TravelCenters of America Navigates Through a Challenging First Quarter of 2020

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TravelCenters of America

TravelCenters of America Navigates Through a Challenging First Quarter of 2020

By Angela Hanson - 05/13/2020
TA forecourt

WESTLAKE, Ohio — The COVID-19 pandemic and other factors resulted in a net loss and the delay of a restaurant rebranding project for TravelCenters of America Inc. (TA), the retailer reported during its first-quarter 2020 earnings call, held May 5.

"We navigated through a challenging first quarter, the latter part of which was heavily impacted by the COVID-19 pandemic," CEO Jonathan Pertchik reported. "Our fuel sales volume during the first quarter increased 3.6 percent, which was driven entirely by diesel fuel sales volume. Our gasoline sales volume, after being up most of the first quarter, declined significantly beginning mid-March as consumers responded to the COVID-19 pandemic. Despite the decrease in gasoline sales volume, total fuel gross margin was strong in March as both diesel fuel and gasoline costs declined as a result of reduced demand, which resulted in a 9.6 percent increase in our fuel gross margin for the 2020 first quarter."

However, the strong fuel gross margin was more than offset by a decline in its nonfuel gross margin due to government-mandated stay at-home orders and the temporary closure of certain full-service restaurants, Pertchik noted.

TA reported a net loss of $18.5 million during the first quarter, compared to a net loss of $12.7 million during Q1 2019. Adjusted EBITDA for the period was $10.3 million, compared to $11.4 million one year prior.

Nonfuel revenues declined by 3.6 percent year over year. TA's restaurant operations saw the greatest revenue drop, at 5.1 percent, followed by truck services (down 4.5 percent) and store and retail services (down 2 percent).

Due to the restaurant closures and the uncertainty of when and how they will reopen, TA and IHOP Restaurants agreed to delay the conversion of certain restaurants in TA's network to the IHOP brand for one year. TA announced in late October 2019 that the companies had entered into a franchise development agreement whereby they would open up to 94 IHOP locations inside TA and Petro branded locations, as Convenience Store News previously reported.

TA also made the decision during the first quarter to reduce some planned capital expenditures in order to focus on maintenance and other items.

Despite the negative financial impact of the pandemic and the furloughing of approximately 3,000 employees, TA officials expressed optimism about the company's future, citing the comparatively positive numbers of the quarter's first two months. Additionally, TA expects its recently announced companywide restructuring plan to create a better-running organization with improved visibility, accountability and financial performance.

Taking a longer term look at the future, TA expects to grow its network primarily through franchising, along with selectively acquiring or developing full-service travel centers where demand exists in its network. It also intends to selectively franchise, acquire or develop smaller-format TA Express locations to complement its full-service network.

On the foodservice front, TA plans to replace full-service casual dining restaurant brands with better-known consumer brands, and to convert and upgrade quick-service restaurant options to replace underperforming brands.

TA will make adjustments to its restaurant offerings when they resume operations. Options such as salad bars and buffets will not be available during the initial reopening, and possibly not ever, based on public reaction, according to company leadership.

Westlake-based TA has more than 21,000 employees serving customers in more than 260 locations in 44 states and Canada, principally under the TA, Petro Stopping Centers and TA Express brands. It operates nearly 650 full-service and quick-service restaurants and 10 proprietary restaurant brands, including Quaker Steak and Lube, Iron Skillet, and Country Pride.

About the Author

Angela Hanson

Angela Hanson

Angela Hanson is Associate Editor of Convenience Store News. Read More