SANFORD, N.C. -- The Pantry is known as one of the strongest and most aggressive convenience store companies in the country with regard to growth. So it came as some surprise three months ago, when CEO Peter Sodini announced the company's acquisition strategy was flawed. We've been remiss on putting such heavy reliance on acquisitions, Sodini said in late July.
Three months later, Sodini proudly announced the changes that have been made to right this wrong. We opened five new-build, large-format stores during fiscal 2006 and are planning to accelerate [image-nocss] that program to about 20 new openings in fiscal 2007, Sodini said yesterday during a fourth-quarter earnings call, during which the company announced record quarterly and annual results. [See story at left for a complete report on The Pantry's financial results.]
Thus, The Pantry has doubled the amount budgeted for new-builds for the new year, according to CFO Dan Kelly. We're ramping up new-store development, Kelly said. So new-store development is up about $15 million year over year, to a little over $30 million.
Sodini said the larger-format stores that are being built are capable of generating about twice as much profit as the company's current average store. These are state-of-the-art facilities with features like QSRs and car washes, he said. Adding new stores by building them ourselves, as opposed to acquisitions, can help us grow in the expanding suburbs of certain markets or fill in gaps in our market presence. New stores also help us to leverage our regional management and other infrastructure.
Sodini is quick to note, however, that construction is not a replacement for a strong acquisition strategy. These are not meant to be a substitute for acquisition activity, but to complement it and add another dimension to our growth strategy, he said. Given those two vehicles with new-store growth being a new addition, we feel very comfortable about our ability to be able to expand units going forward.
In fiscal 2006, Sanford, N.C.-based The Pantry purchased 113 stores through three major deals and 10 smaller transactions. That was an increase over the 96 stores acquired the previous year.
So far in our new fiscal year, we've acquired seven stores in four separate deals and entered into definitive agreements to acquire another eight stores, Sodini said. Overall, we're very encouraged by the pipeline of potential acquisitions that we see for 2007, and we believe this will be as strong a year for acquisitions as fiscal 2006 was.
That growth will also be boosted by an increase in the number of QSRs the company runs in its stores.
In foodservice, we added 24 quick-service-restaurant franchises during fiscal 2006. Most of the additions were either Subway or Quiznos subs, Sodini said. We also closed a number of our proprietary QSR concepts during the year, and at yearend we had 197 existing units. We continue to plan for approximately 25 new QSRs per year, and we like QSRs where they're appropriate for two reasons: 1) they're not only highly profitable, but 2) they can also help make our stores destination stores for some customers.
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