Speedway's Hess Conversion Way Ahead of Schedule
FINDLAY, Ohio — Approximately 80 percent of the conversions of former Hess retail sites to the Speedway brand name have been completed, which is way ahead of the original timeline, according to Gary R. Heminger, CEO of Speedway LLC parent company Marathon Petroleum Corp.
Thus far, nearly 1,000 of the 1,245 acquired Hess locations have been converted to the Speedway brand, Heminger stated during Thursday’s 2015 fiscal third-quarter earnings call.
“On Sept. 30, we celebrated the one-year anniversary of [the Hess] retail acquisition and can say it’s performing very well,” he said on the call.
In addition to the store conversions, Speedway has completed or is currently in the process of completing 240 remodels of former Hess locations, primarily located along the East Coast.
Also, Marathon Petroleum has captured more than double the projected synergies of $75 million related to the Hess retail acquisition, Heminger relayed.
The acquired Hess stores were a main component that led Speedway to report strong fiscal third-quarter earnings. For the quarter ended Oct. 30, Speedway’s net earnings more than doubled to $243 million.
SPEEDWAY DOUBLES EARNINGS
Looking at the results in more detail, gasoline and distillate sales reached 1.55 billion gallons vs. 842 million gallons in the year-ago period. Gasoline gross margins increased more than 5 cents per gallon to 21.46 cents per gallon. Same-store gasoline sales volume rose 0.5 percent vs. 2014’s third quarter.
Same-store gasoline sales volume continues to be strong thus far in October, rising 1.8 percent year over year, noted Timothy T. Griffith, Marathon Petroleum’s chief financial officer and senior vice president.
Inside Speedway stores, merchandise sales improved to $1.294 billion, compared to $870 million in the same period in 2014. Merchandise gross margins came in at $358 million, a $123-million improvement year over year. Merchandise gross margin percentage rose nearly 1 percentage point to 27.7 percent. On a same-store basis, merchandise sales advanced 3.6 percent year over year.
“Speedway benefited from higher light-product margins, and its peer-leading merchandise model drove higher profitability compared to last year,” said Heminger.
During a question-and-answer session with Wall Street analysts, Heminger was asked twice how Marathon Petroleum might unlock the financial value of Speedway in the future. The CEO reiterated prior comments that Speedway will remain part of the Marathon Petroleum portfolio, as opposed to spinning off the retail division.
“We continue to believe Speedway is a strategic part of our portfolio,” he responded. "Are we thinking of spinning off Speedway? The answer is 'no.'"
Companywide, Findlay-based Marathon Petroleum reported 2015 third-quarter earnings of $948 million, compared to $672 million in the same quarter last year.
“We had solid performance across all segments,” concluded Heminger.