NEW YORK -- Despite the devastation and tragedy sown when Hurricane Katrina blew ashore near New Orleans in late August, 2005 so far has been especially good for convenience retailers. It could even be a year of record profits depending on how the price of gasoline affects consumer spending.
Pretax profit per store in the first six months of 2005 was up significantlymore than 44%according to executives with CStoreXchange (CSX) LLC, a provider of monthly performance benchmarking data in the convenience industry. That's very good news for the industry, [image-nocss] said CSX partner Gene Gerke. I doubt if we can maintain that for the whole year but if we keep pushing it, this should be a very good year for the industry in terms of profits.
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Gerke drew that conclusion by examining CSX's proprietary retail database packed with data from more than 65 convenience chains representing more than 3,000 stores. Gerke and CSX partner David Nelson discussed their findings during How's Business 2005: Mid-Year Review, a CSPNetwork CyberConference sponsored by BIC USA.
Gerke and Nelson painted a mostly optimistic picture of the industry's performance through the first half of 2005, even though this period is typically not the industry's best time of year. I think the convenience store side of the industry is definitely having a better year this year than it did a year ago, Nelson said. It has the potential to be a record year.
Nelson and Gerke told attendees that the effects of Hurricane Katrina will be huge, but will likely be mostly regional. Gerke noted that the storm certainly destroyed many businesses that were directly in its path, but that convenience chains in other areas actually experienced a boost in sales as people fled from the Gulf Coast. Gerke said that to predict what it means for the industry overall is difficult at this point.
Gerke added that CSX data indicates that the Gulf Coast region was not having a particularly good year even before the disastrous storm, so the hurricane was bad news on top of bad news for retailers there.
While most of the news about c-store profits was good, Nelson and Gerke warned that high fuel prices will play a key role in determining c-store retailers' success for the remainder of 2005.
By way of example, Nelson pointed out that the top four fastest-growing expenses for petroleum marketers in the first half of 2005, according to CSX's corporate database of more than 100 companies, were all fuel-relatedfuel costs, credit card fees, contracted freight and gross receipt taxes. This was happening even before Hurricane Katrina pinched gasoline supplies causing record price spikes.
Gerke and Nelson both emphasized the need for all industry players to grow non-fuel gross profit dollars to offset fuel-related expenses and the competitive pressures on fuel margins.
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