Delek to Get Aggressive on Acquisitions and Large-Format Store Builds

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Delek to Get Aggressive on Acquisitions and Large-Format Store Builds


BRENTWOOD, Tenn. -- MAPCO Express parent Delek US Holdings Inc. will be aggressive in building new large-format convenience stores and continue remodeling existing locations.

During 2011, Delek opened two new large-format stores and remodeled another 50 stores, CFO Mark Cox said during a conference call this morning. The industry can expect to see plenty of more large-format and remodeled stores from Delek throughout 2012, he added.

As CSNews Online reported in November, the first MAPCO Express large-format store -- which Delek also refers to as a "mega" store -- opened in Sherwood, Ark., more than three months ago.

With a strong cash position, Delek will also strongly consider acquiring convenience store assets, noted Uzi Yemin, the company's president and CEO.

"Cash is continuing to pile in," he said, referring to the company’s net cash on hand.

Also during the conference call, Yemin said the company will consider converting into a master limited partnership (MLP). He did not offer any timeframe for the possible transaction.

Delek joins Marathon Petroleum Corp. and Sunoco Inc., which both said last month they’re considering becoming MLPs. To become a MLP, a company must generate at least 90 percent of its income from what the Internal Revenue Service calls "qualifying" assets. The production, processing or transportation of oil are three things deemed as qualifying assets.

Delek's retail segment proved to be one of its best divisions during its 2011 fiscal fourth quarter.

The retail segment -- primarily operating under the MAPCO Express brand -- posted a profit of $8.5 million, compared to an $8.2-million gain in its 2010 fourth quarter.

Foodservice sales were a key driver that lifted Delek to a 2-percent same-store merchandise sales increase vs. Q4 2010. According to the company, foodservice sales increased 17.4 percent over the prior year, as a result of increased concentration on fresh food quick-service restaurant (QSR) concepts.

Foodservice now comprises 21 percent of MAPCO Express' sales. Yemin said he hopes to ramp up that number to 35 percent of the store mix in the next two or three years, if foodservice sales continue to do well.

Same-store retail fuel gallon sales also showed strength in Delek's latest quarter. They grew 4.3 percent compared to the same period in 2010. Retail fuel margins came in at 14.6 cents for Delek's 2011 Q4, compared to 13.1 cents the prior year.

"In the middle of 2011, we employed a competitive fuel margin strategy that does not adversely affect our bottom line," said Cox. "We are pleased with the results."

The one weakness in Delek's retail division appears to be its merchandise margin. That figure declined to 29.2 percent vs. 29.8 percent in the company’s 2010 Q4. Delek cited lower gross profit margins in the cigarette category as a reason for the decline.

However, Cox said he sees cigarette margins stabilizing. "We expect no more downward movement," he said.

At the end of 2011, Delek operated 377 convenience stores, compared to 412 at the end of calendar year 2010.

As for the company as a whole, Delek suffered a $6-million net loss during its fiscal fourth quarter. However, that loss was considerably smaller than the $70.9-million loss the company took in its 2010 fourth quarter.

As for the most recent quarter, Delek blamed a "pronounced narrowing in crude oil differentials and a decline in regional asphalt prices" for much of its $6-million loss.