CrossAmerica Weathers Challenging First Quarter of 2024
Wholesale volume was 184 million gallons for Q1 2024 vs. 201.9 million gallons for Q1 2023, reflecting a decline of 9%. A substantial portion of the wholesale volume decline was attributable to the conversion of wholesale locations to retail locations.
"Overall, it was a soft start to the year for volume demand in the industry. Our quarterly wholesale same-store volume results, while better on a relative basis than national data, are disappointing," Nifong stated.
On the Retail Front
Despite the macroeconomic environment, CrossAmerica's retail segment experienced a positive first quarter. The partnership reported that retail segment gross profit increased 7% to $54.4 million during Q1 2024 vs. $50.9 million in Q1 2023. The increase was primarily due to higher merchandise gross profit, partially offset by a decline of 3% in motor fuel gross profit.
Same-store merchandise sales, excluding cigarettes, increased 2% for the quarter. Merchandise gross profit increased from 27.8% in Q1 2023 to 28.2% in Q1 2024 due to improved merchandise margins in packaged beverages and snacks.
CrossAmerica's retail segment sold 121.7 million fuel gallons during the first quarter of 2024, which was an increase of 2% compared to the first quarter of 2023. Same-store retail segment fuel volume for Q1 2024 declined 3%, dropping from 112.3 million gallons in Q1 2023 to 108.6 million gallons.
Merchandise gross profit increased 18% and merchandise gross profit margin percentage was up approximately 30 basis points vs. the same period in 2023.
Other Q1 2024 financial results CrossAmerica reported included:
- Operating expenses for the retail segment increased $7 million, or 20%, primarily driven by a 22% increase in the average company-operated site count due to the conversion of certain lessee dealer and commission agent sites to company-operated sites.
- Adjusted EBITDA was $23.6 million, a decline of $8.2 million from adjusted EBITDA of $31.7 million in the first quarter of 2023.
- A net loss of $17.5 million included a $15.9 million loss from lease terminations with Applegreen.
Increase in Store Count
Despite the soft financial results for the quarter, there were positive developments for the business, Nifong pointed out. One of the most significant was the partnership's conversion of certain assets from Applegreen Midwest LLC and Applegreen Florida LLC, which was completed in April.
In January, CrossAmerica signed a purchase agreement to acquire these assets from Applegreen Midwest and Applegreen Florida for $16.9 million. The deal terminated the existing lease agreements between the two companies at 59 locations and transferred their operations, plus all inventory, to CrossAmerica.
Of the 59 locations, 31 locations were converted during the first quarter of 2024 and the remaining locations were converted in April 2024. This transaction resulted in the conversion of these lessee dealer sites to company-operated sites, bringing CrossAmerica's total company-operated site count to 100.
"We expect this transaction to be immediately accretive to our retail segment and overall results," Nifong commented.
In addition to building upon its network of company-operated sites, CrossAmerica is committed to divesting noncore properties; however, during the first quarter of 2024, the partnership did not divest any properties. Subsequent to the quarter's end, CrossAmerica divested two properties for a $2.5 million net gain.
"While the number of closed transactions is low year to date, we have been busy building our pipeline of divestitures and expect the pace and volume of transactions to increase materially for the remainder of the year," the chief executive said.
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.