'Impressive Trajectory' for Murphy USA

Fuel volume, merchandise sales grew in 2015

Andrew Clyde

Andrew Clyde

EL DORADO, Ark. --Retail fuel volume grew 3.4% for Murphy USA Inc. overall at 12.4-cents-per-gallon (CPG) margins as average-per-store-month (APSM) volumes declined 1.4% against the record fourth-quarter 2014 environment, the company said in reporting its financial results for the quarter and 12 months ended Dec. 31, 2015.

Merchandise sales increased 6.7% overall (1.7% APSM) at a 14.3% unit margin led by non-tobacco sales and margins, up 9.8% and 8.2%, respectively on an APSM basis, it said.

Net income was $66.7 million in fourth-quarter 2015, with income from continuing operations of $29.2 million.

"Murphy USA ended 2015 on an impressive trajectory, achieving our aggressive new-store and merchandise growth plans for the year. While fuel performance moderated from the record fourth-quarter 2014 environment, we grew total volume and market share for the year," said Andrew Clyde, president and CEO. "The company enters 2016 with strong earnings momentum from our major initiatives along with the clear focus of our independent growth plans."

The company added 44 new stores in the quarter, bringing the chain total to 1,335 stores at the end of 2105.

El Dorado, Ark.-based Murphy USA's board also approved the strategic allocation of capital to pursue new additional growth opportunities and to undertake a share repurchase program of up to $500 million by Dec. 31, 2017.

  • Click here for more details on Murphy USA's growth plan.

Income from continuing operations and adjusted EBITDA for the quarter ending Dec. 31, 2015, declined as retail fuel margins moderated to more historical levels when compared to the record margins earned in fourth-quarter 2014. The impact of lower retail fuel margins was offset in part by higher total fuel volume from new store additions, higher merchandise sales and margins and improved product supply and wholesale contributions.

Total network retail gallons sold in the quarter increased by 3.4%, ahead of demand growth in Murphy USA marketing areas. Per-store volumes declined 1.4% average per store month(APSM) and 1.5% same-store sales (SSS) reflecting a relatively more stable price environment in 2015 versus the steeply falling price environment witnessed throughout fourth-quarter 2014.

For the full year, per-site gallons declined 0.9% APSM and 1.0% SSS reflecting both the difference in Q4 volatility and the lack of the enhanced Walmart summer fuel discount program in 2015.

Product supply and wholesale margin dollars excluding renewable identification number (RINs) improved in the quarter as the period experienced a drop in Gulf Coast gasoline prices of 22 cents in fourth-quarter 2015 compared to 115-cent drop in 2014. The improvement for the quarter reflected improved inventory and timing variances offset by weaker supply-to-retail transfer prices due to the different market conditions.

Adding $23.6 million to the total fuel contribution was the sale of 53 million RINs at an average price of 45 cents per RIN in the current period. For the full year, RINs added $117.5 million to the bottom line as 218 million RINs were sold at an average price of 54 cents per RIN compared to 196 million RINs sold at an average price of $0.48 in 2014. For the full year, the combined contribution from PS&W and RINs effectively contributed an additional 2.44 CPG to the retail fuel contribution (e.g. dividing by retail gallons sold) in 2015 compared to 2.67 CPG in 2014.

Total merchandise sales increased 6.7% in the fourth quarter (up 5.2% full year), driven both by new store additions and 2.6% SSS growth. Total merchandise margin contribution increased 6.2% for the quarter (up 8.6% full-year), as per store improvements and effective promotional sales helped drive better system-wide performance. While merchandise unit margins were down by 0.1% for the quarter, on a full-year basis unit margins were up 0.4%.

Tobacco contribution per store for the quarter was down 2.9% (down 1.2% SSS) primarily due to rebate adjustments in the other tobacco products (OTP) category. Cigarette margin dollars increased per site on relatively flat sales for the quarter.

For the full year, the improvement in cigarette margin dollars led to the overall increase in tobacco contribution.

Non-tobacco contribution per store increased 8.2% APSM (6.2% SSS) for the quarter, driven by increases in beverages, general merchandise and lotto/lottery categories. Beverages continue to benefit from larger stores, enhanced product mix and promotions, and refresh/super-cooler improvements.

Total station and other operating expenses increased $2.3 million for the quarter while retail station operating expenses on an APSM basis declined 3%, primarily due to lower credit-card fees associated with lower average fuel prices. For the full year, total operating expenses on a per-store-month basis remained flat, excluding credit-card fees.

Murphy USA opened 44 retail locations in Q4-2015, bringing the year-end store count to 1,335 locations that include 1,111 Murphy USA sites and 224 Murphy Express sites. It opened a total of 73 stores during the year and it closed one Murphy USA location at a Walmart Neighborhood Market location with the real estate sold to a third party.