» Convenience Store Sales, Profits Showed Gains in 2008
An otherwise tough year for convenience stores was balanced out by strong retail fuel margins from the unprecedented drop in wholesale fuels prices during the fourth quarter of 2008, according to data released by National Association of Convenience Stores (NACS), Chicago.
Overall convenience store industry profits rose 54 percent in 2008 to reach $5.2 billion, reversing a two-year decline where profits dropped 42 percent over that period. Industry sales jumped 8.1 percent to reach $624.1 billion, with both motor fuels sales (up 10.1 percent to $450.2 billion) and in-store sales (up 3.2 percent to $173.9 billion) showing growth.
The growth of in-store sales defied the overall trend in U.S. retail sales, which fell 0.6 percent based on U.S. Department of Commerce data. It also came despite a rare decline in the number of convenience stores. For only the third time in the past 15 years, the industry store count dropped --1.0 percent to 144,875—as many stores closed because of the punishing economic conditions and record-low motor fuels margins the industry faced during the first three quarters of 2008.
The convenience store industry sells an estimated 80 percent of the fuels purchased in the United States, and motor fuels sales continue to dominate industry revenues, accounting for 74.5 percent of all sales dollars, in examining same-firm sales data. However, overall fuel gallons sold declined 2.4 percent. Meanwhile because of low gross margins on fuel (5.7 percent), only 31.7 percent of all profit dollars came from fuels sales.
Credit card fees continue to be the industry’s top pain point, surging another 10.5 percent in 2008 to reach a record $8.4 billion—nearly three times the level just five years ago.
Although unemployment levels nationwide were souring in 2008, there was good news with respect to the convenience store industry’s employment figures. The industry saw a modest 0.8 percent gain in number of employees, which rose to 1.73 million.
There were several significant differences between the industry’s top performers and bottom performers. Top quartile performers sold more than twice as much motor fuels as the bottom quartile (187,932 vs. 84,369 gallons per month). The top quartile performers significantly outperformed the bottom quartile inside the store as well—with merchandise sales of $124,797 vs. $75,753 per store per month. As a result, top quartile stores showed an average monthly pretax profit of $13,173 per month, while the bottom quartile lost $3,626 per month.
Once again, cigarettes dominated in-store sales, accounting for nearly one in every three dollars spent in stores, but cigarette gross margins continued to plummet, falling to 15.3 percent.
These low cigarette margins dropped the category to third in terms of gross margin contribution. Meanwhile, foodservice—which includes dispensed beverages and food prepared on site—continues to show strong growth, accounting for nearly one in four in-store profit dollars.
The industry’s 2008 metrics are based on the NACS State of the Industry survey based on data from 156 firms representing more than 20,000 stores. Complete data tables and analysis will be released in June in the NACS State of the Industry Report of 2008 Data.
» Well’s Dairy Saves Big With Microsoft Solution
The IT department at Wells’ Dairy Inc. is using virtualization and systems management solutions from Microsoft Corp. to support its business.
By deploying Microsoft virtualization and Microsoft System Center management software, Wells’ Dairy has been able to save more than $500,000 on hardware and software licensing costs.
The Le Mars, IA-based company wanted to optimize its growing datacenter operations, improve business continuity and build a more agile IT infrastructure.
To do that, the Wells’ Dairy IT department turned to virtualization, a technology which allows several servers to exist on a single piece of hardware yet run independently.