CHICAGO — The South and West regions of the country shined in 2018 as the best places to do business in the convenience-store industry.
On a national basis, total store sales per store per month increased 9.9%, but the South Central region saw sales jump 15.6%, the West rose 13.2% and the Southeast was up 12.2%, according to preliminary 2018 figures presented at the NACS State of the Industry Summit.
However, as with the rest of the country, the bulk of those sales increases came at the pump. Nationally, fuel sales were up 13.2% at c-stores, an average topped in all regions but the Midwest. Meanwhile, in-store sales growth—up 2.2% on a national average—was strongest in the West (up 5.9%) but down in the Midwest.
In the South Central region, which includes Texas and its collar states, growth in total sales per store per month leapt 15.6%, quickening its growth rate from the previous year. Much of the increase in that region came from fuel sales, which were up 16.9%, and foodservice sales, which rose 5.9%.
In foodservice, retailers in all regions saw lagging sales across different segments of the category, from a 14.8% decline in frozen dispensed beverages in the South Central region to a 16% drop in commissary foodservice in the Central region.
“Those are other channels stealing our customers,” said SOI Summit presenter Charles McIlvaine, chairman and CEO of Coen Oil Co., Canonsburg, Pa.
Some regions enjoyed terrific growth in commissary programs, with sales up 23.6% in the Southeast and an amazing 66.2% in the South Central region. The Midwest, however, saw foodservice and fuel declines similar to that of the South Central states, maintaining its position for a second year in a row as the worst-performing region of the country.
Westward Expansion
Despite the splash of red ink across various sales categories, gross-profit dollar performance was generally in the black, particularly in the Northeast, where fuel gross-profit dollars were up 10.1%, and merchandise (not including cigarettes) jumped 10.5%.
In foodservice, gross-profit dollars were up in most regions, led by the Southeast at 5.9% and the South Central states at 5.4%. Only the West saw a decline, down 2.4%. This was, significantly, the only bit of bad news in the West, where total gross-profit dollars rose 5.5%, fuel profits were up 5.6% and in-store profits grew 4.1%. In fact, the West was the only region that saw sales of cigarettes grow (up 2.3%) in 2018, making it the most resilient region.
Even as the West recorded healthy sales and profits, it was hammered with increasing expenses. Its total direct-store operating expenses (DSOE) and facility expenses grew an average of 8.4% in 2018, the bulk of it coming from credit-card fees and facilities, according to CSX data. The Midwest was least affected by core expenses (up just 1.8% overall) and in fact saw repairs and maintenance costs decline 4.2%.
Billy Milam, COO of RaceTrac Inc., Atlanta, and a co-presenter at the conference, said that many of the reporting companies in the Midwest are larger chains. “They have been able to pull costs out of the system; they are, frankly, more efficient because of their scale,” he said. Meanwhile, many of the companies in the West are smaller and don’t enjoy the same efficiencies.
“It’s certainly a weak signal to pay attention to,” Milam said.
Regional Sales Change
The West drove the most sales growth in 2018, led by fuel sales and fuel prices that were up 17.3% compared to the previous year. The Midwest maintained its position as the slowest-growing region.
Per store per month | NE | SE | MW | SC | CE | WE |
|---|---|---|---|---|---|---|
| Total sales | 10.9% | 12.2% | 6.9% | 15.6% | 10.8% | 13.2% |
| Fuel sales | 14.8% | 15.5% | 9.7% | 16.9% | 15.7% | 15.1% |
• Fuel gallons | 1.9% | 1.2% | (3.5%) | 1.0% | 1.1% | (1.9%) |
| • Average selling price | 12.7% | 14.1% | 13.6% | 15.8% | 14.4% | 17.3% |
| Inside sales | 3.8% | 2.8% | (0.4%) | 3.6% | 2.4% | 5.9% |
| • Foodservice sales | 5.4% | 6.7% | (5.1%) | 5.9% | 2.3% | 4.9% |
| • Merchandise sales | 3.2% | 2.2% | 0.2% | 3.2% | 2.5% | 5.8% |
| • Merchandise less cigarettes | 10.9% | 4.4% | 3.6% | 5.0% | 4.2% | 7.2% |
| • Cigarettes | (4.9%) | (1.5%) | (3.6%) | 2.0% | (1.0%) | 2.3% |
Source: NACS preliminary data. Final data to appear in the NACS State of the Industry Report of 2018 Data.
Regional Gross-Profit Dollar Change
The Northeast saw fuel sales increase 14.8% and fuel gross-profit dollars rise 10.1% in 2018. Cigarette profits were challenged in every region but the West and Southeast.
| Per store per month | NE | SE | MW | SC | CE | WE |
|---|---|---|---|---|---|---|
| Total gross profit | 7.0% | 5.2% | 2.7% | 10.1% | 3.6% | 5.5% |
| Fuel | 10.1% | 5.8% | 3.3% | 16.6% | 6.4% | 5.6% |
| • Pool margin | 10.0% | 4.5% | 7.1% | 15.4% | 5.3% | 7.7% |
| • Margin, credit-card fees | 10.5% | 2.7% | 6.3% | 16.4% | 16.4% | 5.9% |
| In-store | 4.8% | 4.1% | 1.0% | 4.6% | 2.1% | 4.1% |
| • Foodservice | 4.4% | 5.9% | 2.6% | 5.4% | 1.5% | (2.4%) |
| • Merchandise | 5.7% | 3.6% | 0.5% | 4.5% | 2.5% | 4.7% |
| • Merchandise less cigarettes | 10.5% | 4.1% | 4.1% | 6.3% | 4.1% | 5.7% |
| • Cigarettes | (6.2%) | 1.5% | (5.5%) | (5.7%) | (5.2%) | 0.7% |
Sources: NACS preliminary data. Final data to appear in the NACS State of the Industry Report of 2018 Data; CSX
Regional DSOE Change
A resurgence in credit-card fees took its toll on direct store operating expenses (DSOE) across all regions of the United States. Overall, the West proved the most resilient.
| Per store per month | NE | SE | MW | SC | CE | WE |
|---|---|---|---|---|---|---|
| Wages and benefits | 3.9% | 3.9% | 1.3% | 0.4% | 1.4% | 6.4% |
| Card fees | 10.9% | 12.7% | 11.5% | 17.2% | 10.6% | 14.3% |
| Utilities | 4.4% | 2.6% | (0.1%) | (2.1%) | 6.1% | 8.3% |
| Repairs and maintenance | 2.0% | (2.4%) | (4.2%) | 2.5% | 7.8% | 9.8% |
| Supplies | 2.4% | 2.2% | 1.7% | (0.5%) | 2.2% | 6.7% |
| • Total DSOE | 4.0% | 4.2% | 1.6% | 3.9% | 4.2% | 7.7% |
| Facility expense | 8.2% | 11.0% | 1.6% | (2.2%) | 7.0% | 11.7% |
| Total DSOE and facility expense | 4.8% | 5.5% | 1.8% | 2.5% | 4.7% | 8.4% |
Sources: NACS preliminary data. Final data to appear in the NACS State of the Industry Report of 2018 Data; CSX
Regional Category Sales
Cigarette sales lagged in every nation but one in 2018, while other tobacco products (OTP) showed the strongest growth.
| Per store per month | National | NE | SE | MW | SC | CE | WE |
|---|---|---|---|---|---|---|---|
| Cigarettes | (3.1%) | (4.9%) | (1.5%) | (3.6%) | (2.0%) | (1.0%) | 2.3% |
| Packaged beverages | 4.4% | 3.1% | 3.4% | 1.4% | 7.9% | 3.4% | 5.2% |
| Beer | 1.8% | 4.5% | 0.6% | 3.6% | 10.6% | (0.4%) | 4.7% |
| OTP | 23.6% | 33.3% | 11.2% | 23.6% | 8.1% | 17.4% | 27.4% |
| Salty snacks | 3.6% | (2.3%) | 10.7% | 2.3% | (3.7%) | 2.9% | 7.5% |
| Candy | 0.5% | (1.0%) | 2.7% | (2.3%) | 5.8% | 1.8% | 4.7% |
| Packaged sweet snacks | (5.9%) | (7.2%) | 1.6% | (8.9%) | 8.4% | (6.9%) | 4.1% |
| Milk | (5.7%) | (5.6%) | 4.0% | (11.6%) | 1.0% | (4.6%) | (8.8%) |
| Alternative snacks | 2.6% | (0.9%) | (2.7%) | 2.1% | 7.9% | 16.8% | 4.1% |
| General merchandise | (0.6%) | 5.1% | (6.4%) | 11.2% | 8.3% | 3.3% | (0.8%) |
Sources: NACS preliminary data. Final data to appear in the NACS State of the Industry Report of 2018 Data; CSX