EL DORADO, Ark. — After overcoming "the most challenging quarter in company history" during the second quarter of 2021, Murphy USA Inc. President and CEO Andrew Clyde believes the retailer's third-quarter performance continues to showcase the reasons why its business model is "uniquely built to thrive in the current environment."
"Last quarter, we discussed the top 10 operating challenges the business was facing and how the team overcame those challenges to ensure delivery of strong financial results. Third quarter wasn't really all that different," Clyde said during the company's Q3 2021 earnings call, held Oct. 28. "We saw higher trending crude prices, continued labor challenges, and ongoing supply chain issues. Yet, thanks to our dedicated store associates and support staff, we once again overcame those challenges and delivered another quarter of impressive financial results, further demonstrating the resilience of our business.
"It is becoming more evident to us, and should be to our investors, that the headwinds our industry is facing are ultimately translating to tailwinds for Murphy USA," Clyde added.
The retailer's net income for Q3 2021 was $104 million, compared to a net income of $66.9 million during Q3 2020, while adjusted EBITDA for the latest quarter was $202.5 million, compared to $141.5 million a year ago.
Total retail gallons sold during the third quarter increased by 11.4 percent year over year, while fuel volumes on a same-store sales basis rose by a more modest 1.9 percent.
Merchandise sales were also up. Total merchandise contribution increased 58.6 percent to $187.3 million during Q3 2021, up from the same period in 2020. The retailer attributed the increase to the inclusion of QuickChek Corp. Q3 marked the second full quarter to pass since Murphy USA took ownership of the Whitehouse Station, N.J.-based QuickChek chain.
The inclusion of QuickChek also prompted Murphy USA's food and beverage contribution margin to increase significantly to 14.8 percent of total merchandise contribution dollars, compared to 0.9 percent the previous year.
"I would say on both the Murphy USA and QuickChek side that we saw really nice improvement in the [product] mix. On the Murphy side, beverages, candy and salty alternative snacks all performed really well year over year, more than offsetting the general merchandise tailwinds we had during COVID," Clyde noted. "At QuickChek, we continue to see record food sales at a number of the stores."
A Robust Pipeline
During the third quarter, El Dorado-based Murphy USA opened seven new-to-industry retail sites, including four Murphy Express stores and three QuickChek stores, bringing the company's total network to 1,669 locations. This includes 1,151 Murphy USA stores, 360 Murphy Express stores, and 158 QuickChek stores.
Thirty-one stores are currently under construction, including 16 new 2,800-square-foot Murphy Express stores, three QuickChek stores, and 12 raze-and-rebuilds.
"The pipeline looks really robust for next year," Clyde commented. "2022 and beyond looks very solid."
When asked if merger-and-acquisition activity is something Murphy USA considers circumstantial as it integrates QuickChek into its business model, the chief executive told analysts that he "would never speak in terms of one and done," but that any opportunities the company explores would have to be "massively transformational."
"If you think about the intent behind QuickChek, it was to make a strategic acquisition to buy a capability. If you saw something really unique out there that you thought you can apply that capability to, or if you think about the Murphy Express model where we may be looking to enter new markets and you could get a toehold position with quality assets, you might do something like that," he said. "But what I can tell you is everything that we've seen and taken a look at doesn't fit that profile. So, I would put that much lower on the probability list but I wouldn't assign a zero probability to it."