“Our newly built stores continue to perform very well, and as a result, we plan to increase our overall capital budget in 2012 to accelerate new store construction to a planned 25-30 stores,” says Susser Holdings CEO.
Fourth Quarter 2011 Results
Same-store merchandise sales increased by 5% on top of a 7.3% increase in the fourth quarter of 2010. Average retail gallons per store increased 7.2% year-over-year, versus growth of 4.3% in the year-earlier quarter.
Retail net merchandise margin was 33.4% in the latest quarter, versus 33.8% a year ago. Retail fuel margins before credit card expense averaged 18.6 cents per gallon, compared with 15.0 cents a year ago.
Adjusted EBITDA rose 31% from a year ago to $31.6 million. Gross profit totaled $128.9 million, up 14.9% versus the fourth quarter of 2010.
Net income was $5.3 million, or $0.29 per diluted share, versus a net loss of $1.3 million, or $0.07 per diluted share in the year-earlier quarter.
Consolidated revenues for the latest quarter totaled $1.3 billion, which was up 28.5% from a year ago. The year-over-year increase is driven by a 33.7% increase in combined revenues from both retail and wholesale fuel sales, resulting from a 12.5% increase in total gallons sold and an 18.8% increase in the average selling price per gallon of fuel, plus a 9.5% increase in merchandise sales.
“We delivered our 23rd consecutive year of growth in same-store sales during 2011,” said Sam Susser, president and CEO. “We also realized record Adjusted EBITDA last year, driven by historically strong fuel margins as well as robust performance inside our Stripes convenience stores. Our newly built stores continue to perform very well, and as a result, we plan to increase our overall capital budget in 2012 to accelerate new store construction to a planned 25-30 stores.”
In the fourth quarter alone, the company grew same store merchandise sales by 5%, and despite higher fuel prices, average gallons sold per store increased more than 7%, Susser noted. The chain’s Laredo Taco Co. restaurants continue to grow unit sales, which helps drive additional sales of high-margin drinks and snacks elsewhere in the store.
“We did experience some increases in food costs during the quarter, but they were manageable. These costs, combined with pressure on cigarette margins, had a slightly negative impact on our merchandise net margin in the fourth quarter,” said Susser. “Our team remains highly focused on cost containment and increased efficiency, using technology that generates detailed store-by-store data to help us be a more competitive and effective merchandiser.
Meanwhile, the Texas economy continues to perform well. December unemployment in Texas fell for the third month in a row to 7.8%, while home foreclosures were at their lowest level since November 2008 and improvement is beginning in both new home starts and the number of existing home sales.
“Oilfield workers are an important customer segment for us, and our stores continue to benefit from the strong Texas onshore drilling rig count, which is holding steady at over 900 rigs,” Susser said. “We are continuing to capture the benefits of drilling and related activity in the Permian Basin of West Texas and in the Eagle Ford Shale play in South Texas, both of which are within our primary market areas.”
Convenience Store Growth
Susser opened six large-format Stripes convenience stores during the fourth quarter of 2011, for a total of 541 retail stores in operation at year-end. For the full year, the company opened 19 new stores and closed four smaller stores. So far in 2012, one retail store has opened and six others are currently under construction.
In the wholesale fuel business, 127 new wholesale dealer sites were added during the fourth quarter, including the 121 acquired in October, and two were discontinued for a total of 565 contracted branded dealer sites at year-end. Susser added a total of 142 dealer sites and discontinued eight during fiscal 2011.
In December 2011 Susser issued 3,775,000 new shares of common stock for $21.75 per share and raised total net proceeds of $77.5 million, after deducting underwriting discounts, commissions and offering expenses. The company intends to use the proceeds for growth capital for new store development and general corporate purposes, which may include opportunistic debt reduction based on market conditions. The company completed three sale leaseback transactions in the fourth quarter for net proceeds of $6.7 million.
Adjusted EBITDA for full-year 2011 reached a record $167.0 million. The ratio of net debt to Adjusted EBITDA improved 36 basis points versus the third quarter, to 2.0 times. Net debt at Jan. 1 totaled $330.8 million, based on total debt of $451.3 million, less cash of $120.6 million.
For the 12 months ended Jan. 1, the company invested $138.5 million in gross capital expenditures and $122.2 million in net capital expenditures, after considering sale leaseback and other asset sale transactions.
Fourth Quarter Highlights
Merchandise – Total sales from merchandise increased by $19.1 million or 9.5% year-over-year to $219.0 million in the fourth quarter. Approximately $9.8 million of the increase was realized from stores that have been in operation for 12 months or more, with the remainder from new stores added over the last four quarters. Same-store merchandise sales increased 5%, on top of a 7.3% increase in the year-earlier quarter. Food service, packaged drinks, beer and snacks led the merchandise segment sales gains.
Net merchandise margin was 33.4%, compared with 33.8 percent a year ago, reflecting primarily lower cigarette margins and slightly higher year-over-year food costs. Merchandise gross profit was 8.2% higher than a year ago at $73.1 million.
Retail Fuel – Fourth quarter retail fuel volumes increased 9.7% versus a year ago to 200.1 million gallons. Average gallons sold per store per week increased 7.2% from a year ago to 28,900 gallons. Revenues from retail fuel sales totaled $661.0 million, a 30.2% increase over the prior year, reflecting a 52-cent-per-gallon increase in average pump prices along with the impact of increased gallons sold.
Retail fuel gross margin averaged 18.6 cents per gallon, compared with 15.0 cents per gallon in the fourth quarter of 2010. After deducting credit card expense, net fuel margin was 13.3 cents per gallon for the fourth quarter, compared with 10.4 cents per gallon in the year-earlier quarter. Retail fuel gross profit increased 36.1% versus a year ago to $37.2 million. The company has provided quarterly fuel margin history on its Website.
Wholesale Fuel – Wholesale fuel volumes sold to 565 independent, contracted dealers and other third-party customers increased 16.7% from a year ago to 143.8 million gallons. Wholesale fuel revenues were up 39.9% versus a year ago, to $403.5 million. The revenue increase is the result of a 47-cent-per-gallon increase in average wholesale selling prices, along with the increase in gallons sold.
Wholesale gross margin was 5.1 cents per gallon, which was flat compared with the fourth quarter of last year. Wholesale fuel gross profit increased by 18.6% year-over-year to $7.4 million.
Full-Year 2011 Highlights
For the 12 months ended January 1, 2012, Susser’s same-store merchandise sales grew 6%. Revenues for the full year were $5.2 billion, up 32.1% versus 2010, driven primarily by higher fuel prices, increased gallon volumes and higher merchandise revenues. Merchandise sales totaled $881.9 million in 2011, up 9.4% versus the previous year. Merchandise margin for the year was 33.7%, versus 33.6% in fiscal 2010.
Retail fuel margin was 23.2 cents per gallon in 2011, compared with 18.4 cents the year before. After deducting credit card expense, net fuel margin was 17.7 cents per gallon, compared with 14.0 cents per gallon in 2010. Wholesale fuel margin was 5.9 cents per gallon for fiscal 2011, compared with 5.3 cents per gallon in the prior year.
Adjusted EBITDA for the full year totaled $167.0 million, up 39.2% from 2010. Gross profit was $557.0 million, an increase of 17.7% over the previous year, reflecting improved year-over-year volumes and margins in fuel and merchandise.
Net income for fiscal 2011 was $47.5 million, or $2.68 per diluted share, versus reported net income of $786,000, or $0.05 per diluted share, in fiscal 2010. Excluding the one-time impact of the debt refinancing in the second quarter of 2010, the company would have earned $16.5 million, or $0.96 per diluted share in fiscal 2010.