Regional SOI Data: South Central and West

Oil bust, low gas prices result in a mixed bag for inside sales

Abbey Lewis, Editor in Chief, CSProducts

For better or worse, gasoline played a major role in inside store sales—whether it was the oil-patch exodus in the South Central region, or favorable margins at the pump in the West. In-store sales were up in the West by 4.7%, while South Central saw a decrease of 0.4%.

“We saw the biggest exodus from the oil patch, and [the Bubba demographic] is a huge consumer of prepared food. That had a huge impact,” said Kyle McKeen, president and CEO of Dallas-based Alon brands. “Our area was really doing well and growing foodservice, but it’s been a challenge now in that area.”

Fuel gallons sold per store per month were up 0.9% in the West, while in the South Central they were down by 8.3%. And inside gross profits showed a similar gap, with South Central at a decrease of 1% per store per month, and the West gaining 4.6%.

Despite gains, challenges remain in the West in regard to employee retention. Nonmanager turnover increased by 10.3% in 2015.

“We continually lose staff to Uber and all that,” said Varish Goyal, president of Fremont, Calif.-based Vintners Distributors, in reaction to what he referred to as “1099,” a nod to self-employed tax-filing papers. “What we find is that a year later, they come back. We are at year two of this; it will be interesting to see what happens after.”


Key Productivity Measures

Dominating the South Central region, “Texas is the No. 1 state for the number of c-stores in the country,” said moderator Dae Kim of NACS. “It has more stores than any other state in the union. Texas alone is 10% of the store count in the country.”

And to that end, it is full of opportunity in foodservice. McKeen of Alon recognizes the possibilities inherent in the region’s lagging foodservice sales: “[Foodservice] is so powerful in the Northwest, but it’s an area in South Central that hasn’t been really developed.”

2015 National PCYA* South central PCYA*
Motor fuels gallons sold 147,508 0.7% 98,348 (8.3%)
Merchandise sales $124,001 4.8% $89,197 (0.5%)
Foodservice sales $32,890 9.6% $13,014 (4.7%)
Store operating profit $24,047 0.5% $13,264 (23.9%)
Break-even CPG 9.75 (8.4%) 11.14 9.6%
EBITDA $23,757 3.9% $12,133 (23.8%)
Nonmanager turnover (annual) 86.5% 12.2% 103.4% 11.2%
Manager turnover (annual) 21.2% (5.7%) 16.2% (25.2%)
Wages as a percent of gross-profit dollars 25.0% 4.4% 25.0% 10.8%
In-store gross-profit dollars per labor hour $30.21 4.1% $27.83 1.3%

Direct Store Operating Expenses (DSOE)

“Wages and benefits across every region have gone up, and that’s something that everyone is looking at today,” McKeen said. “It’s a perfect storm.” Operating expenses, outside of credit-card fees, are becoming incredibly difficult to manage, especially in areas such as South Central that have seen dramatic changes in the local economy—likely due to the boom and bust of the shale business.

Per store per month National South central PCYA*
Wages and benefits $26,297 $16,368 2.3%
Credit card charges $6,595 $4,786 (20.5%)
Utilities $3,370 $2,519 (5.8%)
Repairs and maintenance $3,468 $2,602 (0.6%)
Supplies $1,648 $981 (10.9%)
Total DSOE $48,786 $32,380 (3.1%)

Top 10 Merchandise Categories in Gross-Profit Dollars

Beer is king in the South Central region—and for unique reasons. “If you go out West, a drug store in California looks like a packaged-liquor store in Texas,” said C.J. Watson, vice president of small-format sales for Anheuser-Busch. “The competitive dynamic is very, very different. Single-serve beer is a huge mix of sales. Ice bins of single-serve beers, almost anywhere else you go in the country—that’s not available. This geography tends to sell larger pack sizes. You tend to see more beer caves.” And because high-end beers have a much higher margin and tend to be sold only in single-serve in this region, it’s a valuable segment.

Per store per month National PCYA* South central South central index PCYA*
Cigarettes $6,740 0.5% $4,505 67 1.0%
Beer $2,900 3.5% $3,744 129 1.3%
Packaged beverages $9,651 8.4% $6,806 71 5.6%
OTP $2,124 4.3% $3,247 153 (6.5%)
Salty snacks $2,799 9.9% $2,222 79 4.0%
Candy $2,169 2.4% $1,957 90 0.2%
General merchandise $951 5.2% $1,337 141 (0.4%)
Sweet snacks $1,087 8.1% $861 79 (2.3%)
Milk $921 10.2% $599 65 23.8%
Alternative snacks $1,581 12.1% $639 40 (3.6%)
Total merchandise $33,682 6.3% $26,681 79 (0.2%)

Source: CSX LLC | * Percent change from a year ago

Continued: West