CrossAmerica Continues to Invest in Retail Segment
ALLENTOWN, Pa. — The first quarter of 2025 presented a host of challenges for CrossAmerica Partners LP, including the impact of poor weather conditions in the Northeast, inflationary pressures and economic uncertainty from the implementation of tariffs.
Despite the headwinds, the partnership continues to execute its efforts to convert certain controlled sites from existing classes of trade to company-operated retail or commission sites, and continues to recycle capital from sites that are not in long-term plans for the portfolio, President and CEO Charles Nifong explained during the partnership's first quarter 2025 earnings call held earlier this month.
"Since the quarter's end, our company-operated sites generated strong inside sales relative to the overall market — a sign of the successful execution of our retail strategy," he commented.
[Related content: CrossAmerica Makes 'Significant Progress' on Class of Trade Optimization Efforts]
For the quarter ending March 31, CrossAmerica was up 33 company-operated retail sites year over year and up 11 company-operated sites from the end of the fourth quarter of 2024, driven by its class of trade optimization efforts.
Commission agent site count increased by 31 sites vs. the year-ago period and increased five sites relative to the end of the fourth quarter of 2024.
In total, the partnership increased its overall retail site count by 64 sites during Q1 2025.
In addition to building upon its network of company-operated sites, CrossAmerica is committed to divesting noncore properties. During the quarter, the partnership sold seven sites for $8.6 million in proceeds, resulting in a net gain of $5.6 million.
"We expect this momentum to continue through 2025 as this continues to be an area of focus and effort for us. We expect to outperform our results for 2024 in this area," Nifong said.
Retail Segments Results
Looking at its retail segment, CrossAmerica reported gross profit increased 16% to $63.2 million. This was driven by a 17% increase in the average retail segment site count year over year, as well as increases in motor fuel and merchandise gross profit.
Same-store merchandise sales, excluding cigarettes, declined 1% for Q1 2025 vs. Q1 2024. Based on available national demand data, inside store sales were weak for the first quarter, down approximately 3% year over year on an overall sales basis.
"So, on a relative basis, our retail segment inside sales outperformed the industry for the quarter," Nifong said, noting that since the quarter's end, inside sales have been up 3% to 4% compared to the prior year. A portion of that increase is due to the inclusion of Easter and Easter week occurring during the second quarter of 2025 vs. 2024 when Easter was in the first quarter.
Merchandise gross profit increased 16%, primarily driven by an increase in the average company-operated site count.
Retail fuel margin on a cents per gallon basis increased 10% year over year. Fuel margin was 33.9 cents per gallon for Q1 2025 vs. 30.8 cents per gallon for Q1 2024. Crude oil prices were more volatile during the first quarter of 2025 and as a result, retail fuel margins were higher year over year, Nifong pointed out. Same-store retail segment fuel volume declined 4% vs. Q1 2024.
Turning to operating expenses, the retail segment's operating expenses increased $8.6 million, or 20%, driven by the 17% uptick in the average company-operated site count. On a same-store basis, operating expenses were up approximately 6%, with 1.1% of that increase due to elevated snow plowing and other weather-related expenses in the areas of repairs and maintenance.
Other Areas of Focus
Additionally, CrossAmerica remained focused on allocating gross capital spending across company-operated locations. This included targeted fuel brand and forecourt refresh projects oftentimes supported by the partnership's wholesale fuel suppliers, Maura Topper, chief financial officer, reported.
The partnership also focused on projects to increase food offerings, both proprietary and quick-service restaurants (QSR).
"During the year, we have opened four new QSR locations in our company-operated convenience stores and continue the expansion of our food and beverage programs at various stores," Topper said. "These growth investments have and will contribute to merchandise sales and margin results and help drive customer traffic onto our lots and into our stores."
Other Q1 2025 financial results CrossAmerica reported included:
- Net loss was $7.1 million vs. $17.5 million in the first quarter of 2024.
- Adjusted EBITDA was $24.3 million vs. $23.6 million for the year-ago period, an increase of 3%.
- Wholesale segment gross profit decreased 1% vs. Q1 2024. The slight decline was primarily driven by a 15% decrease in rent gross profit.
- Motor fuel gross profit increased 8% year over year for the quarter.
Allentown-based CrossAmerica Partners is a wholesale distributor of motor fuels, convenience store operator, and owner and lessee of real estate used in the retail distribution of motor fuels. Its general partner, CrossAmerica GP LLC, is indirectly owned and controlled by entities affiliated with Joseph V. Topper, Jr., the founder of CrossAmerica Partners and a member of the board of the general partner since 2012.
Formed in 2012, CrossAmerica Partners LP is a distributor of branded and unbranded petroleum for motor vehicles in the United States. It distributes fuel to approximately 1,700 locations and owns or leases approximately 1,100 sites. Its geographic footprint covers 34 states.