Murphy USA Previews Strategy for the Next 10 Years

EL DORADO, Ark. — Early into its second decade as an independent company, Murphy USA Inc. is at a turning point, company leadership shared during its recent earnings call.

"As we look back over our history as a standalone public company, I would characterize the first 10 years since our spinoff as transforming how we conduct business in our stores, optimizing our high-volume formats, reducing our breakeven requirement to enhance merchandising and reduce costs, channeling the incredible spirit of our associates towards aligned objectives and creating a unique everyday low-price loyalty platform with Murphy Drive Rewards," said Murphy USA President and CEO Andrew Clyde.

The next 10 years will serve as a continuation of this foundation and transformation of the kind of stores Murphy USA does business in and how it interacts with its customers, he continued. Murphy USA's new build stores bring higher volumes, merchandise sales and margins, but also higher operating costs due to the larger footprint.

"More importantly, these stores deliver higher returns, a better coverage ratio and a more attractive offer for our customers, helping us to sustain and grow market share," Clyde continued.

Recent in-store results were underpinned by continued learning through innovation and an increased focus on growing the convenience retailer's food and beverage contribution. Clyde noted that the third quarter of 2023 saw significant momentum in food and beverage sales, driven by its QuickChek subsidiary's signature subs brand partnership with the New York Giants plus improved grab-and-go and co-branded frozen beverages results at Murphy USA.

[Read more: QuickChek Gets Into the Game as Official Sub Partner of NFL Team]

"While not home runs in any individual quarter, these singles and doubles generate cumulative and enduring benefits while also demonstrating tangible results of our innovative mindset and relentless commitment to our customers," Clyde said.

Q3 BY THE NUMBERS

El Dorado-based Murphy USA reported net income of $167.7 million during Q3 2023, compared to net income of $219.5 million during Q3 2022. Revenue was $5.8 billion vs. $6.2 billion during the previous-year quarter. Adjusted EBITDA was $306 million, down from $367 million one year ago. Primary factors behind these lower figures included lower total fuel contribution and increases in store operating expenses and general and administrative expenses, partially offset by higher overall merchandise contribution margins and lower payment fees.

The average price at the fuel pump was $3.41 per gallon during the third quarter, down from $3.67 during the same quarter one year ago. Total retail gallons decreased 2.5 percent during the quarter compared to Q3 2022, while volumes declined 4.7 percent on a same store sales basis.

Merchandise contribution dollars during Q3 2023 increased 3 percent to $211.8 million on average unit margins of 20.1 percent, compared to the prior-year quarter contribution dollars of $205.7 million on unit margins of 20 percent.

"We are very pleased with third quarter performance as we comp last year's extraordinary earnings," Clyde said. "On a two-year stack basis, Murphy USA demonstrated industry leading fuel volume and tobacco gains, while current year fuel margins highlight the sustainability of elevated industry margins in a less volatile setting. Momentum carried through to October especially at QuickChek where new promotions and initiatives have contributed to record food and beverage profits."

Looking ahead, Clyde noted that while Murphy USA is unlikely to beat last year's numbers, it is focused on long-term success.

"To be sure, we do not expect full year results in 2023 will exceed those of 2022, but that really shouldn't be news to anyone except the bots," he said. "Instead, we believe investors should be focused on two fundamental questions: What is the sustainable trajectory given the advantaged competitive positioning of the Murphy USA business model in the years ahead? And how does the current momentum and initiatives underpin and support that view?"