Murphy USA Celebrates Operational Achievements
EL DORADO, Ark. — In addition to producing strong financial results during its most challenging quarter yet, Murphy USA Inc. reported numerous operational achievements during the second quarter of 2021.
"I want to take this opportunity to do something different as we reflect on the COVID environment, recognize and thank key contributors, including our field and home office heroes, and communicate to you just how nimble and responsive our business can be when it comes to serving customers, working with strategic partners, supporting our employees, and delivering for all our stakeholders," President and CEO Andrew Clyde said during the company's recent quarterly earnings call.
Clyde shared a top 10 list of the achievements that company leadership found to be most representative of the Murphy USA spirit, commitment and passion for its business:
1. Leading through merchandise supply chain disruptions
Murphy's team was proactive and went the extra mile to ensure they could continue serving customers, according to Clyde. He commended the QuickChek team in particular.
"When faced with supply shortages that potentially impacted their prepared food offer, the operations team filled the void to make sure product got from suppliers to the stores, including renting trucks themselves to deliver fresh produce, so they could keep serving customers," he said. "That is what I call amazing spirit and a commitment to customer service."
Some of the company's largest merchandise suppliers also struggled with reduced item availability due to shortages in raw materials and workforce. Murphy's team kept in constant contact with vendor partners, took product deliveries outside of normal hours, adjusted the promotional calendar as needed, and communicated updated planogram tactics to stores.
2. Adapting to the Colonial Pipeline shutdown
Murphy is one of the largest shippers on the Colonial Pipeline, so the shutdown impacted nearly a third of its stores. The company's supply team was able to optimize routing of fuel supplies from other markets, while leveraging its fuel carrier partnerships and storage positions to minimize operational impact.
3. Navigating continued driver shortages for fuel and merchandise logistics
Driver ability has contributed to fuel and merchandise supply chain challenges, but Murphy's scale and strategic relationships with fuel carriers helped it minimize outages and rate increases on the fuel transport side. Store operations were also impacted as fewer deliveries resulted in extra labor and effort to stock and display some direct distributed products.
"Our renewed partnership with Core-Mark continues to pay dividends, as they maintained excellent fill rates on core products and their new Track My Order real-time logistics technology allowed efficient use of store labor," Clyde said. "Despite the three externalities highlighted above, we continued to press forward with major initiatives to drive improvements to position the business for the future."
4. Engaging customers and store associates through innovative tobacco promotions
"Despite comping against last year’s record pantry-loading results, we were pleased, but not surprised, to see tobacco sales and margins continue to grow favorably against the prior-year quarter," Clyde said.
Margin dollars grew at a 2.2 percent rate on a same-store basis during Q2 while tobacco sales also grew slightly. Data shows the company has maintained and grown tobacco contribution from both existing and new customers that it was able to better serve during the pandemic.
Store employees are incentivized through contest and bonus opportunities to upsell product and leverage promotions, which has helped drive results in both the tobacco and non-tobacco spaces.
"In a normal environment, the ability to properly staff our stores might not be a noteworthy event, but in our case, it was critical to executing effective promotions with our vendor partners, most notably in the tobacco space," Clyde said.
5. Resetting large-format stores to achieve their return potential
Clyde stressed that the company has not taken its eye off the ball in center store categories.
To further its goal of optimizing return on capital employed after analyzing opportunities in Murphy's large-format, 2,800-square-foot store design, the company implemented a reset across its group of pilot stores that resulted in increased merchandising space, better product assortment, and more appealing packages and displays, along with other changes meant to improve the customer experience and grow sales.
Results include improvements across key categories, including salty snacks, candy and alternative snacks, as well as fresh food products and grab-and-go, open-air coolers.
Resets are now being implemented across the chain's large-format stores to further boost their return potential as part of Murphy's organic growth strategy.
6. Integrating QuickChek
Murphy continues to execute and realize near-term synergies from its acquisition of the Whitehouse Station, N.J.-based QuickChek chain and is on pace to meet its year-one target of $5 million of run rate savings, Clyde reported.
"We could not be more pleased with QuickChek’s performance as many stores recorded all-time record food sales. The team is going above and beyond during these challenging times and alignment of the two cultures has created a highly collaborative environment to deliver additional opportunities," he said. "Our integration team has identified over 100 unique opportunities for consideration that could create incremental value over time."
7. Managing critical labor and staffing shortages
Murphy took a proactive approach to ensuring its customer-facing services and sales-oriented activities were not compromised. This included a hiring campaign that attracted more than 50,000 applicants, and the adjustment of hours of operations in stores where staffing challenges were the most severe. It also prioritized and communicated critical functions and workflows in the field.
"We happily and intentionally made tradeoffs to pay overtime to engage workers...to help provide a seamless customer experience as possible," Clyde said. "In addition, we implemented a mix of seasonal rate increases and retention payments, which combined with higher commissions from promotional selling activities, helped to stabilize turnover and boost new hires."
These steps did not eliminate the staffing challenges, but helped mitigate pressure on stores, which contributed to "impressive" merchandise results despite store operating hours that were 2 percent below normal levels, the CEO noted.
8. Leveraging home office heroes
Clyde praised the home office teams that worked behind the scenes to incorporate the QuickChek family and assets into Murphy USA, particularly:
- The accounting team, which worked nights and weekends to close the books on two accounting systems and reconcile different reporting periods;
- The technology team, which quickly integrated collaboration tools and back-office functionality;
- The human resources team, which transitioned and onboarded the entire QuickChek organization; and
- The contracts management team for accelerating the alignment of key contracts.
As of July 12, Murphy's entire home office teams are 100 percent back in the office while it continues to explore ways to increase flexibility for the staff.
9. Taking employee engagement to the next level
Murphy launched its biannual employment engagement survey following QuickChek's annual survey a few months prior, achieving higher participation levels than in 2019 and exceeding the benchmarks across its priority engagement focus areas, including four new items measuring inclusion and diversity. Results included high marks on questions regarding fairness, trust, and ability to effectively manage a diverse workforce.
"The basis for everything we accomplish as a company in any environment is a function of the engagement and spirit of the team, and my leadership team and I are extremely proud that we find our organization stronger and more engaged on the other side of these difficult times," Clyde said. "As always, we will not be complacent in this regard and we will actively listen to and incorporate feedback that can take our team’s engagement to the next level."
10. Believing in and investing in itself
"During the first half of 2021, we actively engaged investors and took every opportunity to engage investor sentiment and perceptions — not only about Murphy USA, but also the broader convenience sector," Clyde said.
Murphy repurchased $148 million worth of stock during Q2 2021, representing its conviction of the business' future potential. Murphy plans to balance repurchase decisions vs. the capital needs of the company.
"From the resiliency of our business model and agility of our leaders to respond to disruption, to the relentless pursuit to achieve the full potential of our growing business, through the actions of an engaged and never complacent team, I could not be more proud of the overall results this quarter," Clyde concluded.
El Dorado-based Murphy USA operates more than 1,650 gas stations and convenience stores, primarily in the Southwest, Southeast, Midwest and Northeast United States.
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