7 C-Store Chains Benefiting From Tax Reform
By Greg Lindenberg on Apr. 10, 2018WASHINGTON -- The U.S. Tax Cuts and Jobs Act, which President Trump signed into law just before Christmas in December, appears to have driven significant financial benefits for companies and their employees in the convenience-store industry.
The tax reform cuts more than $5.5 trillion in taxes over 10 years, the administration said. The act cut the corporate tax rate by nearly 15%.
Many businesses are reaping the rewards of the reforms, and some are responding by rewarding their workers. More than 500 companies nationwide have announced pay raises, bonuses, 401(k) match increases, expansions and utility rate cuts since the president signed the bill into law Dec. 22, according to Americans for Tax Reform, which tracks the benefits.
Here are some of the convenience-industry retailers that have announced tax-reform-related rewards for their employees or cited tax reform as a reason for improved earnings …
1. Stewart’s Shops
Citing the success of its retail offering, its competitive positioning and recent tax reform, Stewart’s Shops Corp. said in April that its employees are receiving their profit-sharing statements with more than 20% growth on their existing accounts.
“This success is from the service our great partners provide, our broader foodservice, the value of being a retailer not significantly impacted by Amazon, and the changes in the federal corporate tax law,” the company said.
Ballston Spa, N.Y.-based Stewart’s Shops has 336 stores in 31 counties in upstate New York and southern Vermont. The retailer is No. 27 on CSP's 2017 Top 202 ranking of c-stores by number of company-operated locations.
2. Allsup’s
In March, Allsup's Convenience Stores Inc. gave all full-time, nonexecutive employees who have been with the company at least a year a one-time time cash bonus of $1,000.
The bonus was a result of the Tax Cuts and Jobs Act, the company said.
“The new tax reform legislation provides tax cuts for individuals and companies and should result in positive economic growth,” said Allsup’s.
Clovis, N.M.-based Allsup’s operates 317 c-stores in New Mexico, West Texas and Oklahoma. The chain ranked No. 26 in a year-end update of CSP’sTop 202 list of the largest c-store chains in the United States for 2017.
3. Family Express
Family Express Corp. has boosted its starting wage thanks to the tax-reform bill, the company said in February. The retailer’s entry-level associates will now earn $11 an hour.
The c-store chain’s decision to increase wages by $1 per hour is not the first pay boost by the company. In 2015, Family Express began providing above-market compensation ahead of other retailers.
Valparaiso, Ind.-based Family Express has nearly 70 c-stores in Indiana. The retailer is No. 85 on CSP's 2017 Top 202 ranking of c-stores by number of company-operated sites.
4. Marathon Petroleum/Speedway
Marathon Petroleum Corp. credited changes to the U.S. tax code for substantially increasing company earnings during the fourth quarter of 2017 and for the full year.
The company reported fourth-quarter earnings of $2.02 billion vs. $227 million in fourth-quarter 2016. For the full year, earnings were $3.43 billion, compared with $1.17 billion in 2016.
During the fourth quarter, the Tax Cuts and Jobs Act significantly revised U.S. corporate income tax law by, among other things, reducing the corporate income tax rate to 21%. Marathon earnings for the fourth-quarter and full year include a tax benefit of about $1.5 billion as a result of remeasuring certain net deferred tax liabilities using the lower corporate tax rate.
Findlay, Ohio-based Marathon Petroleum is the nation's second-largest refiner, with a crude-oil refining capacity of about 1.9 million barrels per day in its six-refinery system. Marathon-brand gasoline is sold through about 5,600 independently owned retail outlets across 20 states and the District of Columbia. Its Speedway LLC unit, based in Enon, Ohio, operates approximately 2,740 c-stores in 21 states and ranked No. 3 on CSP'sTop 202 2017 list of the largest c-store chains in the United States.
5. Murphy USA
Murphy USA reported fourth-quarter 2017 net income of $124.8 million, compared with net income of $43.8 million in fourth-quarter 2016. This included an estimated deferred tax benefit of $89 million thanks to the Tax Cuts and Jobs Act.
For full-year 2017, net income was $245.3 million, compared with $221.5 million for full-year 2016.
The Tax Cuts and Jobs Act's passage has helped Murphy boost its after-tax cash profile for year-end 2017 by more than $2.7 million. The retailer’s effective tax rate, including state taxes, should end at 24% to 26%, down from the upper-30% range.
Regardless, executives aren’t planning to go on a spending spree with the extra cash. “The tax reforms certainly created some benefits in flexibility,” CEO Andrew Clyde said. “There is nothing at all about our capital allocation discipline that’s going to get looser. It’s going to remain as tight as it’s ever been.”
The El Dorado, Ark.-based chain has more than 1,400 c-stores. It is No. 5 on CSP's 2017 Top 202 ranking of c-stores by number of company-operated locations.
6. Casey’s
Concerning the tax reform, Casey’s General Stores Inc. CFO Bill Walljasper in December said, “We anticipate it will have a significant, one-time favorable impact on our earnings per share when it becomes effective, as Casey’s will reset its deferred tax liabilities at a new, lower tax rate. Going forward, the company will benefit from the substantially lower corporate effective tax rate.”
In a filing with the U.S. Securities and Exchange Commission in March, Casey’s said, “As the company has an April 30 fiscal year-end, the lower corporate income tax rate will be phased in, resulting in a U.S. statutory rate of 30.4% for the fiscal year ending April 30, 2018. The company’s statutory federal tax rate will be 21% for fiscal years ending April 30, 2019 and beyond. … For the three months ended Jan. 31, 2018, the company recorded a one-time tax benefit of $167 million due to a remeasurement of deferred tax assets and liabilities. In addition, applying the reduced rate of 30.4% to our first- and second-fiscal-quarter earnings resulted in an $8 million reduction to tax expense.”
Ankeny, Iowa-based Casey’s has more than 2,000 c-stores in 15 mostly Midwestern states. The company ranked at No. 4 in CSP’s 2017 Top 202 list of c-store chains by size.
7. Couche-Tard
Alimentation Couche-Tard Inc. cited the U.S. Tax Cuts and Jobs Act for a 62% increase in net earnings despite weak same-store sales and fuel volumes. The global c-store retailer reported net earnings of $463.9 million for its third quarter ended Feb. 4, 2018, vs. $287 million for the comparable period in 2017.
Couche-Tard received a net tax benefit of $196.3 million following the tax reform taking effect, it said.
The benefit derived mostly from the remeasurement of the company’s deferred income-tax balances using the new U.S. statutory federal income-tax rate, which decreased from 35% to 21%, partly offset by the Deemed Repatriation Transition Tax, it said.
"We are continuing our push toward integration, digitalization and mobilization of advanced technology to bring even more efficiencies to our operations. Additionally, after further review, our analysis indicates that with all else equal, the U.S. tax reform should bring our consolidated tax rate down to a range of approximately 17% to 19%, starting in fiscal year 2019,” said Claude Tessier, CFO.
Laval, Quebec-based Couche-Tard has more than 8,000 Circle K and other c-stores in the United States. Its CrossAmerica Partners LP unit supplies fuel to more than 1,300 locations in the United States. Couche-Tard is No. 2 in CSP’s 2017 Top 202 c-store ranking by number of U.S. company-operated locations.