Murphy USA 3Q profits slide 34% as higher fuel costs cut convenience store margins

Higher fuel costs and rising pump prices cut into third quarter profits for Murphy USA, Inc. Wednesday (Oct. 31) as the Arkansas convenience store operator seeks to improve margins across its growing Midwest and Southeast U.S. footprint.

For the period ended Sept. 30, the former El Dorado subsidiary of Murphy Oil Corp. reported net income was $45 million, or $1.38 per share, down 33.7% from net income of $67.9 million, or $1.90 per share, in the same period of 2017. Revenues, however, rose by 17% to $3.78 billion, compared to $3.23 billion a year ago.

A survey of Wall Street analysts forecasted the Arkansas gas station owner to report third quarter earnings of $1.51 per share on revenue of $3.6 billion, according to Thomson Reuters. Company President and CEO Andrew Clyde, however, highlighted the company’s continued growth after splitting off from its former El Dorado parent just over five years ago on Sept. 3, 2013.

“On the 5th anniversary of Murphy USA becoming a stand-alone public company, I couldn’t be more impressed with how the business and our team have evolved over time, delivering and sustaining superior financial results through investments in organic growth, coupled with cost discipline, innovation and a commitment to operational excellence,” said Clyde.

Companywide, Murphy USA reported total fuel contributions fell 18.3% to $172.7 million in the third quarter, compared to $211.3 million a year ago. Total retail fuel contributions decreased 4.7% during the quarter due primarily to a less favorable retail, product, supply and wholesale margin environment, partially offset by a 3.5% increase in total retail gallons sold due to new store growth and same store volume improvement quarter-over-quarter, officials said.

Total merchandise contribution increased 7.0% to $104.5 million in third quarter 2018, while average unit margins increased to 16.8% from 16.1%, a new quarterly record. On a same store sales basis, total merchandise contribution dollars grew 5.5% due to better margins both tobacco and non-tobacco margins.

Total station and other operating expenses increased 7.1% for the current-year quarter, reflecting new store additions and higher payment fees due to higher retail fuel prices and merchandise sales. On a per store basis, operating expenses excluding payment fees increased 2.8% primarily due to higher repair and maintenance costs.

During the three-month period, Murphy USA opened seven new retail locations and re-opened three raze-and-rebuilds. That brings the gasoline retailer’s total count of locations to 1,454, consisting of 1,159 Murphy USA sites at mostly Walmart locations and 295 Murphy Express sites. A total of 27 stores are under construction, which includes 15 kiosks undergoing raze-and-rebuild projects that will return to operation as 1,200-square-foot stores.

“We expect to be at near 1,474 stores by year end,” company officials said.

In its 2018 guidance, Murphy USA said it plans to build up to 30 new stores and 25 additional raze-and-rebuild locations. The El Dorado gasoline store operator has projected a capital budget of $225 million to $275 million, comparable with the $274 million spent in 2017.

At the close of business Wednesday, Murphy USA shares were down $1.07 or 1.3% at $80.63 on the New York Stock Exchange. Over the past year, the Arkansas convenience store chain has traded in the range of $61.05 as a low and $89.69 as a high.