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Promising Outlook

Updated CSX data put 2005 on strong track

SALT LAKE CITY -- If you believe the numbers, 2005 is looking good for an industry battling skyrocketing gasoline street prices and continuing pressure from big-box retailers. Warmer weather and growing consumer acceptance of higher prices at the pump led to these upbeat numbers, which came to light yesterday at the opening session of this year's Outlook Leadership conference held in partnership with CSP in Salt Lake City.

About 250 retailers and suppliers in attendance at the afternoon session reviewed data provided by Columbia, Mo.-based CstoreXchange ([image-nocss] CSX), an industry research and benchmarking firm. The data showed in-store gross-profit percentages at 28.2% for a 12 month period ending in May 2005, slightly down from the 28.7% recorded a year earlier. However, pre-tax profit per store was up to $41,200 in that same 12-month period for 2005 compared to $36,700 from the year before.

Reviewing calendar-year data for the first five months of 2005, Dick Meyer, a CSX partner, said, This could be the best start ever, with our data showing average pre-tax profit per store up $1,800 per month.

Brad Chivington, senior vice president of sales and marketing for Mechanicsville, Va.-based GPM Investments, which operates the 160-store Fas Mart chain, said sales and percentages on many of the metrics GPM uses to benchmark are well above national averages and its own previous-year numbers.

Chivington credits the success to several initiatives, including a focus on a proprietary chicken operation, which now sells 2 million pounds of chicken annually, as well as a customized coffee area. In addition, Chivington credits a new philosophy of extending the season, with the season referring to the spike in sales during the summer months. Using this philosophy, he negotiated with vendors to extend their promotional efforts into the months that are traditionally lackluster.

We asked our suppliers: Can you apply some of those resources to move Memorial Day back to the beginning of April? Chivington said. At first they said they couldn't, but later they said they could.

CSX derived its overview of the industry through data collected from more than 100 firms representing 4,500 stores. Staff then used the data to compile what it calls same firm reports as a way to make more direct, year-to-year comparisons.

For a five-month comparison between January and May of 2005 vs. 2004, CSX reported a 3.4% increase in inside sales per store at $95,300 this year vs. $92,200 last year. Fuel margins grew 1.5 cents per gallon, hitting 12.2 cents per gallon in the first five months of this year vs. 10.7 cents per gallon last year. Fuel volumes also increased 1.3% to 109,300 gallons pre store so far in 2005, up from 107,900 in 2004. However, premium gallons sold per store slipped 9.5%, dropping to 6,100 gallons per store from 6,800.

Meyer, speaking along with CSX partner David Nelson, went on to predict a rosy 2005 for the industry based on these numbers. Calculating per-store profit for the calendar year, he said stores in the study should average $40,300.

Not everyone in the room shared Meyer's optimism. One California retailer, who declined to be identified, said gasoline price inversions and supply issues have had a negative effect on fuel margins. He said that while California can sometimes run contrary to the rest of the country, he was skeptical of the CSX figures.

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