"We continue to be pleased with the customer reaction to the change in West Texas, and when we're done with the conversions, we expect to achieve cost and other synergies as a result of managing just one brand," said Steve DeSutter, president andCEO [image-nocss] of retail, during an earnings conference call yesterday. "At yearend, we reported increased sales and customer counts in Town & Country stores that were rebranded to Stripes. We continue to see similar results during the first quarter of this year."
See complete quarterly earnings report in a related story elsewhere in this issue of CSP Daily News.
Susser Holdings purchased the Town & Country chain in November 2007 and has since rebranded 82 to Stripes. With 76 stores left to be rebranded, Susser is completing the conversion project at a rate of about one store per week.
"We closely monitor the stores once they've been completed," DeSutter said. "We look at foodservice sales in terms of units, the number of purchases and items purchased."
In the fourth quarter, he said, the company saw a 20% improvement in converted stores vs. non-converted stores. "We actually did slightly better than that in the first quarter," he added. Same-store merchandise sales run about double the improvement in the rebranded stores vs. the non-rebranded stores.
"Our customer counts are up a couple of percentage points in the rebranded stores. Average transaction size is up. And foodservice sales are up significantly, about 5% better in the rebranded stores on a same-store basis."
Added Susser Holdings CEO Sam Susser, "The updates are fantastic from a customer standpoint. The stores look brand new, they have an enhanced equipment package, and the customers obviously feel very good about the change. But also, our Laredo Taco Co. menu is much more value-oriented. We're in there with hot price points that customers are responding to."
Making a splash with the foodservice offer is key to the rebranding, said DeSutter.
"[During the quarter], in addition to stronger market demand, overall improvement in restaurant sales were driven by a number of factors, including more value-priced, grab-and-go offerings in West Texas, attractive price-point offerings in all of our Laredo Taco restaurants and highly coordinated promotional activities in all of our markets around the lunch daypart, increasing plate sales and combo-meal sales, ranging from $1.99 to $3.99," DeSutter said.
While the price-points are lower for most Laredo Taco products compared to Town & Country's Country Cookin' offer, Susser said the overall effect benefits the company.
"The food [margin] side is meaningfully lower [for Laredo Taco], but the volumes are meaningfully higher," he said. "And the number of overall transactions in higher in the Laredo Taco format, so although we're looking at a lower percent margin with a Laredo Taco conversion, we're generating more gross-profit pennies in the bank because of the growth and total number of transactions."
And with an increase in foodservice sales comes a related bump in the sale of other products, as well.
"Seventy percent of our food transactions come with related sales," he said, "so if we can grow the number of tacos and burgers [sold by] 50 units a day, then we're going to pick up drinks and snacks on 35 units a day, and that helps offset the lower margin, more than offsets it, actually."
Meanwhile, Susser Holdings has entered into an agreement to sell seven Village Market small grocery stores in West Texas. The stores were part of the Town & Country acquisition.
"The Village Market stores were serviced by a separate grocery distribution network and did not really enhance the purchasing power of our c-store operations and were consequently not core to our business," DeSutter said. "[This] will allow us to focus our investment on core convenience stores, Laredo Taco Co. and the wholesale fuel division operation.
With that sale expected to close during the second quarter, Susser Holdings will likely close the quarter with 523 stores in operation, 519 stores with fuel and 305 stores with a restaurant concept.
Corpus Christi, Texas-based Susser Holdings Corp. is a third-generation family-led business that operates convenience stores in Texas, New Mexico and Oklahoma, primarily under the Stripes and Town & Country banners. The company also supplies branded motor fuel to more than 390 independent dealers through its wholesale fuel division.
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