NEW ORLEANS -- Susser Holdings Corp. is fast becoming a right-place-right-time story, as the rebirth of the oil industry in Texas is bringing customers to its pumps, convenience stores and Laredo Taco Company eateries, its CFO told an audience at the Burkenroad Reports Investment Conference Friday.
The Corpus Christi, Texas-based Susser is near doubling the number of new-builds it plans for 2012, ramping up to a target range of 25 to 30 new stores versus 15 in 2009, 14 in 2010 and 19 last year, according to Mary Sullivan, the chain's CFO.
Susser's bullishness is based on sales numbers as its newer stores achieve projected budgets much sooner than expected. Sullivan said counting out "record fuel margins" last year, the typical return on investment from a new store grows from zero to the mid-teen percentages by year two, with Susser's goal of "20% unlevered return on investment" in three years.
"We have stores two years old already beating a mature location at 25%," she said.
Much of the success is stemming from the healthy Texas economy and the drilling boom in and around the Permian Basin area, which bring population growth to West Texas. Many of the chain's newer stores are located there.
The growing population and, in particular, the demographics of the area are playing into Susser's success, as well. Growth in the Hispanic population in the chain's core markets is expected to hit 37% versus the national average of 16%. In addition, the 18-to-35-year-old male demographic is higher in south Texas than the national average, 60% versus 50%.
With younger, male customers, Sullivan said, "We're in the path of future beer drinkers."
Texas has added a half a million jobs where most states have lost them. She said of the top 100 metropolitan areas in the country, only seven have added more jobs since 2008 and five of those cities are in Texas.
"Texas has grown by 4.3 million over the last 10 years," Sullivan said. "That's bigger than the total population of half the states [in the United States]."
And the projection is continued growth. She said more people are moving there for jobs, and Texas has the second-highest birth rate of any state, with Utah being No. 1. "It's a fantastic place to be invested, and there's a lot of opportunity for growth."
Susser as a company has experience much of that growth over the years, Sullivan said, showing a slide comparing its goals--made after its initial public offer (IPO) in 2006--to five years later:
- Goal: Double EBITDA (earnings before interest, taxes, depreciation and amortization) within five years.
- Actual: More than tripled EBITDA since 2006.
- Goal: Continue to grow same-store sales and same-store cash flow.
- Actual: Positive merchandise same-store sales growth in 23 of the past 24 quarters (5.6% average).
- Goal: Continue building big-box (5,000-square-foot) stores with 20% unlevered ROI.
- Actual: 63 new stores constructed since 2006, delivering 22% unlevered ROI.
- Goal: Grow foodservice sales, decreasing reliance on cigarettes.
- Actual: Foodservice is currently three times greater a contributor to gross profit than cigarettes.
Part of the success of inside sales over cigarettes or fuel is the company's Laredo Taco Co. foodservice concept. Started in 2001, the foodservice offer features authentic Mexican items, with fresh ingredients including tortillas made from scratch every morning. Sullivan called the program the chain's loyalty offer because 72% of people who buy Laredo Taco products buy another item. And if that customer visits the Laredo Taco counter, then he or she visits the location 40% more than the average consumer.
The chain appreciates its retail and wholesale structure, opting to do both as a way to gain synergies with purchasing and to leverage technology and general and administrative expenses over both entities.
In terms of growth via acquisition, Sullivan said the company is not afraid of it, having doubled in either store count or EBITDA five times in its history. But the numbers clearly show that new, "big-box" stores can produce double, even triple the cash flow of one of the chain's legacy locations.
Susser is a third-generation, family-led business with approximately 1,100 company-operated or contracted locations, with more than 540 c-stores in Texas, New Mexico and Oklahoma under the Stripes banner. Restaurant service is available in more than 330 of its stores, primarily under the proprietary Laredo Taco Co. brand. The company also supplies branded motor fuel to approximately 565 independent dealers through its wholesale fuel division.
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