CORPUS CHRISTI, Texas -- Nearly a year after Susser Holdings first announced its intention to purchase the Town & Country chain, the integration of the two companies is beginning to pay off to a tune five times greater than originally expected. "Now that the integration of Town & Country is complete, we'll start to realize the full synergy savings of about $500,000 a quarter," said CFO Mary Sullivan on a recent conference call.
And once all the synergies are added up, Susser Holdings expects to save $10 million a year, compared to the $2 million initially suggested in September 2007. [image-nocss] In March 2008, the company projected about $5 million in savings.
"Our guidance is for $10 million of synergies arising from the Town & Country acquisition," president and CEO Samuel L. Susser said on the second-quarter earnings call with stock analysts earlier this month, "$2 million of which are G&A [general and administrative] savings. We expect to realize that beginning now, in the third quarter of this year.
"And on the merchandise and fuel side, we expect to realize a full $8 million in 2009, but the vast majority of it we expect to realize here in Q3 and Q4 [of 2008]."
Thus far, the synergies mostly are related to renegotiated contracts of scale related to the company's new size.
"The increased scale that we got out of Town & Country put us in a position to negotiate for stronger deals, more promotional support, more service from our DSD vendors, and that's impacting not just Town & Country but also Stripes," Susser said. "The dollars that we're talking about in synergies are procurement savings that are long-term, sustained, contractual savings that we expect to be repeatable not only for the next 12 months but for the years ahead."
He added that there is still potential for additional synergies to fall into place in the coming years, mostly centered on foodservice.
"On the food side, we still have runway left, and I would have to describe it as a long, slow runway," Susser said. "It's years of work and opportunity and remodeling of stores and working on the menu. We went after the stuff that we could impact quickly first, and we have got it implemented, and we are realizing great sales growth and great margin growth as a result. On the food side, we 've got opportunity that we need to be working toward for the next two or three years before it will flatten out."
And the groundwork for that has already been laid.
"Since the acquisition, we 've been able to create some positive sales momentum in the foodservice business out west," Susser said. "A lot of that is coming from improved staffing. We've really focused on the people side. We've been able to increase the hours of operations, and I think the biggest change has been we 've enhanced in-stock conditions. We've got more food made fresh, available and ready to go."
He added, "We also have begun to test just recently our Loredo Tacos out west. I'm certainly not ready to declare a victory. I think this is a long-term project for the business, but we're pleased with the initial results and we expect to keep learning and responding to what the consumer tells us."
Corpus Christi, Texas-based Susser Holdings is a third-generation, family-led business that currently operates 510 c-stores in Texas, New Mexico and Oklahoma under the Stripes and Town & Country banners. Restaurant service is available in more than 285 of its stores, primarily under the proprietary Laredo Taco Co. and Country Cookin' brands.
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