ARKO Provides Update on Transformation Plan
RICHMOND, Va. — Following a transformative and aggressive merger-and-acquisition strategy to expand the company's network over the last decade, ARKO Corp. is committed to an organic growth strategy moving forward.
During the convenience and fuel retailer's recent second quarter 2024 earnings call on Aug. 5, Chairman, President and CEO Arie Kotler emphasized the importance of developing the right plans and platforms for organic growth within its operating retail footprint and provided an update on the retailer's multiyear transformation plan.
As part of the initiative, which Kotler introduced during the company's Q1 2024 earnings call, ARKO will put additional targeted capital allocation toward strategic sub-segments of its retail stores intended to drive traffic and improve profitability.
The company plans to allocate capital based in part on a pilot program, currently in development, which is designed to improve the customer experience and value proposition. This has the potential to include an expanded and refined offering across a larger store network, with a focus on food and an enhanced in-store experience.
Currently, the pilot will focus on seven stores within one region, with the goal of a region-wide rollout before, ultimately, expanding the program across ARKO's retail footprint. The convenience and fuel retailer expects to begin implementing the new design in pilot stores in the fourth quarter of 2024, Kotler reported.
Additionally, the transformation plan calls for leveraging the company's unique, multisegment operating model through more active conversion of retail stores within ARKO's retail segment to dealer sites within its wholesale segment.
Following a review of its retail store portfolio, ARKO has identified a number of retail locations for potential conversion, which are expected to yield greater profitability after conversion. The company expects to have converted approximately 40 retail stores to dealer sites by the end of the third quarter of 2024, of which a small number had converted as of the end of the second quarter.
Additionally, ARKO continues to support organic expansion and three new-to-industry stores are currently at different stages of construction. One is scheduled to open in the third quarter.
"Our commitment to strong execution, enhancing customer value and improving store-level economics remain a top priority. We are well positioned to navigate the near-term macro headwinds, and we continue to believe in the long-term opportunities for ARKO," Kotler said. "We expect the ongoing enhancements to our operations will guide us through this environment, while also laying the foundation for our multiyear transformation plan."
Additional details of the transformation plan will be provided at ARKO's Investor Day in the fourth quarter.
Richmond-based ARKO owns 100% of GPM Investments LLC and is one of the largest operators of convenience stores and wholesalers of fuel in the United States. ARKO operates in four reportable segments: retail, which includes convenience stores selling merchandise and fuel products to retail customers; wholesale, which supplies fuel to independent dealers and consignment agents; GPM Petroleum, which sells and supplies fuel to its retail and wholesale sites and charges a fixed fee, primarily to its fleet fueling sites; and fleet fueling, which includes the operation of proprietary and third-party cardlock locations, and issuance of proprietary fuel cards that provide customers access to a nationwide network of fueling sites.
ARKO is No. 6 on the 2024 Convenience Store News Top 100 ranking.