Q2 Brings Nearly Double the Earnings for Murphy USA

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Q2 Brings Nearly Double the Earnings for Murphy USA

08/04/2016

EL DORADO, Ark. — Despite some publicly traded convenience store operators finding tougher sledding in 2016’s second quarter for a variety of reasons, Murphy USA was not one of them.

In fact, the company saw its net earnings nearly double year over year in its 2016 fiscal second quarter, to $46.3 million.

Most metrics improved vs. 2015’s second quarter, including merchandise contribution dollars, which grew by 10.8 percent year over year to $92.7 million at average unit margins of 15.7 percent — both records for the El Dorado-based convenience store retailer.

Retail fuel volumes increased by $200 million to $1.3 billion for the period ended June 30, while total retail fuel contributions rose 22.5 percent to $112 million.

Tobacco contributions were also strong on a per-store basis, rising 5.9 percent year over year to $13,651, which the company attributed primarily to its new distribution agreement with Core-Mark Holding Co. Inc. The agreement took effect in February.

Non-tobacco in-store sales increased by 9.7 percent vs. the year-ago period, driven by strong sales in snacks, beverages and lottery.

The only real weakness in Murphy USA’s second quarter was same-store sales, which dropped by 0.1 percent year over year.

“Second-quarter results showcased the benefits of our differentiated fuel-driven business model,” said President and CEO Andrew Clyde. “We continue to demonstrate tangible progress among the core elements of our formula for value creation as we accelerate new store additions, generate record merchandise margins and diligently focus on cost-control initiatives, all of which result in strong improvement in our break-even metric.”

Speaking of new store additions, Murphy USA opened 15 stores in its most recent quarter, including seven raze-and-rebuilds. Forty sites are currently under construction, as well as three raze-and-rebuilds. The company is on track to open 60 to 70 new stores this calendar year.

In total, Murphy USA operated 1,344 c-stores as of June 30 — 1,118 under the Murphy USA brand name and 226 Murphy Express sites.

Clyde also announced during Thursday's Q2 earnings call that Murphy USA introduced a new Visa credit card that offers cents-off-at-the-pump discounts. Since the program only kicked off Aug. 1, he could not yet say what affect the new program will have on future earnings, but he does believe Murphy USA is poised to see an uplift.

“Research we have done shows consumers prefer immediate cents-off discounts,” he said. “We expect this to drive traffic to our stores.”

FUTURE HEADWINDS

Although Murphy USA is operating on all cylinders, Clyde acknowledged that two headwinds all c-stores face could be of concern for the company.

First off is the Department of Labor’s proposed non-exempt overtime rule set to go into effect Dec. 1, which includes a nearly doubling of the current salary threshold from $23,360 to $47,476, under which virtually all workers will be eligible for time-and-a-half pay.

The second top-of-mind topic is EMV upgrades at the forecourt, for which there is a liability shift deadline of Oct. 1, 2017. This requires c-store retailers to upgrade their automated fuel dispensers to accept EMV chip-and-PIN and chip-and-signature cards by this date or risk being held financially responsible for fraudulent transactions taking place at the pump.

EMV is an acronym for Europay, MasterCard and Visa, the three companies that originally created the security standard.

“We are actively developing a response [to both issues],” concluded Clyde. “Murphy USA can continue to win in this dynamic environment.”