4 Ways Murphy USA Improved Profits

EL DORADO, Ark. -- “Accelerating” merchandise profits propelled Murphy USA Inc. to report net income of $55.6 million in second-quarter 2017, compared with net income of $46.3 million in second-quarter 2016.

"Our strong results in the second quarter demonstrate the substantial earnings power of our low-cost, high-volume business model during periods of favorable retail fuel margins," said President and CEO Andrew Clyde. "Meanwhile, our merchandise profits are accelerating while per-store operating costs continue to decline, creating further upside operating leverage while reducing the company's earnings volatility during periods of challenging fuel margins."

Merchandise contribution dollars grew 5.5% during the quarter to $97.7 million, achieving a record unit margin of 16.1%.

“A lot of it is the new team kicking in, new leadership, new processes, around center of store,” Clyde said on the company’s earnings call.

Here are four ways Murphy USA's earnings improved ...

In late March, Murphy USA announced a change in its senior leadership following the departure of Marn Cheng, senior vice president of retail operations support, who resigned for personal reasons. The company reassigned his responsibilities internally and won't fill the senior vice president’s role.

“We've just gotten a lot smarter around some of our center-of-store opportunities,” said Clyde. “We just did a reset on our kiosk nontobacco, nonbeverage items, which was long overdue. We just did a beverage reset as well. The store managers I spoke with in the days after were really excited about the new mix of products.”

He described it as “continuous improvement opportunities around basics, more effective promotions and promotional activity working better in concert with our vendors than we had in the past.”

Total retail fuel margin plus product supply and wholesale, including renewable identification numbers (RINs), for second-quarter 2017 was 18.1 cents per gallon (CPG), compared with 16.8 CPG in second-quarter 2016.

Total retail gallons grew 2.5% to 1.06 billion gallons for the network during second-quarter 2017, while volumes on an average per-store-month (APSM) basis declined 2% vs. second-quarter 2016, and retail fuel margins averaged 16.6 CPG vs. 10.8 CPG in second-quarter 2016.

Murphy USA opened five retail locations in second-quarter 2017, not including 12 raze-and-rebuilds, bringing the quarter-end store count to 1,411, consisting of 1,154 Murphy USA sites and 257 Murphy Express sites. The company is building a total of 24 stores along with two kiosks undergoing razing and rebuilding, which will return to operation as 1,200-square-foot stores before the end of the year. It has opened seven stores since the end of second-quarter 2017.

“As we continue to do our refresh program, we'll finish 900 accelerated refreshes by the end of this year,” Clyde said. “That makes our stores look better, deliver a better offer. The same with the raze-and-rebuilds.”

El Dorado, Ark.-based Murphy USA is a retailer of gasoline and convenience-store merchandise with more than 1,400 locations in 26 states, primarily in the Southwest, Southeast and Midwest. Murphy USA was ranked No. 5 in CSP's 2017 Top 202 list of the largest c-store chains in the United States.