Speedway President Kenney: C-Store Industry is 'Ripe For Consolidation'

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Speedway President Kenney: C-Store Industry is 'Ripe For Consolidation'


NEW YORK -- Speedway LLC plans to aggressively pursue acquisitions in the near future, Tony Kenney, the convenience store chain's president, said during Marathon Petroleum Corp.'s (MPC) investor conference, which took place yesterday.

During his presentation, Kenney pointed out that the c-store industry is "highly fragmented and one I believe is ripe for consolidation," considering that 63 percent of U.S. convenience stores are run by single-store operators and 76 percent are owned by chains of 50 locations or less.

"Smaller retailers may present some good opportunities," Kenney said at yesterday's conference. "The convenience store channel remains a viable business strategy. Industry sales and profits continue to grow. Consumers have shown a preference to shop the channel and it performs well over [all] economic cycles."

In addition to its acquisition strategy, Kenney said Speedway, the fourth-largest U.S. c-store chain, will grow its market share organically via "exceptional customer service and operating efficiently and competitively every day."

Two million people visit Speedway stores daily, according to Kenney. He intends to increase that number by way of Speedy Rewards, the chain's loyalty program. Founded in 2005, Speedy Rewards now has 3.7 million registered users.

"Consumers have many retail and gasoline choices," said Kenney. "Most of those places have the same brands. Speedy Rewards makes the difference. It's a good way to give extra value to customers during challenging times."

Although MPC, Speedway's parent company, provides a great oil pipeline, Kenney pointed to merchandise sales as a key Speedway driver. About two-thirds of the c-store chain's gross margins come from merchandise sales, he said. "The merchandise side of the business is one that is more sustainable, gradable and one that is growing," Kenney added. "It provides a solid foundation for earnings and cash flow for Speedway. Light product margins tend to be much more volatile and competitive."

On a broader basis, MPC stands behind its retail operations. "Unlike many major oil companies [that] have chosen to divest their retail [operations], MPC remains committed to owning and operating retail [locations]," Kenney said. "We are firm believers in the incremental value that is provided by an integrated marketing model."

Speaking at MPC's first investor conference as an independent company, CEO Gary Heminger reported that the company's performance has been in the top quartile -- compared to competitors -- for the past decade. "We are well positioned to take advantage of short-term and medium-term market conditions, but we believe our track record shows that our ability to generate positive returns throughout the entire business cycle is also a fundamental strength."