Susser Reports Strong Operating Results

“Traffic through our stores remains brisk, and we saw increased sales across all of our key categories,” says Susser Holdings Corp. president and CEO.

Susser Holdings Corp. has reported strong financial and operating results for the quarter ended April 1, 2012.

Same-store merchandise sales increased by 6.7%, compared with growth of 5.6% a year earlier.  Average retail gallons per store increased 5.8% year-over-year, versus growth of 3.2% in the first quarter of last year.

Retail net merchandise margin was 33.5%, versus 34.0% in the first quarter a year ago. Retail fuel margins before credit card expense averaged 13.3 cents per gallon, compared with 15.3 cents a gallon a year ago and a first quarter average of 12.4 cents per gallon for the previous five years.

Adjusted EBITDA was $22.9 million in the first quarter, down less than 1% from a year ago.  Consolidated gross profit totaled $123.0 million, up 6.3% versus the first quarter of 2011.

Due to seasonality, the first quarter is typically Susser’s lowest volume quarter. Net loss was $528,000, or $0.03 per diluted share, versus a net loss of $23,000, or $0.00 per diluted share in the first quarter of last year.

Total revenues for the first quarter increased 21% from a year earlier, to $1.4 billion.  The increase was driven by a 19.1% increase in retail fuel revenues, a 30.5% increase in wholesale fuel sales, and an 11.4% increase in merchandise sales.  The higher fuel revenues were driven by increases in both volumes sold and selling prices.

“Traffic through our stores remains brisk, and we saw increased sales across all of our key categories” said Sam Susser, president and CEO. “Our Laredo Taco Co. in-store restaurants continue to deliver good unit sales growth which, along with the co-purchases, is offsetting pressure in cigarette margins.  We currently operate 334 stores with restaurants, 320 of which are Laredo Taco Co. locations.”

The company’s net income and adjusted EBITDA were negatively impacted by lower fuel margins in the first quarter, as wholesale gasoline costs increased by approximately 65 cents per gallon from the beginning to the end of the quarter. Retail fuel margins, however, were still above its previous five-year average for that quarter.  Compared to a year ago, the two-cent drop in retail fuel margin reduced the company’s earnings by about $3.2 million, or 16 cents a share, and reduced its adjusted EBITDA by about $4.9 million.  Growth in merchandise, fuel volume and solid expense control mitigated most of the reduction in retail fuel margin.

“Our stores continue to benefit from a strong Texas economy.  Interestingly, since the U.S. economy hit bottom in September 2008, only seven of the 100 biggest metro areas have added net new jobs, and five are in Texas. Out of those five, four are key market areas for our retail and wholesale operations: McAllen/ Edinburg, Houston, San Antonio and Austin—so we are very well positioned in our markets,” Susser said.

“We’re using new technology very effectively inside and outside our stores to help us hold down costs, improve operating efficiency and enhance the customer experience. We expect these technology and other operational initiatives to add directly to our bottom line this year and into the future,” Susser said.

New Stores
Susser opened one large-format Stripes convenience store during the first quarter and closed two smaller stores, for a total of 540 in operation as of April 1. So far in the second quarter, three additional stores have opened, one has closed and 11 others are currently under construction. The company expects to open 25-30 new Stripes stores this year.

In the wholesale fuel business, Susser added seven dealer sites and discontinued five for a total of 567 contracted branded dealer sites as of April 1.  The company expects to add 25-35 new dealer sites in 2012 and typically discontinues service to 10 to 20 lower volume sites in most years.

Financing Update
No new financing was required during the first quarter of 2012.  Net debt at April 1 totaled $322.8 million, based on total debt of $451.1 million, less cash of $128.3 million. The company’s ratio of net debt to trailing 12-months Adjusted EBITDA improved five basis points versus the fourth quarter, to 1.9 times.  The company had no outstanding borrowings under its revolving credit facility and $15.3 million in standby letters of credit, leaving borrowing capacity on the revolver at April 1 of $104.7 million.

During the first quarter the company invested $24 million in new store construction, land purchases and other capital expenditures.

First Quarter Highlights
Merchandise – Merchandise sales totaled $226.1 million in the first quarter, an increase of $23.1 million, or 11.4% year-over-year.  Approximately $13.6 million of the increase came from stores that have been in operation a year or more, with the remainder from new stores added over the last four quarters.  Same-store merchandise sales increased 6.7%, versus growth of 5.6% for the same period a year ago. Foodservice, beer, packaged drinks, snacks and candy drove the growth.

Net merchandise margin as a percentage of sales was 33.5%, compared with 34% a year ago.  The small decline primarily reflects lower cigarette margins.  Merchandise gross profit was $75.7 million, up 9.7% versus a year ago.

Retail Fuel – Retail fuel volumes in the first quarter increased 8.8% versus a year ago to 208.1 million gallons.  Average gallons sold per store per week increased 5.8% from a year ago to approximately 30,000 gallons.  Revenues from retail fuel sales totaled $736.4 million, up 19.1% from the first quarter of last year, reflecting a 31-cent-per-gallon increase in average pump prices, along with the impact of the increased gallons sold.

Retail fuel gross margin averaged 13.3 cents per gallon, compared with 15.3 cents per gallon in the first quarter of last year.  After deducting credit card expense, net fuel margin was 7.9 cents per gallon, compared with a net 10.3 cents per gallon a year ago.  Retail fuel gross profit declined by 5.4% versus a year ago to $27.7 million, reflecting the lower fuel margin.

Wholesale Fuel – Wholesale fuel volumes sold to 567 independent, contracted dealers and other third-party customers increased 17% from a year ago to 141.6 million gallons. Wholesale fuel revenues increased 30.5% versus the first quarter of last year, to $438.8 million.  The revenue increase is the result of a 32-cent-per-gallon increase in average wholesale selling prices, along with the increase in gallons sold.

Wholesale gross margin was 5.0 cents per gallon, versus 5.1 cents per gallon in the first quarter of last year. Wholesale fuel gross profit increased by 14% from a year ago to $7.1 million.




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