Repairs and maintenance | $3,245 | $3,468 | 6.9% |
| Supplies | $1,580 | $1,648 | 4.3% |
| Total DSOE | $47,375 | $48,786 | 3.0% |
| Facility expense | $10,917 | $11,743 | 7.6% |
| Total DSOE and facility expense | $58,292 | $60,528 | 3.8% |
Sources: NACS preliminary figures from NACS State of the Industry Survey of 2015 Data; CSX LLC
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