Murphy USA Focuses on Organic Growth

EL DORADO, Ark. — Murphy USA Inc. is in the midst of an aggressive organic growth mode that will continue into 2015, CEO Andrew Clyde reported during Thursday's 2014 fiscal third-quarter earnings call.

In its latest quarter ended Sept. 30, Murphy USA opened 16 new convenience stores. An additional six locations have opened since, and 22 more stores are currently under construction.

For all of fiscal 2014, Murphy USA expects to open 60 new stores, 41 of which will boast its larger 1,200-square-foot footprint. The retailer currently has 1,245 locations, 1,045 of which are branded Murphy USA, while 200 operate under the Murphy Express banner.

Despite this robust growth, Clyde revealed the El Dorado-based company has no intention of looking into acquisitions in 2015. "Organic growth is the first point of our strategy," he said.

Thus far, the strategy is paying off. Murphy USA's net income for its most recent quarter reached $62.7 million, vs. $36 million for the same quarter in 2013.

Total retail fuel volume increased 7 percent to 1.04 billion gallons. Retail fuel margins per site increased 2.7 percent, with an average margin of 17.5 cents per gallon.

Merchandise margin dollars were also strong, rising 5.1 percent in the third quarter. Merchandise revenues were $561 million, a year-over-year improvement of $4.2 million.

Tobacco sales were the one negative. When excluding this segment, in-store sales increased 9.6 percent during the quarter. According to Clyde, packaged beverages, dispensed beverages, beer and wine, salty snacks, electronic cigarettes and electronic vapor products all sold well in Murphy USA's latest quarter.

When questioned by a Wall Street analyst about the tobacco segment, Clyde responded that the company had forecasted a decline in tobacco sales as fewer Americans smoke. He also noted that CVS Health Corp.'s exit from tobacco sales may not help the retailer tremendously, as most customers already relied on Murphy USA as a low-cost tobacco provider. 

Despite the falling tobacco sales that most every c-store operator is straddled with, Clyde said in-store sales in Murphy USA's fourth quarter are already off to an excellent start.

He acknowledged that it's too early to know what benefit lower gas prices are having on in-store sales. But he did say the chain's larger 1,200-square-foot store format and constant promotions have been big winners for the retailer.

Customers can expect plenty more promotions in 2015, Clyde hinted. "We had great meetings at [October's] NACS [Show] with suppliers," he said. "We are close to completing our 2015 promotional calendar. We will have plenty of new programs throughout the year."

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