Feeling the Pressure

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Feeling the Pressure

By Linda Lisanti and Don Longo

Despite a meteoric rise in fuel prices last summer, convenience stores' inside sales rose 3.3 percent on a per-store basis in 2008, and pretax profits per store rose 17.7 percent over a year ago, reversing a decline of nearly 6 percent in 2007.

According to the 2009 Convenience Store News Industry Report -- the longest-running compilation of convenience store sales and operational results in the industry -- total industry sales last year reached an all-time high of $633.9 billion, an 11.4-percent increase over 2007.

Much of that increase was driven by a 15-percent rise in motor fuel dollar sales, to $467.9 billion. However, total motor fuel gallons pumped last year declined 2.2 percent, as motorists were hit with the shock of $4 per gallon prices at the pump during the summer (and a $3.23 per gallon weighted national average of all grades and diesel fuel for the year). With Americans cutting back drastically on their automobile use, motor fuel volume declined to 144.9 billion gallons -- about the same amount of fuel that was pumped by c-stores in 2006.

Last year's total sales figures also were impacted by the first decline in the past decade of the total number of industry stores. It was only the third time in the past 15 years that the industry store count decreased. The total number of stores fell 1 percent to 144,875, with most of the decrease occurring among single-store owners who now represent 61.8 percent of total industry storefronts, down slightly from 62 percent the previous two years.

Some industry observers will be tempted to look at the numbers and feel relief that c-stores were able to grow profit margins despite some really challenging conditions. But thinking this way might cause them to miss the bigger picture of fundamental changes in both the industry and consumer behavior that will make future years -- particularly 2009 -- even more challenging.

Convenience store operators who still depend primarily on fuel and cigarettes for the bulk of their profits will go the way of the dodo bird, if economic trends of the past few years continue in the same direction.

Meanwhile, foodservice is no longer an option for c-stores, as observers predict the U.S. industry is transforming into the European style, composed of large, fuel-focused roadside locations and neighborhood convenience food locations with a broader assortment of fresh foods and grocery products.

This year's CSNews Industry Report contains data on the following categories:

-- Total industry store count
-- Merchandise and foodservice sales
-- Industry gross profit dollars, margin and pretax profits
-- Sales and profit analysis of the product categories
-- Motor fuel prices and consumption analysis
-- Operating expenses

Additional information on all product categories, plus much more, is also available for sale in our special Extended Edition of the 2009 CSNews Industry Report, at www.csnews.com/research.