Murphy USA's Investments Drive Top-Line Growth

EL DORADO, Ark. — Murphy USA's investments in its future growth are paying off.

According to President and CEO Andrew Clyde, the company delivered $93 million in adjusted EBITDA for the second quarter and executed on several initiatives that led to strong underlying fundamentals.

"The investments we are making in the core business to drive customer traffic and gain market share are paying off with top-line growth as evidenced by fuel and merchandise costs," Clyde said during the company's second-quarter earnings call on Aug. 1. "As with any investment, there is a near-term cost but these investments are in an efficient and effective way to acquire customers and share of wallet for the long-term."

In addition, "the investments further improve already strong raze-and-rebuild and new-to-industry store returns paving the way for higher rate of sustainable organic unit growth and accretive long-term earnings growth," he noted.

Looking at the numbers, same-store fuel gallons increased 3.7 percent in the second quarter on solid margins as Murphy USA continues to deliver its low price value proposition across markets.

"Aided by falling prices in April through early June, we realized higher year-over-year contribution from retail even with the sharp price run up at the end of the quarter," Clyde explained.

According to the chief executive, total fuel contribution fell below prior year due to inventory and timing variances associated with falling prices — opposite of the first quarter — and as a result, total fuel contribution was flat year-to-date vs. 2018.

"Our retail pricing excellence initiative is adding greater precision and speed to our practices, and we are confident that with each quarter further benefits will flow to the bottom line," he said. "While June's per store gallons were the highest in five years, we know some tough comps lie ahead as we cycled the large price fall off in the fourth quarter 2018."

However, he noted that July volumes are already showing a 2-percent increase year-over-year. "We remain confident we will continue to see benefits from the sharpened tactics through our retail pricing excellence initiative," Clyde said.

Inside the store, same-store merchandise sales grew 5.7 percent for the quarter, with same-store merchandise contribution dollars up 3.8 percent. Tobacco was the strongest category as same-store sales were up 6.5 percent and margin dollars were up 6.6 percent, "leading to share increases across subcategories and bucking industry trends," he said.

In addition, higher traffic along with strong lotto and lottery demands supported same-store sales and margin growth in other merchandise categories.

Looking at cigarettes, Murphy Driver Rewards (MDR) members are purchasing nearly three packs per month more. Murphy USA is also seeing a basket size increase of nearly $1 among other categories with MDR members, Clyde noted.

"This is just a start. We have only rolled out the most basic offer and functionality of MDR. We haven't even begun targeted consumer offers at scale or turned on any of the bells and whistles the program," he said. "So we are not only far from reaching the potential of the program, we are probably equally as far from defining the potential."

El Dorado-based Murphy USA's portfolio includes 1,474 stores in 26 states, consisting of 1,160 Murphy USA sites and 314 Murphy Express sites. Murphy USA is No. 29 on the 2019 Convenience Store News Top 100 report.