Murphy USA’s first quarter profit, sales down slightly from a year ago

Murphy USA Inc. on Monday (April 29) posted modest profits in the first quarter as the El Dorado gas station store operator said customer traffic at the chain of nearly 1,500 convenience stores continues to grow despite rising product and fuel prices.

For the period ended March 31, Murphy USA reported net income of $5.3 million, or 16 cents per share, compared to earnings of $1.16 per share, or $39.3 million, in the same period a year ago. First quarter revenues fell 4% to $3.11 billion, compared to $3.24 billion in 2018.

Wall Street analysts forecasted Murphy USA to report quarterly profits of 27 cents per share on revenue of $3.13 billion, according to Thomson Reuters. Last year’s results included a $35.3 million after-tax gain settlement from the 2010 Deepwater Horizon oil spill, company officials said.

“2019 is off to a strong start as the business performed exceptionally well in the first quarter, despite sharply rising product prices, managing to showcase meaningful year-over-year adjusted (earnings-before-taxes) growth to $58.8 million,” said President and CEO Andrew Clyde. “We continued to drive traffic to our stores, growing year-over-year same store volumes for the third straight quarter, which helped generate strong merchandise results in both the tobacco and non-tobacco categories.”

The National Association of Convenience Stores (NACS) said U.S. convenience stores ended 2018 on pace for a 16th straight year of record in-store sales. Convenience store sales nationwide surged 8.3% to $654.3 billion, led by a 13.2% increase in fuel sales that accounted for 69.6% of total sales. Convenience stores sales are 3.1% of the U.S. gross domestic product of $20.5 trillion.

By segments, in-store sales increased 2.2% to a record $242.2 billion, NACS data show. Higher gas prices, up 13.7% from $2.37 per gallon in 2017 to $2.69 per gallon in 2018, contributed to the increase in overall industry sales. Fuel margins, which have increased over the last five years, were also higher in 2018, up 7.5% to 23.35 cents per gallon, while gallons sold decreased by 0.4%.

“Fuel sales were strong in 2018 but consumers were making fewer stops to refuel, which suggests that greater fuel efficiency in vehicles is translating to less trips per week to the convenience store,” said Andy Jones, NACS vice chairman of research.

Foodservice sales accounted for 22.6% of in-store sales, a category that continues to be a key focus area for convenience stores, according to NACS. Foodservice is a broad category that mostly encompasses prepared food as well as commissary foods and hot, cold and frozen dispensed beverages.

NACS officials said the growth in foodservice also has led to an increase in store size. The average convenience store is 3,230 square feet, but as newer stores feature touchscreen food-ordering kiosks, add space for in-store seating and waiting areas, and incorporate an open-kitchen design, the size of new stores has increased to 4,991 square feet in rural locations, and 4,603 square feet in urban locations.

For Murphy USA, total fuel contributions jumped 11.9%, or $13.6 million, to $128.2 million in the first quarter, compared to $114.6 million a year ago. Total merchandise sales were $606.2 million, ahead of the $565.8 million in 2017.

Total merchandise contributions increased 6.6% to $97.5 million in the first quarter versus $91.5 million a year ago due to higher sales across the chain and new store performance. Although average unit margins were flat versus the prior year quarter at 16.1%, total merchandise contribution dollars grew 6% on a same-store sale basis through successful execution of store-level initiatives and enhanced promotional activities to improve both tobacco and non-tobacco sales, officials said.

Total station and operating expenses were up slightly at $132.8 million, up 3.5% compared to $127.4 million a year ago. The higher gas station operating expenses were largely due to higher employee related costs, accelerated planned maintenance activity, and other store level costs, company officials said.

The Arkansas convenience store operator said it opened one retail location in the first quarter, bringing the company’s store count to 1,473 locations, consisting of 1,160 Murphy USA sites and 313 Murphy Express sites. There are 16 stores under construction, including 12 kiosks undergoing a 1,400 square foot raze-and-rebuild construction.

In its 2018 guidance, Murphy USA said it plans to build up to 30 new stores and 25 additional raze-and-rebuild locations. The company’s capital budget calls for an outlay of $225 million to $275 million, about the same as the $274 million spent in 2017.

Murphy USA (NYSE: MUSA) shares closed Monday up $1.18 at $82.26. The company’s shares have traded in the range of $61.05 and $88.34 during the past 52 weeks.