ARKO's Three Key Pillars of Marketing & In-Store Initiatives Drive Positive Q1 2023 Results

RICHMOND, Va. — ARKO Corp. President, Chairman and CEO Arie Kotler attributes the continued success of the company's in-store performance to ARKO's refocused investment on resources including people, space and capital.

During the company's recent first-quarter 2023 earnings call, Kotler highlighted the three key pillars of ARKO's marketing and store initiatives that have contributed to strong in-store performance. They are:

1. Grow sales in core destination categories through data-driven decisions and strong supplier partnerships.

ARKO invests in the assortment square footage allocated from merchandising and loyalty promotions for the core destination categories of packaged beverages, beer, candy, salty snacks, sweet snacks and alternative snacks.

During Q1, these categories drove 63 percent of same-store sales, excluding cigarettes, and 43 percent of total same-store sales. Year over year, same-store sales for these six categories grew by approximately 10 percent and margin rates grew 110 basis points.

"Our customers expect and deserve for us to have the right assortment, space and value in these categories," Kotler said. "We continue to refine and drive the expansion of these categories across our company-operated stores to ensure that we are offering our customers the right assortment and value proposition."

According to the executive, the core criteria of ARKO's merger-and-acquisition strategy is to acquire chains where the company can add value. The Richmond-based retailer's scale, purchasing power, and merchandising and marketing expertise has enabled the company to improve the performance of stores that it purchased by improving the product assortment, product placement, promotional events and loyalty, he pointed out.

2. Drive increased frequency and total spend through order-and-delivery, and relevant in-store and in-app personalized deals via the fas REWARDS program.

ARKO implemented new upgrades to the fas REWARDS loyalty app earlier this spring to drive more trips with existing customers, while attracting new loyal customers. The program currently has 1.38 million enrolled members.

Since the launch of the upgraded app, the number of members enrolling each week has increased an average of approximately 30 percent compared to pre-launch enrollment, Kotler shared.

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"We know that enrolled marketable members make more trips and spend more in our stores than nonenrolled members. In fact, in Q1 2023, our enrolled members made an average of almost six more trips per month vs. nonenrolled members," the executive said.

In Q1 2023, enrolled members spent on average approximately $68.50 more per month than nonenrolled members. Additionally, the Q1 2023 enrolled members increased their average monthly spend by 8.2 percent when compared to Q1 2022.

"While early, we are encouraged by engagement in the new app, including the redemption of our in-app-only hot deals, as well as use of our new in-app order and delivery functionality," he said.

3. Develop high-margin food programs.

ARKO continues to expand its packaged and fresh food offerings, including pizza, chicken, prepared foods and other options. Same-store franchise sales across all brands increased 24.5 percent in the first quarter of 2023 year over year.

"While we have made great progress with our grab-and-go prepared, frozen foods and franchise partnership with Sbarro and Dunkin', we are still in the early stages of defining this strategy along with assortment and price value proposition for the consumer and our go-to-market strategy," Kotler commented.

"Our goal is to become destination for package, preferred and fresh food, and we look forward to providing further updates. Our objective is to make continuous improvement in each pillar and position our core convenience store business to continue delivering great results and exceeding our customers' expectations," he added.

Kotler also provided an update on ARKO's electric vehicle (EV) charging network journey. At the end of the first quarter, the convenience operator's network included more than 50 charging ports with plans to add more charging capacity across the country.

ARKO began gearing up for EV charging adoption in 2021 when it signed a strategic memorandum of understanding with Chakratec, an Israel-based developer of EV charging technology, to distribute the kinetic storage systems for fast charging of EVs.

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ARKO, which owns 100 percent of GPM Investments LLC, 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; 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; and GPM Petroleum, which sells and supplies fuel to its retail and wholesale sites and charges a fixed fee, primarily to its fleet fueling sites.