Sunoco's Store Count Ticks Up Some More

DALLAS — Sunoco LP continues to make acquisitions, this time adding six convenience stores, along with wholesale motor fuel distribution and commercial fuel distribution businesses, in eastern Texas and Louisiana.

Sunoco purchased these assets from Denny Oil Co. Inc., CEO Bob Owens announced Thursday during the company’s 2016 fiscal second-quarter earnings call.

“We are looking forward to entering a new region,” he said.

This transaction comes on the heels of two other acquisitions completed in late June — 14 Rattlers locations in central Texas from Kolkhorst Petroleum Inc., and 18 upstate New York sites from Valentine Stores Inc. Sunoco also purchased Emerge Energy Services LP’s fuel business for $178.5 million during the second quarter.

“We are selective, but M&A continues to provide opportunities in a fragmented market,” said Owens. “We think we can thread the needle and find attractive and accretive acquisitions while reducing leverage.”

None of these new assets were included in Sunoco’s second-quarter earnings, ended June 30, with the exception of a few days. Companywide, Sunoco earned net income of $72.1 million in its most recent quarter, compared to $34.9 million in 2015’s second quarter.

Retail operations were mixed, with results negatively affected by stores it operates in oil-producing regions, according to Owens. Stores in these regions include Stripes locations in the Eagle Ford Shale in southern Texas, an important oil-drilling region in the United States that has been hurt by low oil prices. Sunoco has 140 stores in oil-producing regions, approximately 10 percent of its store count. 

Weaker results from oil-producing stores were most evident in Sunoco’s Q2 same-store merchandise sales, which decreased by 1.8 percent year over year, while same-store fuel sales dropped by 2.8 percent.

When looking at just its Texas stores in oil-producing areas, same-store merchandise sales decreased by 15.6 percent year over year, and same-store fuel sales declined by 17.9 percent year over year.

Excluding oil-producing stores, same-store merchandise sales would have increased by 0.6 percent, and same-store gallons would have decreased by 1 percent.

In total, for its retail division, the master limited partnership lost $11 million in its latest quarter, compared to net income of $4.2 million in 2015’s second quarter.

Despite some negative comparables, there were positive signs in Sunoco’s Q2:

• Total merchandise sales increased by 2.8 percent year over year to $576.6 million.
• Merchandise sales contributed $187.3 million of gross profit with a merchandise margin of 32.5 percent, a 100-basis-point improvement vs. a year ago.
• Fuel margins for all gallons sold increased to 13.8 cents per gallon, a rise of 0.9 cents per gallon.

In the three-month period ended June 30, Sunoco opened six new-to-industry stores, with another 23 stores currently under construction. Under its capital spending plan, Sunoco reported that it has the wherewithal to construct and complete at least 35 new-to-industry sites in calendar year 2016.

Dallas-based Sunoco LP operated approximately 1,340 convenience stores as of June 30 along the East Coast, in the Southwest and Hawaii under the APlus, Stripes, Aloha Island Mart and Tigermarket brands. Its third-party sites totaled approximately 5,600 locations.