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SOI 2019: The Midwest Struggles as the South and West Soar

OTP and fuel drive sales, while cigarettes and credit-card fees cut deep
Photograph by Francisco Gonzalez

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







Total sales10.9%12.2%6.9%15.6%10.8%13.2%
Fuel sales14.8%15.5%9.7%16.9%15.7%15.1%

   • Fuel gallons







   • Average selling price12.7%14.1%13.6%15.8%14.4%17.3%
Inside sales3.8%2.8%(0.4%)3.6%2.4%5.9%
   • Foodservice sales5.4%6.7%(5.1%)5.9%2.3%4.9%
   • Merchandise sales3.2%2.2%0.2%3.2%2.5%5.8%
       • Merchandise less cigarettes10.9%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 monthNESEMWSCCEWE
Total gross profit7.0%5.2%2.7%10.1%3.6%5.5%
   • Pool margin10.0%4.5%7.1%15.4%5.3%7.7%
   • Margin, credit-card fees10.5%2.7%6.3%16.4%16.4%5.9%
   • Foodservice4.4%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 cigarettes10.5%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 monthNESEMWSCCEWE
Wages and benefits3.9%3.9%1.3%0.4%1.4%6.4%
Card fees10.9%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 maintenance2.0%(2.4%)(4.2%)2.5%7.8%9.8%
   • Total DSOE4.0%4.2%1.6%3.9%4.2%7.7%
Facility expense8.2%11.0%1.6%(2.2%)7.0%11.7%
Total DSOE and facility expense4.8%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 monthNationalNESEMWSCCEWE
Packaged beverages4.4%3.1%3.4%1.4%7.9%3.4%5.2%
Salty snacks3.6%(2.3%)10.7%2.3%(3.7%)2.9%7.5%
Packaged sweet snacks(5.9%)(7.2%)1.6%(8.9%)8.4%(6.9%)4.1%
Alternative snacks2.6%(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

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