Murphy USA's Core Categories Are Driving Long-Term Success
EL DORADO, Ark. — The strength of its core categories drove Murphy USA sales during the third quarter of 2024.
As the retailer saw incremental benefit in basket-building categories such as fuel, nicotine, beer and lottery, the convenience store chain in turn leveraged them to drive transactions and other more discretionary categories across the center store, company leadership shared during the company's recent earnings call.
The performance in tobacco was "exceptionally strong," noted Andrew Clyde, Murphy USA president and CEO.
"We are continuing to grow our market share in combustible products eclipsing 20% share in Murphy markets," he said. "Similarly, we are taking share in driving sales and margin growth in traditional smokeless products and the fast-growing oral nicotine category, where collectively, we are seeing double-digit growth in sales and margin, further differentiating our performance versus peers."
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Murphy banner stores saw total packaged beverage sales increase 2.9% and margin growth rise 6.2%. They also saw mid- to high- single-digit strength in general merchandise, candy and salty snacks — each of which grew share in the company's markets vs. broader declines registered in Nielsen data, Clyde said.
He attributed these results to the value of Murphy USA's 2024 initiatives, including personalization of Murphy Drive Rewards offers and its analytics-driven pricing and assortment strategies to optimize its offer and leverage price elasticities at the SKU level.
The company's QuickChek c-stores continue to experience competition from quick-service restaurants' value pricing during the quarter, with overall food and beverage sales per store remaining fairly flat. However, coffee sales were a "bright spot," growing 4.3% on a per-store basis and made-to-order specialty drinks up 14% on a per-store basis, the chief executive noted.
"Recognizing the inside traffic headwinds will likely persist into 2025, we are taking intentional action to drive QuickChek traffic and further increase the competitiveness of our value offer," Clyde said.
Current initiatives that the company expects to have positive result include value offers and promotions for breakfast and lunch.
"While it's early in the sandwich promotion, we are seeing significant customer uptake in the 6-inch sub offer, where volumes were up 63%. And perhaps more encouragingly, we are seeing a 16% increase in total sandwich units, meaning we are seeing cross-pollination across the category. Coupled with the higher traction in the New York Giants premium subs vs. their inaugural launch last year, we are very encouraged by the trips and transactions we are seeing attached to this core traffic-driving category," Clyde said.
The company predicts that the newly designed and relaunched QuickChek Rewards program will offer additional opportunities to engage with customers and drive sales in 2025.
By the Numbers
Murphy USA reported net income of $149.2 million during Q3 2024, down from $167.7 million during the same quarter last year. Adjusted EBITDA was $285.6 million, down from $306 million one year prior. Company leadership attributed this primarily due to lower total fuel contribution and higher store operating expenses, which were partially offset by higher retail fuel volumes and higher overall merchandise contribution.
Total retail gallons rose 2% and volumes on a same store sales basis increased 0.5% compared to Q3 2023. Total merchandise contribution increased 2.4% year over year to $216.8 million.
"Strength in our core categories continued to drive Murphy USA's advantaged business model in the third quarter," Clyde said. "Retail fuel margins were over 3 [cents per gallon] higher than 2023, and per store volumes grew 1.1%, as pricing dynamics continue to reflect higher industry breakeven margins. Within the Murphy branded stores, total merchandise margin dollars were up 5.9% reflecting strength in both nicotine and non-nicotine categories while there were continued headwinds in the Northeast QuickChek markets.
"As our innovation and business improvement initiatives take hold, our network grows, and we continue to take share on key categories, we are well-positioned to compete and win with our value-conscious customers," he continued. "We are accelerating our new-store build program in 2024 and 2025, which is generating strong returns and remains the primary growth driver of the business over the next five to 10 years."
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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