Murphy USA Lets Value Lead the Way
EL DORADO, Ark. — Murphy USA Inc. expects its business strategy and "relentless" focus on everyday low pricing and value to continue paying off as consumers seek exactly those things, the company shared during its recent earnings call for the second quarter of 2024.
"In times of significant consumer distress, consumers change their purchase behavior, and more of them come to Murphy," said President and CEO Andrew Clyde. "When that stress subsides, we find that most stay loyal customers because of the incredible value we deliver on the same products and the empathetic service and smiles they receive from our associates who understand their pain points."
[Read more: Charting the Journey to Foodservice Excellence]
Clyde noted that although softness in certain center-store categories and lighter-than-expected traffic in markets where the company operates its QuickChek brand have had an impact on its year-to-date results, same-store sales and margin growth were strong during Q2 2024, driven by "exceptional" tobacco category performance. The company plans to continue investing and reinvesting in tobacco from a price, promotion and capability perspective to drive strong growth across all products in the broader nicotine ecosystem.
At the same time, competition is heating up in foodservice as inflation remains impactful on Murphy's customers, Clyde continued.
Two For One
After acquiring Whitehouse Station, N.J.-based QuickChek Corp. in 2021, Murphy USA quickly deepened its investment in prepared food and beverages, and put key foodservice learnings to use on both sides of the company.
Since then, the retailer has found success through foodservice initiatives such as becoming the Official Sub Partner of the New York Giants and debuting a summer value menu. These efforts contributed to Murphy USA receiving the gold medal in the Foodservice Innovator to Watch category in Convenience Store News' 2024 Foodservice Innovators Awards.
"We have especially seen the effects in the Northeast markets, where we see lower inflation for food at home vs. food away from home, and that remains a challenge," he said. "We also note that [quick-service restaurant (QSR)] promotional intensity has increased, where many QSRs are pivoting back to value and competing per share in prepared food and beverages, which are core traffic-driving categories at QuickChek."
Murphy USA's value offer and impending new loyalty program rollout are likely to shore up the company's competitive stance, according to Clyde.
"Similar to [Murphy Drive Rewards] members, [QuickChek] Rewards members remain very active, shopping with greater frequency and with larger baskets," he said. "But with one less trip or a trade down, it adds up. With our commitment to value pricing, the new QC Rewards rollout coming up and other initiatives, we are well positioned to get that incremental trip and trade up back."
On the packaged goods front, customer spending continues to be strong in beer and salty snacks, which "customers not only don't want to forego, but are buying more of, compelled by our value offer," Clyde reported.
By the Numbers
Murphy USA opened three new stores and reopened nine raze-and-rebuild stores during the second quarter. This brings the company's year-to-date openings to six new stores, including one QuickChek location, and 11 raze-and-rebuilds, which transformed small kiosks into 1,400-square-foot stores.
The construction pipeline currently includes 22 new stores in progress, including three QuickChek stores and 25 raze-and-rebuilds. Another slate of new store construction is scheduled to begin in early September.
"For perspective, the raze-and-rebuild projects are generally easier to permit and build vs. the new stores," said Galagher Jeff, executive vice president and chief financial officer. "We do like this program as it enhances customer offers, improves the appearance of our stores and comes with high reinvestment returns."
Murphy USA plans to ramp up new store additions in 2024, 2025 and beyond, according to Jeff, noting that the company will achieve its guided range of 30 to 35 new stores this year, accelerating its pace of store growth from 28 store openings in 2023.
Murphy USA reported net income of $144.8 million during Q2 2024, up from $132.8 million during the same quarter last year. Adjusted EBITDA was $278.6 million, up from $257.1 million in Q2 2023. The company cited higher total fuel contribution and higher overall merchandise contribution, partially offset by higher store operating expenses, as main factors for the increase.
Total retail gallons rose 0.6% during the quarter, while volumes declined 1.3% on a same-store sales basis compared to last year. Total merchandise contribution increased 4.7%.
El Dorado-based Murphy USA has more than 1,500 stores located primarily in the Southwest, Southeast, Midwest and Northeast United States. The company and its team of nearly 15,000 employees serve an estimated 2 million customers each day through its retail network in 27 states. The majority of Murphy USA's stores are located in close proximity to Walmart Supercenters. The company also markets gasoline and other products at standalone stores under the Murphy Express and QuickChek brands.
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