Higher operating expenses, lower fuel prices dent Murphy USA 2Q profits

Convenience store operator Murphy USA Inc. reported Wednesday (July 31) that second quarter profits were down 37% from a year ago, primarily due to higher operating expenses and declining fuel contributions from lower gas prices heading into the summer driving season.

For the period ended June 30, the former gas station subsidiary of Murphy Oil Corp. reported net income of $32.7 million, or $1.01 per share, compared to $51.8 million, or $1.58 per diluted share, in the same period a year ago. Revenues for the three-month period were flat at $3.8 billion compared with $3.82 billion in the same period of 2018.

A survey of five Wall Street analysts had expected the Arkansas gasoline station owner known for its Walmart parking lot locations to see second quarter earnings of $1.08 per share on revenue of $3.63 billion, according to Thomson Reuters.

“In the second quarter we invested in multiple areas of the business to acquire customers and drive traffic to our stores, resulting in share gains in our most important categories,” explained Murphy USA President and CEO Andrew Clyde. “We grew same store fuel volumes for the fourth consecutive quarter and delivered exceptional merchandise performance, especially in tobacco, where investments we have made in the category increased our market share versus broad-based declines across the industry.”

Clyde also said the company’s in-store and pump price rewards program, which climbed to over 9 million members nationwide, played a role in higher store traffic and fuel volume. Murphy USA board also approved a new two-year, $400 million stock buyback program.

“Based on our view of the potential of the business and our ability to increase future organic growth through operating cash flows, we are excited to announce board approval of an up to $400 million share repurchase program to be executed through July 2021,” said Clyde.

Murphy USA reported total fuel contributions fell 6.9% to $167.7 million, compared to $180.1 million in a year ago. Total merchandise contribution and sales were $105.5 and $658.8 million, respectively, compared to $102.3 million and $616.1 million in 2018.

Total station and operating expenses grew by 7.6% to $145.6 million, compared to $134.8 million a year ago. Murphy USA officials said the higher gas station costs were primarily due to higher employee related costs, planned and unplanned maintenance activity, and other store level costs.

“We expect some of these costs to be transitory in nature and are forecast to moderate in the second half of the year,” the company said.

During the three-month period, the El Dorado gas station chain opened one new retail location, bringing the gasoline retailer’s total count to 1,474, consisting of 1,160 Murphy USA sites at mostly Walmart locations and 314 Murphy Express sites. A total of 18 stores are currently under construction, including 12 kiosks undergoing rebuilds that will return to operation as 1,400 sq. ft. stores in the second half of 2019.

Murphy USA shares closed Wednesday up $1.79 at $88.35 on the New York Stock Exchange. The company’s shares have traded in the range of $69.98 and $89.38 during the past 52 weeks.