Susser CEO: C-store Chains Will 'Gobble Up' Smaller Operators

CORPUS CHRISTI, Texas -- Larger convenience store chains will make a strong push to acquire single-store operators, Sam Susser, Susser Holdings Corp.'s president and CEO, predicted during an investor conference call this morning.

"Single-store operators continue to find ways to carve out strength," the chief executive said. "But larger chains will continue to gobble up smaller businesses. Larger chains can take advantage of things such as [technological] improvements and low-cost debt."

Susser added that his company wants to make acquisitions itself, but "will remain disciplined."

Susser Holdings' retail arm, however, is being very aggressive regarding new store openings. The convenience store chain, which operates the Stripes brand of stores, is currently undergoing the most aggressive store opening strategy in its history.

Susser Holdings opened four new big-box Stripes stores in its 2012 fiscal first quarter, ending on April 1, and 11 more Stripes stores should open by the end of its second quarter. The company remains on track to open 25 to 30 stores this year.

"We don't plan to slow down [regarding store openings] in 2013, either," Susser said during today's conference call.

One reason for such aggressive growth plans is the Texas economy, which Susser said continues to outpace nearly all other areas of the United States. "The robust Texas economy continues to be a tailwind in our favor," he noted.

Steve DeSutter, president and CEO of Susser Holdings' retail division, added that the Texas economy is so good that Stripes stores are actually slightly understaffed in some areas. In response, the company plans to ramp up recruiting efforts.

Susser did admit that one negative to the strong local economy is that wage pressures are starting to creep in as potential employees have begun to seek increased salaries. "However, we're grateful for that challenge," he said.

As for its earnings, Susser Holdings lost $528,000 during its fiscal first quarter, compared to a loss of $23,000 in the same period in 2011.

The company reported several areas of strength, though, including same-store merchandise sales rising 6.7 percent compared to its 2011 first quarter, and average retail fuel gallon per store up 5.8 percent.

"We had a pretty solid first quarter," Susser said. "Our markets are growing, but we are growing faster than they are."

According to DeSutter, foodservice sales were stellar during Susser Holding's first quarter. The segment now makes up 22 percent of sales and 30 percent of the company's gross profits.

Susser Holdings expects in-store sales to continue to be strong. "We can't control fuel prices," said Mary Sullivan, Susser Holdings' CFO. "But sales inside the store are our bread and butter."

The company's Laredo Taco Co. restaurant division accounted for a healthy percentage of in-store sales. Susser said he was especially pleased with Laredo Taco as it is even performing well in low-Hispanic populated areas.

Looking ahead, Susser acknowledged that dollar stores have moved near Stripes locations in droves, but they have yet to negatively influence Susser Holdings' bottom line.

"There have been reports that dollar stores will start selling beer and cigarettes in our areas," he said. "If they are successful, it could have some impact [on our bottom line]…We welcome the competition. We respect them, but we think we'll continue to do well."