While top-performing convenience stores inevitably require more to run, the profitability of those same stores is exponentially higher than the bottom 25% of operators.
Whether the measure is cents-per-gallon (CPG) break-even, productivity per square foot or labor cost per hour, the top quartile’s earnings and profitability numbers are six or seven times greater than that of the bottom quartile, according to Billy Milam, president of RaceTrac Petroleum, Atlanta, and member of the NACS research committee.
“With CPG break-even, top-quartile companies had a 9-cent advantage coming out of the gate,” Milam said, “with inside sales per square foot almost double the bottom quartile with slightly less space.”
Bottom-quartile companies had a CPG break-even of 17.15 cents; top-quartile firms needed only 8.71 cents. The measurement refers to how much a company would have to make on a gallon of gasoline to cover costs.
In terms of inside sales per square foot, bottom-quartile stores averaged $34.44 per store per month, while top quartile was $73—with average square feet about the same (2,749 square feet for bottom quartile and top firms slightly less at 2,568 square feet).
The differences stem from advantages in everything from scale to format, efficiency to responsiveness. Speaking about the innovations of top-performing firms, Steve Loehr, vice president of operations support for La Crosse, Wis.-based Kwik Trip, and current chairman of NACS, told the audience of some of the decisive strategies the company has undertaken.
Loehr described expanding the footprint of new stores by 1,000 more square feet (with Kwik Trip locations already above industry averages in terms of store size) to create a “market feel.” Changes include:
- Butcher-quality meat.
- An improved hot-beverage program, including a self-serve espresso and hot- and cold-coffee system.
- The company’s first non-gas test store on the University of Wisconsin–Madison campus.
- Compressed natural gas (CNG) added to 35 stores, with 10 new stores scheduled for upgrade.
An increase of 35 stores in recent months has meant 2,400 new employees, for which the chain received 120,000 applications.
“That’s a 1.8% acceptance rate,” Loehr said. “It’s three times more likely you’ll get accepted to Harvard than at Kwik Trip.”
On the metric of people, Milam pointed out that top-quartile performers spend about $2 more at $14.57 per hour than bottom-quartile firms ($12.21), but gross-profit dollars per labor hour are $11 more, $31.91 for top companies vs. $20.67 for the bottom 25%.
Non-manager turnover rates annually are lower for top-quartile companies (82.3%) vs. bottom-quartile stores (102.1%). Manager turnover is about the same, with top performers at 18.2% and the bottom at 18%.
CONTINUED: Deep in the Top Decile
Deep in the Decile
NACS also provided a breakdown of how the top quartile performed against the top 10% of high-profit performers, the top decile. In this comparison, the variances are less pronounced, but differences exist. Top-decile companies sell 1.13 times more gallons of motor fuel, have a CPG break-even of 0.58 cents less and reap a store operating profit of 1.31 times the top quartile, at $52,047 per store per month vs. the top quartile at $39,605.
While all stores benefited from the sudden fall in crude prices, top firms outperformed the bottom quartile in the increasingly important area of foodservice. As demand trends for the core categories of fuel and cigarettes stagnate, the high-margin segment of foodservice is a bright spot. In that area, top performers outpaced the bottom by 2.8 times, with top stores averaging $40,150 per month per store vs. bottom performers at $14,105.
Though pointing out differences, Milam said that as a whole, the industry performed well in 2014. “We saw exceedingly strong profit and a strong foodservice performance,” he said. “We’re starting to get it.”
Top 10% Still Raise the Bar
Though the gap between the top 10% of high-performing chains and the top 25% is far smaller than comparisons to the bottom 25%, marked differences still exist—especially in foodservice and store operating profit.
Comparing Top 10% vs. Top 25%
| Per store per month | Top 10% | Top quartile | Difference |
| Motor fuels gallons sold | 225,139 | 199,307 | 1.13x |
| Break-even CPG | 9.29 | 8.71 | 0.58 |
| Merchandise sales | $157,302 | $147,995 | 1.06x |
| Foodservice sales | $58,878 | $40,150 | 1.47x |
| Store operating profit | $52,047 | $39,605 | 1.31x |
| EBITDA | $49,533 | $37,565 | 1.32x |
| Net profit margin (pretax/sales) | 4.36% | 3.63% | 0.73 points |
Source: CSX LLC
Top Quartile vs. Bottom Quartile
| 2014 | Top quartile | Bottom quartile | Difference, top vs. bottom |
| Capital Productivity | |||
| Store operating profit | $39,605 | $5,660 | 7.0x |
| Store operating profit per square foot | $15.42 | $2.06 | 7.5x |
| Break-even CPG | 8.71c | 17.15c | 0.5x |
| EBITDA* | $37,565 | $6,116 | 6.1x |
| Net profit margin (pretax/sales) | 3.63% | 0.37% | 3.26 points |
| Return on capital employed | 19.81% | 5.94% | 13.87 points |
| Store Operational Productivity | |||
| Motor fuels gallons sold | 199,307 | 99,647 | 2.0x |
| Merchandise sales | $147,995 | $81,647 | 1.8x |
| Foodservice sales | $40,150 | $14,105 | 2.8x |
| In-store gross margin % | 32.55% | 29.21% | 3.34 points |
| Average square feet | 2,568 | 2,749 | 0.9x |
| In-store sales per square foot | $73.00 | $34.44 | 2.1x |
| People Productivity | |||
| Labor cost per hour | $14.57 | $12.21 | 1.2x |
| In-store gross-profit dollars per labor hour | $31.91 | $20.67 | 1.5x |
* Earnings before interest, taxes, depreciation and amortization
Source: Preliminary figures from NACS State of the Industry Survey of 2014 Data and CSX LLC
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