Murphy Reports 4 Growth Areas at Year’s End

EL DORADO, Ark. -- Saying they were impressed by the “relative resilience” of fuel margins and strong merchandise sales, officials with Murphy USA reported net income of $77.5 million in fourth-quarter 2018 during their quarterly investor call on Jan. 30.

Though the numbers were far lower than fourth-quarter 2017 at $124.8 million, that quarter experienced a deferred tax benefit of $88.9 million due to the Tax Cuts and Jobs Act that took effect in December 2017.

“We drove traffic to our stores in the fourth quarter [of 2018], growing per-store volumes and generating the second strongest fourth-quarter fuel contribution since our 2013 spinoff [from Murphy Oil Corp.],” said Andrew Clyde, president and CEO of El Dorado, Ark.-based Murphy USA. “Merchandise capped off an outstanding year, contributing over $400 million of margin in 2018 with line of sight to further improvement in 2019.”

Here are four areas where the chain saw significant improvement …

Total fuel contribution (including retail margins and other fuel-related earnings) for fourth-quarter 2018 was 20 cents per gallon (CPG) compared to 16.5 CPG in fourth-quarter 2017. For the full year, total fuel contribution was 16.2 CPG in 2018 compared to 16.4 CPG in 2017.

Also, total retail gallons increased 4.8% to 1.1 billion gallons for the network during fourth-quarter 2018, while volumes on a same-store sales basis increased 2.1% vs. the prior year quarter. For the full year, total retail gallons increased 2.2% to 4.2 billion gallons, while same-store-sales volumes had a slight decline of 0.6%.

Same-store fuel volumes increased 2.1% to 246,840 gallons in the fourth quarter vs. the prior year period, primarily due to a falling-price environment that generated both strong margins and increased customer traffic, the company said.

Merchandise contribution dollars grew 5.2% during the quarter to $102.1 million on average unit margins of 16.6%, up 30 basis points from 16.3% in fourth-quarter 2017. For the full year, merchandise contribution dollars were up 5% to $400.4 million on average unit margins of 16.5%, a 40-basis-point increase vs. 2017.

Tobacco same-store sales growth was consistent through the last half of the year at a 0.3% increase in both the third and fourth quarters. The opening of new-build and remodeled stores in strategic locations, as well as increased involvement in manufacturer promotional programs, helped build the category during the period, officials said.

The chain’s “Murphy Drive” loyalty program will move from pilot testing into a national rollout starting in March, Clyde said. Currently the program has 1 million people signed on in its northern Texas and Tennessee markets, with Clyde specifically mentioning Florida as a target for pending expansion. He said the program is encouraging customers to make extra trips, buy more gallons per month and increase their market-basket sizes inside the stores.

“We continue to believe this program has the potential to be significantly incremental in terms of driving gallons, trips and new customers, further distinguishing Murphy USA as an everyday, low-price leader in the c-store channel,” Clyde said.

Murphy USA operates more than 1,400 stores under the Murphy USA and Murphy Express banners. Its stations are typically located near Walmart stores as part of a now-defunct partnership, while Murphy Express stores are stand-alone stations. Murphy USA stations tend to be smaller, kiosk-format stores, while Murphy Express stations are larger convenience stores.