OAK BROOK, Ill. -- Could October and November 2006 indeed have generated the lowest gasoline margins in over a decade, as the chairman and CEO of The Pantry Peter Sodini announced on a company earnings call last week? All evidence points to yes.
As several oil companies posted their fourth-quarter 2006 earnings yesterday, most included extreme retail marketing losses versus the previous year and noted much lower retail gasoline margins despite increased volume as the reason.
Retail marketing had a loss of $11 million in the fourth [image-nocss] quarter of 2006 versus income of $25 million in the fourth quarter of 2005, said Sunoco Inc., Philadelphia, in its earnings report. The decrease was primarily due to much lower retail gasoline margins. Monthly gasoline and diesel throughput per company-owned or -leased outlet was up 14% from the fourth quarter of 2005.
Similarly, ExxonMobil announced, Downstream earnings were $1,960 million, down $430 million from the fourth-quarter 2005, as lower refining and marketing margins more than offset the earnings benefit related to our continuing efforts to efficiently manage inventories.
The Pantry itself reported January 25 average gasoline margins of 8.6 cents per gallon (cpg) for the quarter, well below the average 12.8 cpg for the 12 months ending December 31, and dramatically down from the 21.2 cpg the company saw the previous year in the wake of Hurricane Katrina.
Sodini said the poor margins were an historical anomalyspawned by an absence of volatility in the commodity market and [this] is unlikely to be replicated in the near-term.
The results echo comments made by industry analyst Dick Meyer during a CSPNetwork CyberConference in December. Meyer said he did not expect gasoline margin averages for the fourth quarter would match those from 2005. Pointing to the post-Hurricane Katrina and Rita period, when retailers reaped net favorable margins triggered by uncertain fuel supply conditions last September through November, Meyer said those trends were unlikely to recur in 2006. [To view an OnDemand Replay of the CyberConference, click here.]
Meanwhile, financial investment advisor Web site The Motley Fool issued a report noting the importance of petroleum retailers to balance their income.
Convenience stores work hard to motivate gas-purchasing consumers to step inside and buy snacks, beverages and other general merchandise, wrote Ryan Fuhrmann, a chartered financial analyst. Why? Merchandise sales carry high marginsaround 37% in The Pantry's caseespecially compared with gasoline margins, which average closer to 6%.
In the days following The Pantry's quarterly report announcement, its stock dropped about $1 a share on NASDAQ.
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