Murphy USA President Andrew Clyde was positive about the convenience-store chain’s first-quarter 2023 performance in the company’s earnings call Wednesday. Despite the El Dorado, Arkansas-based company’s net income of $106.3 million being lower than first-quarter 2022, it was one of the chain’s best first quarters, which are historically considered shoulder quarters with lower margins being the norm, he said.
“Thinking about the environment in which we generated such strong first quarter results, the most notable element was perhaps the market lack of commodity price volatility as compared to the prior-year period when the Russia-Ukraine conflict first erupted,” Clyde said. “As a result, retail fuel margins were relatively stable throughout the quarter, generally ranging from about 15 cents to 30 cents per gallon.”
- Murphy USA is No. 4 on CSP’s Top 40 update to the 2022 Top 202 ranking of U.S. c-store chains by total number of retail outlets. Watch for the full 2023 ranking in June.
Clyde said Murphy USA continues to see robust fuel traffic despite lower street prices, suggesting sticky behavior from customers who may have initially come to Murphy USA c-stores seeking low prices in a high-price environment and became loyal shoppers due to the chain’s attractive value in its in-store offer.
Merchandise contribution dollars increased, up 6.5% to $187.1 million for the first quarter.
“In-store performance from the Murphy network was even more impressive with higher unit growth and sales growth in almost every category, despite passing through some manufacturer-driven price increases,” Clyde said of the Murphy USA- and Murphy Express-branded c-stores.
Center store and packaged beverage categories delivered roughly 20% sales and margin growth, benefiting from strong new stores and raze and rebuild performance; store resets; and promotional focus on growing categories like energy drinks, he said.
“On the QuickChek side, performance is also strong but facing a different set of challenges unique to its geography and expanded offer,” Clyde said. “Mobility trends in the QuickChek geographies are affected by lower commuter traffic, which has not recovered as fast as other areas of the country, impacting both the fuel and merch businesses.”
The nicotine category is also pressured, he said, but new initiatives, particularly in the smokeless tobacco segment, are showing early signs of improvement.
Prepared food is up modestly as the chain competes with quick-service restaurants (QSR) while maintaining its value proposition. The company has intentionally lagged broader QSR price increases by about 10% over the last couple of years.
“Although food and beverage margins are down 2.2% year over year, we will not compromise our value position in the market at the expense of short-term results,” Clyde said.
When it comes to store growth, Murphy USA’s capital is dedicated to growing the business through new stores and raze and rebuilds. New stores are delivering strong returns in the current environment, he said, and the company is on track to open 35 to 40 new stores in 2023, including six new QuickChek stores and 30 raze and rebuilds.
“Given the strong returns and repeatability of success in our new-store formats, we are investing in our real estate pipeline, growing our inventory in future locations, for both the Murphy USA and QuickChek brands, ultimately preparing the business to deliver more than 50 new stores per year when conditions allow in the future,” Clyde said.
El Dorado, Ark.-based Murphy USA operates gas stations in 27 states primarily in the Southwest, Southeast, Midwest and Northeast. Most of Murphy USA's sites are located adjacent to Walmart stores.