Murphy USA Reveals More Details on Its ‘Plan B’

EL DORADO, Ark. — Following Wal-Mart Stores Inc.’s decision to develop its own proprietary gasoline program for its supercenters not currently supplied by Murphy USA Inc., the convenience store retailer will shift to its “Plan B,” an independent growth strategy, President and CEO Andrew Clyde said during a Wednesday morning conference call with Wall Street analysts.

“It’s been an eventful and exciting past few days that generated plenty of interest,” Clyde said of Walmart’s decision announced Monday. “We’ve seen this fork in the road coming. This decision did not surprise us.”

Murphy USA’s Plan B entails organic store growth of 60 to 80 stores per year for 2016 and 2017, some of which will be larger-format stores. These larger locations span 3,500 square feet — much bigger than its 1,200-square-foot legacy locations — and feature a greatly expanded product mix, although they do not incorporate a made-to-order foodservice operation, Clyde noted.

Murphy USA's larger sites have been very successful thus far in Arkansas, Colorado and Louisiana, according to the chief executive.

The El Dorado-based c-store operator will also repurchase as much as $500 million worth of its stock over the next couple of years. Clyde did not specifically say when the share buybacks will begin, but he did note that the company is currently in a “quiet period” prior to reporting earnings on Feb. 4 and cannot begin any buybacks until Feb. 8.

Regarding Walmart, Clyde revealed Murphy USA made a “compelling offer” to continuing developing sites with the big-box chain, but Walmart decided to go in another direction. He insisted, however, that there was “no breakdown in negotiations” and that the two companies continue to have a strong relationship.

“Nothing happened to deteriorate our relationship and we don’t want to let anything happen to deteriorate it,” he stated.

While Clyde said he does not know Walmart’s future intentions, he acknowledged the big-box operator could build its own gas stations and perhaps even convenience stores in the future, some of which may compete with Murphy USA locations. However, he said Murphy USA is ready for any competitive challenge, as it has already faced the likes of QuikTrip, Sheetz and Wawa, all of whom the chief exec mentioned by name.

“Our business model allows us to compete with anyone,” Clyde said. “… Sooner or later, we are going to bump into [Walmart]. We need to be smart about how we prioritize locations.”

During Wednesday's conference call, Clyde did not directly respond to a question posed by Bonnie Herzog, managing director of tobacco, beverage and convenience store research at Wells Fargo Securities LLC, about whether there's the possibility of Walmart acquiring Murphy USA. Instead, the CEO stressed Plan B is an excellent option for the company to propel future growth and shareholder value.

“It’s a very attractive alternative,” concluded Clyde. “We see the exit sign ahead and need to keep the foot on the pedal.”

Murphy USA Inc. operates more than 1,300 convenience stores and gas stations in 24 states.

This ad will auto-close in 10 seconds