TravelCenters of America Turns Economic Turmoil Into Stronger CPG Margins

WESTLAKE, Ohio — TravelCenters of America Inc. (TA) revealed its positive net income of $37 million from its third-quarter 2022, which translates to a 67% improvement compared to a year ago.

“While fuel margin remained a robust component of this quarter’s results, broad strength and innovation can be found throughout our business, overcoming significant inflationary forces that are affecting the broader economy,” said Jon Pertchik, CEO of TA.

Overall, non-fuel gross margin increased 11.4% to $339,560, and fuel gross margin increased 24.9% to $132,402.

• TravelCenters of America is No.28 on CSP’s 2022 Top 202 ranking of U.S. convenience-store chains by company-owned store count.

Although the war in Ukraine, ongoing supply chain constraints, stubborn inflation and other macroeconomic concerns are unlikely to resolve soon, these same macroeconomic uncertainties have created a favorable fuel market environment that allows for higher CPG margins, according to Pertchik.

“We expect persistent volatility to remain at least through the end of 2022 and perhaps well into 2023,” said Pertchik.

Another expected driver of fuel and non-fuel sales is TA’s new small fleet/private-label card program and the development of an artificial intelligence platform to support diesel street pricing.

During the third quarter of 2022, TA completed the acquisitions of three travel centers, one truck service facility and certain assets of a travel center that TA owns but previously leased and franchised for a total of $55.2 million inclusive of certain closing costs and other purchase price adjustment. During the first nine months of 2022, TA completed the acquisitions of certain assets of five travel centers and two truck service facilities to strengthen the geographic coverage of its network, according to the company.

TA’s growth strategy also includes adding franchised travel centers to its network. Since the beginning of 2020, TA has entered into franchise agreements covering approximately 56 travel centers to be operated under its travel center brand names. Five of these franchised travel centers began operations during 2020, two began operations during 2021 and one began operations during second-quarter 2022. TA expects the remaining 48 to all open by fourth-quarter 2024. The company is targeting 30 to 35 openings annually. 

Revenues from store and retail services rose 3.1% to $204 million for three months ending Sept. 30, while restaurant revenues increased 9.6% to $87 million. Sales growth in this area was offset by ongoing inflationary labor and operating cost pressures, according to the company.

TA also revealed its partnership with Cleveland Clinic, which will designate healthy meal options in full-service restaurants.

“We are upgrading some of our full-service restaurants, which are a key differentiator by bringing on known brands for us to operate and, separately, for us to lease, too,” said Pertchik. “These are just a couple of ways we are carefully working on our various offerings to continue to improve both top and bottom-line results as inflation impacts consumer behavior.”

Fuel growth margin increased $26.4 million to $132.4 million for three months ending Sept. 30, an improvement of just under 25%, and combined margin cents per gallon improved to $0.227, up $0.046, or 25.4%, compared to the prior year.

“In short, our fuel team has continued to meaningfully improve the supply management process and continue to leverage opportunities within a volatile marketplace to drive strong diesel CPG margins,” said Pertchik. “It is important to underscore that while favorable market conditions did continue during the third quarter, our solid results in fuel were due in part to the team capitalizing on that environment.”

TA’s fuel team plans to continue to identify and capitalize on opportunities to ensure adequate supply in a constrained marketplace and strive for lower costs on each delivered load, increasing margin, according to the company.

TA also saw demand for diesel exhaust fluid (DEF). “This product has become an important part of TA’s business, and we remain on track to have DEF dispensers on the diesel fuel island at all TA Petros nationwide by the end of this year,” said Pertchik.

The company is expanding its mobile maintenance business, in which it sends a technician into the yard of store locations to provide service for customers.

“While we will continue to expand that way, we can have further reach by growing that business in markets where we may not—or carters where we may not—have a travel center, but there is customer demand,” said Pertchik. “That is a way to expand, and it is a capital-light and operational expense-light way of growing that business.”