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Healthy Start

Q1 in-store sales increases buck trend, CSX says

NEW YORK -- The convenience industry appears to have bucked a cyclical business trend in the first quarter of 2005, seeing healthy 3.8% increases in inside sales and a 1% increase in gallons of gasoline sold per store.

This information comes from CStoreXchange (CSX) LLC, a provider of performance benchmarking data. CSX executives supplied the data from their proprietary database during How's Business Review: Q1 2005, a CSPNetwork CyberConference. CSX partners include Dick Meyer, president of Meyer & Associates; Gene Gerke, [image-nocss] president of Gerke & Associates Inc.; Dr. David Nelson; and Francis Bologna, CPA.

To view an on-demand rebroadcast of this CyberConference (free to retailers, $49 for others), click here.

During the conference, Meyer said the CSX datamonthly reports from a group of 70 c-store companies with more than 3,000 storesshowed that the industry saw a 3.8% increase in inside sales during the first quarter of 2005. In addition, c-stores saw a slight 1.0% rise in gallons of gasoline per store.

I was very happy looking at this data, Meyer said. The great news is that in the first quarterwe came out favorable. The success is a good sign, he said, but brings up a key question. How can we sustain that or improve that? That will be one of our challenges.

Another encouraging sign, Meyer said, is that inside gross profit dollars jumped 6% in the first quarter 2005 over the first quarter 2004; however, wages were 2% more in the first quarter than last year, and that's probably just the beginning. I'm suspecting they'll go higher, Meyer said.

CSX defines wages as including health insurance, 401(k) programs and payroll taxes. I'm cautioning the industry to be very, very careful to get as much productivity out of your people as you can so we can sustain any favorable improvements in gross profit dollars, Meyer said.

Among the key expenses retailers need to watch, Meyer said, are credit-card fees. These fees have reached levels that prompted Meyer to say, I'm looking for the march on Washington, and I will be the first one in [line]. Those credit-card fees are absolutely suffocating us.

Firms providing data to CSX reported that in the first quarter of 2005, credit-card fees were 26% higher than they were in the first quarter of 2004. The average selling price of gasoline was only 19% higher. We need surgery in this area, Meyer said. The consumers are using plastic faster than the rate of the average selling price increase.

The average store paid $6,000 more in credit-card fees in 2004 compared to the previous year, and that number will likely not decline in 2005. It's probably going to be at least that again this year, Meyer said. And that comes right out of the pretax profit, and we don't sell any more gas because of it.

Another expense that bears careful analysis, said Bologna, a certified public accountant, is repairs and maintenance. Bologna said that in 2003 and 2004, those expenses only went up 4.3%, as a percent of the overall store operating expenses. Yet when you look at Q1 '05, our repairs and maintenance costs are up 11.0%, he said. So we have an opportunity to take control over some controllable expenses.

To address the problem, Bologna recommended retailers assign a member of the management team to own each expense category. Assigning an owner' to oversee those expenses and how those dollars are spent could prove to be a tremendous benefit by year's end, he said.

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