Analyst: CST Brands Stands Out From Its Peers

SAN ANTONIO -- CST Brands Inc. stands out as a convenience store operator vs. its peers, thanks to strong convenience store locations and its high level of real estate ownership, according to analyst Mark Lin of The Motley Fool.

The San Antonio-based operator of 1,040 U.S. Corner Store locations owns 79 percent of the c-stores it operates, compared to about 50 percent for competitors, Lin wrote on the financial website that analyzes stocks and offers investing advice. These real estate holdings specifically make CST Brands stand out from competitors Susser Holdings Corp. and The Pantry Inc., he added.

"The difference is reflected in CST Brands' lower rental expenses as a percentage of sales," Lin reported. "Rent accounts for only 0.4 percent of CST Brands' revenue. In contrast, Susser and The Pantry have rental expenses making up about 1 percent of their respective top lines."

Lease renewals are another key reason why CST Brands stands out from the pack, Lin noted. "More than one-third of The Pantry's c-store leases are up for renewal for the next few years until 2017, but this is partly mitigated by the fact that 90 percent of the leases come without renewal options," he stated. "While Susser is in a less vulnerable position with only about 10 percent of leases expiring within the next five years, it is still susceptible to renegotiating a new lease at higher rates."

Conversely, less than one-fifth of CST Brands' Corner Store locations are leased and most come with renewal options, Lin explained.

In addition, CST Brands' vast real estate portfolio allows it to get a leg up on competitors by opening its new-to-industry (NTI) store concept. NTI stores are bigger than predecessor c-stores and offer a vast array of high-margin foodservice items.

Corpus Christi, Texas-based Susser Holdings Corp. is the parent of Stripes c-stores. Cary, N.C.-based The Pantry Inc. operates Kangaroo Express locations.

CST Brands Inc. was spun off from Valero Energy Corp. on May 1.