EL DORADO, Ark. — Murphy USA Inc. is investing in long-term success following a successful start to 2023.
The company delivered the second-highest first-quarter net income and EBITDA in company history at the same time that its everyday low-price strategy helped drive average per-store volumes up 2.4 percent, CEO Andrew Clyde reported during Murphy's Q1 2023 earnings call, held earlier this month.
Fuel sales are also doing well despite generally lower pump prices allowing customers more leeway in where they choose to fill up, according to Clyde.
"Importantly, we continue to see robust fuel traffic despite lower street prices, suggesting sticky behavior from customers who may have initially come to us seeking lower prices in a high price environment but have become loyal shoppers due to the convenience, service and the attractive value in our in-store offer," he said.
Quarterly same-store gallons are up 1.4 percent for the current year and 5.2 percent on a two-year stack basis, allowing Murphy USA to not only retain market share gains but to build on that base, Clyde said. This is also contributing to the strong performance of in-store merchandise, where same-store sales and margins were up 6 percent and 5 percent, respectively, during the first three months of 2023.
Nearly every in-store category saw both unit and sales growth despite manufacturer-driven price increases. Center store and packaged beverages are seeing particular benefits from strong new-to-industry and raze-and-rebuild stores, store resets and promotional focus on growing categories such as energy drinks.
Clyde noted that the company's QuickChek c-stores operate in areas with lower commuter traffic, which in turn affects both fuel and merchandise sales. However, Murphy USA put new initiatives into place to help shore up performance and it is already seeing sequential improvement, with incrementally better results expected during the second quarter.
Food and beverage margins are down 2.2 percent year-over-year, but the company refuses to compromise its value position at the expense of short-term results, Clyde said.
"We have intentionally lagged broader QSR price increases by about 10 percent over the past two years, establishing our low-price position with our current customers and ultimately with new customers," he added. "In fact, stepping back and looking more holistically at the retail landscape in which we compete, we are seeing retailers willing to accept volume losses because they are making it up with higher pricing.
"Given this dynamic, we are well positioned to improve sales and gain customers from stepped-up advertising, building brand awareness and communicating value through improvements to the QuickChek loyalty platform, along with enhanced promotional activity centered around our core prepared food offer," Clyde continued.
Q1 2023 NUMBERS
The company opened seven new-to-industry Murphy USA/Murphy Express c-stores and one new QuickChek location during the first quarter, along with two raze-and-rebuild Murphy sites, bringing its total store count to 1,720 sites, 158 of which are branded QuickChek.
At the end of the quarter, 11 locations were under construction, including eight new sites (four under the QuickChek banner) and three raze-and-rebuilds.
"New stores are delivering strong returns in the current environment and outperforming the network averages in key metrics," Clyde said.
Although new store openings remain challenging in the current environment, Murphy USA is on track to open 35 to 40 new stores in 2023, including six new QuickChek stores, plus 30 raze-and-rebuilds.
"Given the strong returns and repeatability of success in our new store formats, we are investing in our real estate pipeline, growing our inventory of future locations for both the Murphy USA and QuickChek brands, ultimately preparing the business to deliver more than 50 new stores per year when conditions allow in the future," he continued.
El Dorado-based Murphy USA reported net income of $106.3 million during Q1 2023, down from $152.4 million during Q1 2022. Revenue was $5.1 billion, in line with the year-ago period. Adjusted EBITDA was $220 million, down from $277 million during the same quarter last year.
Average retail gasoline prices were $3.15 per gallon compared to $3.43 per gallon one year ago. Total retail gallons during the quarter increased 4.9 percent from the same period in 2022, while same-store sales volumes increased 1.4 percent.
Merchandise contribution dollars increased 6.5 percent to $187.1 million on average unit margins of 19.4 percent during the quarter, compared to the prior-year quarter contribution dollars of $175.7 million on unit margins of 19.7 percent.
"Given the strong financial performance of the business and the resulting free cash flow we generate, we continue to invest for the long-term," Clyde said.