Preliminary Overview Data From NACS State Of The Industry Summit 2016
It’s official: 2015 was one heck of a year for convenience store retailers.
“Lower gas prices left money in people’s wallets, driving both inside sales and gross-profit dollars,” said Andy Jones, president and CEO of Sprint Food Stores, Augusta, Ga., as he shared category data at the NACS State of the Industry Summit. “Cheap gas was good for everybody in this room.”
Inside sales rose 5.8% in 2015, with in-store gross profits up 6.1%, according to preliminary same-firm figures from the NACS State of the Industry (SOI) Report of 2015 Data. The number of transactions were higher each month of 2015 than in 2014, and this trend repeated itself in many of the core categories. Cigarettes, other tobacco products (OTP), beer and packaged-beverage unit sales were higher in almost every month of 2015 vs. 2014.
“Nine out of 10 of the top 10 categories had positive sales,” Jones said. “Ten out of 10 had positive gross-profit-dollar percent change. That’s great to see.”
Meanwhile, low gasoline prices gave consumers some extra incentive to upgrade other purchases to premium brands, such as cigarettes, beer and meat snacks.
But fuel is a cruel mistress for c-store retailers—or at least an unreliable, unpredictable driver of sales and profits. “History has shown us that margins expand as prices go down, and they get compressed when they go up,” Jones reminded attendees. He also pointed to growing direct-store operating expenses (DSOE)—up nearly 4% in 2015—as a major headwind for future growth.
While the c-store industry has had an “incredible” past two years, it is also not immune from a “perfect storm” of poor business conditions: declining transactions and shrinking fuel margins but increasing DSOE.
With this in mind, Jones urged retailers to concentrate on what they can control in 2016: growing merchandise and foodservice sales. Fortunately, a review of 2015 sales and profit figures for the top in-store categories reveals several opportunities for doing just that.
Total Industry Sales
A nearly 28% drop in fuel prices brought industry fuel sales down in 2015, but inside sale rose nearly 6% to a record $225.8 billion.
|Year||Inside sales ($ billions)||Fuel sales ($ billions)|
Source: NACS preliminary data; final data to appear in the NACS® State of the Industry Report of 2015 Data.
In-Store Sales and Gross-Profit Breakdown
Cigarettes managed to post a gain in gross-margin dollars in 2015, up a slight 0.5%, according to NACS’ same-firm sample.
|In-store category||2015 sales||PCYA*||2015 gross-margin dollars||PCYA*|
|Merchandise (including cigarettes)||$124,001||4.8%||$33,682||6.3%|
|Merchandise (less cigarettes)||$75,678||7.2%||$27,435||8.4%|
|Total in-store sales||$156,411||5.8%||$50,777||6.1%|
Source: NACS preliminary data. Final data to appear in the NACS® State of the Industry Report of 2015 data. | * Percent change from a year ago
Fuel: Sales and Gross-Profit Dollars
A nearly 28% drop in same-store gasoline sales matched up with the more than 28% decline in average price.
|Metric||Per store per month||PCYA**|
|Average selling price||$2.40||(28.2%)|
|Fuel pool margin CPG||21.64 CPG||(3.9%)|
|Fuel margin net credit-card fees||16.95 CPG||(1.1%)|
Source: NACS preliminary data. Final data to appear in the NACS® State of the Industry Report of 2015 Data. | ** Percent change from a year ago
There were many category bright spots in 2015, and some new challengers for the biggest drivers of in-store sales and profits. For example, on a trailing three-year basis, salty snacks have overtaken OTP in gross-profit-dollar growth and has matched it in sales growth, according to CSX data.
Other top in-store categories—packaged beverages, candy, beer and even cigarettes—have trended upward in sales over the past three years. And after years of declining cigarette gross profits, cigarettes finally posted slight growth in 2015, up 0.5% per store per month, according to preliminary NACS SOI figures.
Foodservice, while placing a distant second to cigarettes in share of in-store sales, was the clear leader in gross-profit dollars.
“Foodservice is only 20.8% of sales but it’s a whopping 33.7% of inside gross-profit-dollar contribution. That’s huge,” Jones said. “So it’s easy to see why it’s so important as a means to drive profitability.” Foodservice supplied more than twice the in-store profits of all of the tobacco subcategories combined in 2015.
Outside of foodservice, the next big in-store profit driver is packaged beverages, with 18.8% of gross-profit dollars in 2015. “We sold a lot of cigarettes and grew gross-profit dollars in that category,” Jones said, “but packaged beverages put a lot of money in the bank.”
Below, CSP digs deeper into the categories, revealing other areas where c-store retailers were able to pad their bottom lines.