A recent report of four major public convenience store companies' gasoline margins shows the yearend data from three of the four well under the levels of a year ago, and down even from the period ending September 2009. So with gasoline margins back in a more familiar zone, while volumes continue to struggle, [image-nocss] many retailers are forced to rely more on in-store sales to drive profits.
Convenience stores' "business model is to lure in customers with a competitive gas price, and then get them to buy cigarettes (which represent 35% of convenience store sales)," wrote an analyst for Benzinga.com in a recent review of The Pantry, Cary, N.C. "Counter-intuitively, this type of business actually makes more money when gas prices decline."
And as of late, gas prices have remained flat or risen slowly over several months. Meanwhile, after peaking in September, gasoline demand dropped in October and again in December, according to data from the Energy Information Administration.
What's this meant for the four public companies? For the majority, a steep decline in margins.
According to Memphis, Tenn.-based Morgan Keegan's December Grab-N-Go report, "December gasoline margins were in-line with historic trends but started January weak, in the single digits."
While national gasoline margins averaged just under 15 cents per gallon at the end of 2009, two of the four public companies were earning 3 or 4 cents below that, respectively.
For The Pantry, the fourth quarter 2009 ended with margins of 11.0 cents per gallon, 3.0 cents below the third quarter and nearly 15 cents below fourth quarter 2008 margins (25.8 cpg), according to Morgan Keegan estimates. For Delek US, Brentwood, Tenn., the fourth quarter 2009 ended with margins of 14.0 cents per gallon, 3.8 cents below the third quarter and almost 17 cents below fourth quarter 2008 margins (30.9 cpg), according to Morgan Keegan estimates. For Susser Holdings, Corpus Christi. Texas, the fourth quarter 2009 ended with margins of 15.0 cents per gallon, 4.7 cents below the third quarter and 2.7 cents below fourth quarter 2008 margins (17.7 cpg), according to Morgan Keegan estimates. The anomaly is Casey's General Stores, Ankeny, Iowa, which saw gasoline margins of 12.0 cpg at the end of the fourth quarter 2009, down 2.3 cents from the previous quarter, but up 2.1 cents from the fourth quarter 2008, according to Morgan Keegan estimates.This from a company that set an internal goal of 11.0 cpg margins, according to the report.
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