NACS Releases State of the Industry Report

C-store sales jumped 5% in 2009 despite the economic conditions, reduction in overall consumer spending.

Convenience store in-store sales grew 4.9% in 2009, one of the lone bright spots in a battered U.S. economy that saw overall retail sales drop 7%, according to figures released today by NACS.

The industry numbers were announced in Chicago at the NACS State of the Industry Summit, a two-day conference that reviews and analyzes of the industry’s key economic indicators.

While in-store sales rose to $182.4 billion, the sharp decline in gas prices from a record $4.11 per gallon in July 2008 to under $2 per gallon by the beginning of 2009 led to a dramatic drop in motor fuels revenues for the industry that sells an estimated 80% of the fuels purchased in the U.S., according to NACS. The average price for a gallon of gas dropped 28.5% to $2.28 in 2009, and pulled down motor fuels revenues 26.9% to $328.7 billion. Still, motor fuels sales continue to dominate industry revenues, accounting for 68.4% of all sales dollars.

While motor fuels revenues plummeted because of the lower price per gallon, total gallons sold rose 1.3%. Motor fuels gross margins for 2009 were slim–13.8 cents per gallon–and the effect of these tight margins can be seen in motor fuels’ contribution to overall gross margin dollars. Only 27.3% of the industry’s profit dollars came from motor fuels sales, compared to 72.7% of profits from in-store sales.

Overall, convenience store sales in 2009 were $511.1 billion, accounting for 3.5% of the total U.S. Gross Domestic Product–one of every 28 dollars spent in 2009. Industry profits fell 7.6% to $4.8 billion, but were still the fourth largest in the industry’s history. The importance of foodservice–a category that includes food prepared on site, commissary items and hot, cold and frozen dispensed beverages–continues to grow, with the category now contributing 20.2% of overall industry profits.

“Our strong industry numbers show that our value proposition of convenience continues to resonate with consumers,” said NACS Vice Chairman of Research Greg Parker, president and CEO of The Parker Companies in Savannah, Georgia. “It is astounding that we have grown in-store sales during the worst economic downturn in more than half a century and it shows that our passionate focus on the customer may make us recession resistant.”

Credit card fees continue to be the industry’s top pain point and second largest expense item–behind only labor costs. While overall credit card fees dropped 11.9% to $7.4 billion, the drop was significantly less than what would be expected with the drop in the industry’s revenue dollars. As a percentage of overall sales, credit card actually fees increased, from 1.35 to 1.45% of total industry sales dollars, factoring in all forms of payment, including cash and check. Total credit card fees also surpassed overall convenience store industry profits for the fourth straight year.

The sour employment outlook was also reflected in the convenience store industry’s employment numbers. Employment dropped 8.7% to 1.58 million. Indicative of the tight employment market, turnover dropped to record low levels in 2009. Manager turnover dropped from 29 to 21.8% and non-manager turnover dropped from 109 to 82.4%.

Cigarettes once again led in-store sales, and increased share to 35.8% of in-store sales. The increase in sales dollars was driven by the increase in the federal tax on cigarettes to $1 per pack that took effect in April 2009, as well as additional state tax increases. Foodservice showed strong growth, rising to first in terms of in-store margin dollars and second in in-store revenue dollars.

More than 75% of in-store sales were from the top five categories:
* Cigarettes (35.8% of in-store sales)
* Foodservice (17.3%)
* Packaged beverages (14%)
* Beer (7.7%)
* Salty snacks (3.9%)

Nearly 75% of in-store gross margin dollars were from the top five categories:
* Foodservice (29.7% of in-store gross margin dollars)
* Packaged beverages (17.7%)
* Cigarettes (17.5%)
* Beer (4.9%)
* Salty snacks (4.5%t)

The industry’s 2009 metrics are based on the NACS State of the Industry survey powered by its wholly owned subsidiary CSX, the industry’s largest purpose-designed business development tool, and based on data from 197 firms representing more than 23,000 stores. Complete data tables and analysis will be released in June in the NACS State of the Industry Report of 2009 Data.

Stay tuned to CSD for more live updates from the NACS State of the Industry conference in Chicago.

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