Susser Sets Stripes Record in 2013

Wells Fargo's Herzog makes growing Texas retailer her top c-store recommendation

Susser Stripes Convenience Stores Laredo Taco Compamy

CORPUS CHRISTI, Texas -- Susser Holdings Corp., which opened a record number of Stripes convenience stores in 2013, is a "best-in-class retail business [and] has some of the best growth prospects in the convenience store industry," according to analyst Bonnie Herzog, writing in Wells Fargo Securities LLC's newly released Integrated Research & Economics Outlook 2014.

"Susser is a best-in-class convenience store and foodservice and operator and one of the most compelling growth stories in the c-store industry," she wrote, making it her top recommendation.

Meanwhile, Susser Holdings has announced that it expects to report same-store merchandise sales growth of approximately 2.4% for fourth-quarter 2013 and 3% for the full year, with total merchandise sales of approximately $1.1 billion for the year.

The company has "a concentrated, but underpenetrated, presence in the dynamic and attractive Texas market," she said. "[Its] Stripes c-stores and the valuable Laredo Taco Co. brand have a stronghold in south Texas, and we expect management will pursue broader in-state expansion over the next three-to-five years via acquisitions and organic growth."

Retail average per-store fuel volume growth of approximately 7.8% for the quarter and 5.8% for the year, with total retail gallons of approximately 936 million for the year.

Susser Petroleum Partners LP said that it expects to report total gallon growth of approximately 15% for the quarter and 8% for the year, compared to pro forma 2012 results as if it had been in operation for the entire period. For the full-year 2013, Susser Petroleum said that it expects to report total fuel volume of approximately 1.57 billion gallons.

The master limited partnership (MLP) business model "provides a significant competitive advantage" to Susser, said Herzog. It can "take advantage of [Susser Petroleum's] combined retail and wholesale fuel purchasing volume to obtain attractive pricing and terms while reducing the variability in motor fuel margin. The IPO also lowered [Susser Holdings'] cost of capital and created a strategic vehicle for growth and acquisitions."

Susser Holdings opened nine new large-format Stripes c-stores during fourth-quarter 2013. It closed three smaller stores, razed a fourth that it is rebuilding on the existing location and converted a fifth to a wholesale dealer location during the quarter.

For the year, the company opened a record 29 new stores and closed, rebuilt or converted eight stores. As of Dec. 29, 2013, the company operated a total of 580 Stripes stores, 373 of which include a restaurant.

Susser Holdings and Susser Petroleum Partners completed a sale-leaseback transaction for three new Stripes locations on Dec. 23, 2013, for a total cost of $11.9 million. In total, Susser completed transactions for 25 stores in 2013. On Jan. 10, 2014, Susser completed sale leasebacks for five additional stores at a cost of $19.5 million. Since it completed the initial public offering (IPO) of units in Susser Petroleum Partners in Sept. 2012, Susser Holdings has completed sale-leaseback transactions for a total of 38 newly built stores at a cumulative cost of $152.7 million.

The company added eight new contracted sites in the wholesale segment in the fourth quarter, and it discontinued four for a total of 591 contracted branded sites as of Dec. 31, 2013, including 99 consignment locations and 492 other independent branded dealer contracts. Susser added a total of 32 new dealer sites in 2013 and discontinued 20.

Susser Holdings is a third-generation, family-led business based in Corpus Christi, Texas, that operates c-stores in Texas, New Mexico and Oklahoma under the Stripes banner, with restaurant service in nearly 400 of the stores, primarily under the proprietary Laredo Taco Co. brand. Susser Holdings also is majority owner and owns the general partner of Susser Petroleum Partners, which distributes more than 1.5 billion gallons of motor fuel annually to Stripes stores, independently operated consignment locations, c-stores and retail fuel outlets operated by independent operators and other commercial customers in Texas, New Mexico, Oklahoma and Louisiana.