Delek Reiterates Its Intent to Retain Retail Division

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Delek Reiterates Its Intent to Retain Retail Division

By Melissa Kress, Convenience Store News - 05/09/2013

BRENTWOOD, Tenn. -- There has been a trend of late for oil companies to spin off their retail divisions, but Delek US Holdings Inc. reiterated once again that it has no plans to follow that trend.

Speaking today during the company’s first-quarter 2013 earnings call, Uzi Yemin, Delek’s chairman, president and CEO, said spinning off its convenience store business is not on the company's radar at this point.

"We believe in the business. Our mega stores are performing well and we want to continue that," he explained.

Delek’s retail segment markets fuel and merchandise through a network of a convenience store locations operated under the MAPCO Express, MAPCO Mart, East Coast, Fast Food and Fuel, Favorite Markets, Delta Express and Discount Food Mart banners.

The decision to retain the retail division as part of the Delek US family -- which also includes refining and logistics divisions -- comes as the company eyes opening a total eight to 10 new c-stores this year, according to Danny Norris, vice president of finance at Delek US.

The company opened two new convenience stores in the first quarter, and has four more openings on the drawing board for the second quarter, Norris reported. These new locations will join the retailer’s existing 373-store portfolio -- half of which are either reimaged stores or one of the chain’s larger format prototype stores.

Looking at the numbers, the retail segment contribution margin was $7.9 million in the first quarter, compared to $7.3 million in the same quarter of 2012. According to Norris, higher fuel margins offset slightly lower merchandising margins compared to first-quarter 2012.

Specifically, fuel margin increased to 14.5 cents per gallon in the latest quarter from 12.1 cents per gallon in the prior-year period. Merchandising margin was 29.3 percent in the quarter, compared to 29.4 percent in the same quarter last year.

Same-store merchandise sales were down 4.7 percent in the first quarter compared to a year ago. However, private label merchandise sales (excluding cigarettes) were up 12.3 percent. Private label now comprises 5.4 percent of total merchandise sales.

Overall, for the three months ended March 31, Delek US reported net income of $77.5 million vs. net income of $46.2 million in the first quarter of 2012.