Murphy USA, El Dorado, Arkansas, delivered strong second-quarter 2024 results led by outperformance in the core non-discretionary fuel and tobacco categories, Murphy USA President and CEO Andrew Clyde said.
And while merchandise margins were up nearly 5% in the second quarter, year-to-date results fell short of expectations, Clyde said Thursday in the convenience-store chain’s earnings call.
“Make no mistake, our customers are not immune to the inflationary pressures impacting household budgets of Americans living paycheck to paycheck, which we believe to be a growing customer segment,” he said. “As such, they are making choices in their discretionary spend at our stores. Yet their spend on what we consider categories that remain core to our customers, such as fuel, tobacco, beer, salty snacks and packaged beverages, remains strong. Thus, overall spend at Murphy stores is not only stable and resilient—it’s growing.”
- Murphy USA is No. 4 on CSP’s 2024 Top 202 ranking of U.S. convenience-store chains by store count.
Due to a slow start in the first quarter of the year, softness in some discretionary center store categories and lighter-than-expected traffic in QuickChek markets resulting in fewer transactions that were built into the company’s internal plan, total full-year merchandise margin growth will be around 4%, Clyde said, reflected in the company’s adjusted guided range from $830 million to $840 million.
“Our initiatives are on track, but the early results will not overcome the impact of these drivers. Inflation is real and remains impactful to our customers,” Clyde said.
Clyde said he’s especially seen the effects in the Northeast markets, where there is lower inflation for food at home versus food away from home. Murphy USA acquired Whitehouse Station, New Jersey-based QuickChek in 2021. At the time, QuickChek had 157 c-stores in the Northeast.
“We also note that QSR [quick-service restaurant] promotional intensity has increased, where many QSRs are pivoting back to value and competing per share in prepared food and beverages, which are core traffic-driving categories at QuickChek,” he said. “As a result, year-over-year sales comps remained down about 2% at QuickChek in the second quarter, with similar performance into July. This represents the largest variation to our total merchandised plan, where we anticipated more of a rebound in transactions year-over-year at QuickChek.”
Rewards members remain very active, he said, shopping with greater frequency and with larger baskets.
“But with one less trip or a trade down, it adds up,” Clyde said.
Bright Spot in Tobacco
Clyde noted the bright spots on the merchandise side being investments in the tobacco category from a price, promotion and capability perspective, which is driving strong growth across all nicotine products.
“Our leadership in combustible products has built a strong foundation upon which we continue to grow share in vapor, oral nicotine and other noncombustible products that are not only growing sales and margins in the low double-digit range, but also come with higher margins,” Clyde said. “We intend to support our customers as they transition to noncombustible products, leveraging our advantaged volume position and promotional strength to continue to drive growth in the nicotine category.”
In the Murphy footprint, fuel and tobacco are bringing people to the store and growing the basket in the center store categories attached to the visit, he said. Total tobacco margin dollars were up 12% and non-tobacco margin dollars were up 4.8% in the second quarter of 2024.
Customer spend also remained strong in beer and salty snacks, offsetting softness in candy and lottery, Clyde said.
Murphy USA operates one of the nation’s largest convenience-store chains, operating in 27 states, located primarily in the Southwest, Southeast, Midwest and Northeast, the majority of which are next to Walmart Supercenters.
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