Speedway Reaches Hess Halfway Mark

MPC has converted more than 650 of the 1,250 acquired locations

By 
Greg Lindenberg, Editor, CSP

Marathon Speedway Hess

UPDATE: According to data provided by GasBuddy, the current Speedway count is 2,156, while the current Hess count is 645 (see map below for the conversion progress).

FINDLAY, Ohio --Marathon Petroleum Corp. (MPC) has now converted more than half of the 1,250 Hess gas stations and convenience stores it acquired in October 2014 to its Speedway brand, Gary Heminger, president and CEO, said in reporting MPC’s second-quarter 2015 financial results.

It has converted more than 650 of the retail sites to the Speedway brand since the acquisition, said Heminger on the company’s earnings call.

According to data provided by GasBuddy, the current Speedway count is 2,156, while the current Hess count is 645 (see map below for the conversion progress).

Speedway, MPC's retail segment, performed well and continues to make tremendous progress integrating the East Coast and Southeast retail locations, he said.

"We are on pace to achieve the expected synergies for 2015 from light-product supply, as well as from operating and administrative expense savings. Further, the accelerated progress for store conversions and subsequent remodels has allowed us to more rapidly implement Speedway's industry-leading Speedy Rewards loyalty program. This program and other marketing enhancements are expected to drive the anticipated synergies to the business over the next several years."

Tony Kenney, president of Speedway, said. “We're moving along at an accelerated pace in converting the [Hess] brand to Speedway. … The important thing there is it's more than just the brand. What's going inside the store is all of our technology that is the platform for our marketing programs, primarily our loyalty program, all of our inventory management, other things that drive savings and synergies for us as we operate convenience stores. … As we begin to bring on all of the marketing enhancements through the conversions inside the store, then we'll start to realize those benefits down the road.”

Speedway segment income from operations was $127 million in second-quarter 2015, compared with $94 million in second-quarter 2014. This increase was primarily the result of higher merchandise and light-product margins and the addition of the newly acquired locations, partially offset by higher operating and administrative expenses. Speedway's consolidated light-product margin increased to 13.51 cents per gallon in second-quarter 2015, from 12.82 cents per gallon in second-quarter 2014.

Speedway's income from operations was $33 million higher in the quarter as compared to second-quarter 2014. Speedway's newly acquired locations contributed income of approximately $14 million to the quarter's results or approximately $45 million of EBITDA.

For the legacy Speedway sites, the merchandise gross margin was $23 million higher in second-quarter 2015 compared to the same quarter last year, and the light-product gross margin was about $16 million higher.

Speedway same-store gasoline sales volume was down two-tenths of a percent versus same quarter last year compared to estimates of U.S. demand growth in the second quarter of approximately 3% higher. Overall, gasoline sales volumes for legacy Speedway locations were up 3% in the quarter, reflecting the impact of investments in new, rebuild and remodel locations.

“Another key performance metric for our retail group is same-store merchandise sales,” said Timothy Griffith, CFO, “and we're continuing to see strong demand for our in-store offering as our same-store merchandise sales in the quarter excluding cigarettes were up 4.6% versus same quarter last year. So far in July, we've seen a 1.6% increase in same-store gasoline volumes compared to last July.”

MPC is the nation's fourth-largest refiner. Approximately 5,460 independently owned gas stations across 19 states sell the Marathon-brand. In addition, Speedway owns and operates the nation's second-largest convenience-store chain, with approximately 2,750 convenience stores in 22 states. MPC also owns, leases or has ownership interests in approximately 8,300 miles of pipeline. Through subsidiaries, MPC owns the general partner of MPLX LP, a midstream master limited partnership (MLP). MPC's fully integrated system provides operational flexibility to move crude oil, feedstocks and petroleum-related products efficiently through the company's distribution network in the Midwest, Southeast and Gulf Coast regions.

Part of CSP's 2015 Convenience Top 101 retailers