Murphy USA Upbeat on Eve of One-Year Anniversary
EL DORADO, Ark. – Murphy USA Inc. is confident in its unique business model as it approaches the one-year anniversary of being spun off from Murphy Oil Corp., said president and CEO Andrew Clyde during Thursday’s 2014 fiscal second-quarter earnings conference call. Murphy USA first began trading on the New York Stock Exchange on Sept. 3.
“We are proud of the strong foundation we built as well the value we are building for shareholders,” he said. “In our first year, we have spent $200 million on debt repayments and share repurchases.”
When questioned by a Wall Street analyst, Clyde asserted that Murphy USA will not make a transaction similar to the one announced by CST Brands Inc. and Lehigh Gas Partners LP Wednesday. CST Brands announced it will purchase 100 percent of the general partnership interests of Lehigh Gas GP LLC, the general partner of Lehigh Gas Partners LP. The deal is expected to provide CST -– parent company to Corner Store locations –- with capital via a growth-oriented master limited partnership to execute its long-term strategic plan.
“I can see a lot of merit in CST in doing that,” Clyde told investors. “But we have no dealer-wholesaler business, and don’t intend to go that [route]. We have a different business model. It’s not an effective strategy for our company.”
Building new stores is definitely a part of Murphy USA’s strategy moving forward, however. During its latest quarter ended June 30, Murphy USA opened nine stores, and five more have opened since. The convenience store retailer will break ground on 18 new stores in August alone, and 20 locations are currently under construction, the CEO noted. All stores are 1,200 square feet or larger.
“We’ve been pretty much opening one new store per week,” said Clyde.
El Dorado-based Murphy USA operated a total of 1,228 locations as of June 30, comprising 1,035 Murphy USA sites and 193 Murphy Express sites.
Murphy USA’s net earnings rose nearly $3 million in its second quarter to $73.2 million. Leading the way was in-store merchandise gross margins, which rose 6.3 percent year over year. Broken down further, total non-tobacco sales dollars increased 9.2 percent year over year, with dispensed beverages, salty snacks and alternative snacks performing extremely well, said Clyde. Although tobacco sales slumped during Murphy USA’s most recent quarter, smokeless, vapor and electronic cigarette products were all strong sellers, the CEO said.
“We were extremely pleased with in-store merchandise sales,” he said.
Not quite as impressive were fuel sales, which saw margins decline 2.4 cents per gallon to 13.2 cents per gallon. Retail fuel volumes sold also decreased by 2.6 percent.
Murphy USA attributed the fuel sales declines to a flat-to-rising wholesale price environment and fewer days in the quarter for its Walmart 15 cent/10 cent discount fuel program. Clyde explained that in 2013, this promotion begin on April 1 and ran through the entire second quarter. This year, the same program began on May 18 and will continue until after Labor Day.
With this promotion currently in place, Murphy USA is “positioned well in the third quarter in fuel [sales],” Clyde concluded.