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Murphy USA Has 'Volatile' Second Quarter

EL DORADO, Ark. — Murphy USA Inc.’s fiscal 2015 second quarter was a mix of both good and bad, with positive news coming from inside the store and negative news coming from the forecourt.

Overall, the El Dorado-based operator of 1,282 convenience stores saw net profits fall sharply by $47 million to total $26.2 million.

President and CEO Andrew Clyde remarked during Thursday’s earnings call that the quarter, ended June 30, was “volatile.” The main reason for the profit decline was lower retail fuel margins.

Murphy USA prides itself on being a “low price leader,” but the volatility of commodities caused the difference in pump prices at Murphy USA sites — many of which are housed in Walmart store parking lots — to narrow vs. competitors. “When the street price differential narrows, some people won’t drive as far to our locations,” Clyde remarked.

In addition, Murphy USA did not have its cross-marketing Walmart 10/15-cent fuel discount program to drive fuel sales during the quarter. The retailer is currently in discussions with Walmart regarding new cross-marketing programs. 

Retail fuel volumes did grow 1.9 percent year over year, but declined 2.4 percent on an average per store per month basis, and declined 2.1 percent on a same-store basis in the second quarter.

Despite weaker fuel margins, Clyde reiterated that he is very enthusiastic about the company’s prospects. “We view it as a long-term business with a long-term strategy,” he said.


While fuel margins struggled, in-store merchandise sales and margins were robust. Merchandise revenues rose by $23.9 million to $572 million in Murphy USA’s most recent quarter. Merchandise margin increased nearly 1 percentage point to a record margin of 14.6 percent. Same-store, non-tobacco merchandise sales increased 6 percent year over year.

According to Clyde, general merchandise, packaged beverages and lottery sales were especially strong during the quarter. Sports drinks, enhanced waters and ready-to-drink teas were specific areas of strength.

Looking ahead, Murphy USA currently has 39 new stores under construction. Clyde also revealed the company is halfway done with its 300-store refresh program.

During Thursday's call, Clyde was asked whether the company’s contract with McLane Co. Inc., set to expire in September, will be renewed. He responded that there are “ongoing discussions” with McLane regarding the contract.

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