TravelCenters of America Turns In Solid Third Quarter Despite COVID-19 Challenges

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TravelCenters of America Turns In Solid Third Quarter Despite COVID-19 Challenges

By Melissa Kress - 11/11/2020
Logos for TravelCenters of America's brands

WESTLAKE, Ohio — Despite the continued challenges presented by COVID-19, TravelCenters of America Inc. (TA) saw its fuel sales volume tick up and most of its full-service restaurants welcome back customers during the third quarter of 2020.

For the three-month period, TA saw solid performances from both its fuel and non-fuel businesses, which "largely offset COVID-related decreases in four-wheel traffic and in our full-service restaurants," CEO John Pertchik reported during the company's third-quarter 2020 earnings call, held Nov. 4.

In addition, TA's focus on managing costs delivered improved profitability vs. the prior quarter, the chief executive noted.

Overall fuel sales volume increased by 8.5 percent, driven by an increase in trucking activity, new fleet customers, and overall increased volume from existing customers due to the early success of several company initiatives, according to Pertchik.

Fuel gross margin for the three-month period ticked up 1 percent vs. the same period in 2019, boosted by higher diesel volume and the federal biodiesel tax credit and offset by a more favorable purchasing environment in the third quarter of last year.

"Starting on Oct. 1, we began using our economies-of-scale purchasing power to purchase diesel fuel in substantially larger volumes vs. inefficiently purchasing in smaller increments previously," Pertchik said.

On the non-fuel side of TA's business, the company's overall revenue dipped 3.7 percent vs. the prior-year quarter. However, this was seen as a positive given the significant negative COVID-related impact on its full-service restaurants.

"In many states, these restaurants were deemed non-essential services by government authorities, which forced them to shut down," Pertchik explained. "Additionally, even where and when not forced to shut down, demand at certain locations dropped so precipitously that we chose to shut down."

As COVID-19 began to spread across the United States, TA furloughed nearly 4,000 field employees — which mitigated its loss by reducing costs somewhat on par with the loss of sales and demand.

"We began to slowly reopen some of these full-service restaurants in June with limited menus, reducing inventory and labor costs and allowing us to test different and more effective approaches to running this labor-intensive business more efficiently," Pertchik said.

The majority of TA's full-service restaurants have now reopened and some furloughed employees have returned to work.

"Many other creative methods for utilization of the full-service restaurant spaces on our sites are currently being evaluated and soon will be beta-tested with an eye toward optimizing performance," the CEO added.

As for its quick-service restaurants, revenues in the third quarter improved by 4.2 percent vs. the prior year. This increase was driven by more disciplined leadership and management, Pertchik cited.

As for TA's convenience stores, improved management and merchandising have begun to have a positive impact, as revenues increased by 3.7 percent vs. Q3 2019. 

"We have begun working to centralize purchasing and manage inventory more efficiently, which will eventually translate into better margin for these businesses," he said.

In the area of truck services, TA's Q3 2020 revenues showed year-over-year improvement driven by an increase in work orders. This segment of the business remains a top focus for the company, seen as a key competitive advantage and an opportunity to increase market share among fleet customers, Pertchik explained.

"I'm very proud of the progress demonstrated by our results this quarter vs. 2019 on top of the result of the second quarter," he said. "We now have two sequential quarters under our belt where we delivered solid improvement in net income, EBITDA, EBITDAR, and we did so through a worldwide health and economic crisis.

"These are the early innings, but I am optimistic we are starting to deliver on our promise to rebuild trust and credibility within the marketplace, and have shown a sincere and effective commitment to change through these results," he added.

Westlake-based TA's business includes travel centers located in 44 U.S. states and Canada, standalone truck service facilities in three states, and standalone restaurants in 12 states. TA's travel centers operate under the TravelCenters of America, TA, TA Express, Petro Stopping Centers and Petro brand names. Its standalone truck service facilities operate under the TA Truck Service brand name. Its standalone restaurants operate principally under the Quaker Steak & Lube, or QSL, brand name.

About the Author

Melissa Kress

Melissa Kress

Melissa Kress is Senior News Editor of Convenience Store News. Read More