Murphy USA Starts Out Strong in First-Ever Earnings Report

EL DORADO, Ark. -- Murphy USA Inc. had plenty of good news to report during its inaugural earnings call today. The operator of 1,018 Murphy USA sites and 175 Murphy Express sites, which was spun off from Murphy Oil Corp. on Aug. 30, saw its net profits nearly quadruple to $41.7 million in its 2013 third quarter, compared to net income of $11 million in the year-ago period.

Contributing significantly to the massive earnings rise was fuel margin dollars, which increased 41.5 percent year over year. Overall, the company sold 971 million gallons of fuel in the third quarter, vs. 960 million gallons in its 2012 third quarter. Margins per gallon increased by 4.5 cents to 14.8 cents per gallon. Meanwhile, merchandise sales improved by $8 million to $548 million.

The only negative on the company's balance sheet was merchandise gross margins. Cigarette margins were the primary culprit, according to President and CEO Andrew Clyde.

In an effort to counteract declining cigarette margins -- a problem cited by many other convenience store retailers -- El Dorado, Ark.-based Murphy USA is rapidly opening new 1,200-square-foot stores. The company opened six such stores in the third quarter, with another 22 currently under construction. The retailer plans to open many more of these new-format stores in 2014, added Clyde.

"Results from stores in the new 1,200-square-foot format have been impressive," he said. "This is a high-return model less dependent on tobacco [sales]."

While cigarette margins declined to the tune of 0.7 percent, smokeless products had a banner quarter, Clyde pointed out. "Smokeless sales were up 6.5 percent in our latest quarter," he said. "[Electronic] cigarettes were especially strong. We saw a 6-percent sales increase in this segment, and we have expanded this category to have more leading brands." Thanks to promotions with The Coca-Cola Co., carbonated soft drinks (CSDs) also had an excellent quarter. CSD sales rose 11.6 percent year over year. Murphy USA will work with PepsiCo Inc. on similar promotions in the future, the CEO noted.

The company was so pleased with its quarterly results that Clyde said an initiation of a dividend to shareholders will be discussed with Murphy USA’s board of directors in the future.

"We couldn't be more pleased with our results and progress," he concluded. "We remain bullish on our outlook and potential."