Murphy USA's Value Proposition Powers It Through Q1 2022

EL DORADO, Ark. — Murphy USA Inc.'s low-cost business model helped the retailer power through the first quarter of 2022 as its value proposition continues to draw in customers, according to the company's chief executive.

"We continue to learn more and more about our customers and their needs, and by analyzing the behavior of around 100,000 Murphy Drive Rewards customers who have shopped with us each month since 2019, we are learning a lot about how they are navigating the current environment," CEO Andrew Clyde said during the company's Q1 2022 earnings call, held earlier this month.

As Clyde pointed out, customers are spending more as fuel prices increase, but their consumption remains relatively stable as fewer gallons per trip are offset by increased trip frequency.

"As such, we represent an increasing percentage of their household income, which tells us that their purchases from Murphy USA are not discretionary. They must get to work, drive their kids to school and get to the store, as most of them do not have the luxury to work remotely and shop online," he explained, adding that the additional trips are generating incremental merchandise sales, particularly in the tobacco category.

In addition to existing loyalty members, the retailer is gaining new customers who are looking for greater value through tailored promotions of consumer packaged goods.

"As a result of increased fuel volume and traffic, merchandise sales and margins from attached categories continue to grow," Clyde said. "The benefit of being more affordable and increasingly relevant to consumers is that we are gaining share profitably for both established and emerging categories. This holds true not just for our Murphy branded stores, but also for the QuickChek brand given [its] compelling price-to-value offers in food and beverage, convenience items, and low-price motor fuel."

Murphy USA acquired Whitehouse Station, N.J.-based QuickChek in January 2021. The $645-million transaction added nearly 160 convenience stores to Murphy USA's network.

Q1 by the Numbers

During the first three months of 2022, Murphy USA reported net income of $152.4 million, compared to net income of $55.3 million in the same period of 2021. The current-year results include a full three months of QuickChek contribution vs. just two months in the prior-year period.

Revenue for the first quarter of 2022 was $5.1 billion, compared to $3.5 billion in the year-ago period. Adjusted EBITDA was $277 million in the quarter vs. $154.8 million a year ago. ​​​​​​Average retail gasoline prices were $3.43 a gallon vs. $2.37 per gallon in the first quarter of 2021.

In addition, the company reported total retail gallons increased 7.8 percent to 1.1 billion gallons in the quarter compared to the same three-month period last year, while volumes on a same-store basis increased 3.8 percent.

Merchandise contribution dollars for Q1 2022 rose 18.4 percent to $175.7 million on average unit margins of 19.7 percent, compared to the prior-year quarter's contribution dollars of $148.4 million on unit margins of 17.8 percent.

Food and beverage contribution margin increased to 14.6 percent of total merchandise contribution dollars, compared to 11.5 percent in the prior-year period.

During the quarter, El Dorado-based Murphy USA opened six new Murphy Express stores and one QuickChek store, which increased its store count to 1,686 locations. There are 17 new Murphy Express stores, two new QuickChek stores, and 17 raze-and-rebuild Murphy USA stores currently under construction.

"I believe this quarter's results highlight that the advantages embedded in our model are increasing and many of the structural factors are unlikely to dissipate in the near future as smaller retailers in the sector face increased challenges," Clyde said. "While we are certainly not immune to some of these factors, we believe our scale, business model, customer positioning and continuous improvement mindset better position us to mitigate these pressures, thus growing our relative cost advantage."