C-store Industry Reaped Rewards in 2015, But Risks Are Arising

Brian Berk
April 13, 2016,
Convenience Store News
CHICAGO — 2015 was so good for convenience store operators that Billy Milam, president of RaceTrac Petroleum Inc., said it was “easy” to deliver industry financial data to attendees of the 2016 NACS State of the Industry (SOI) Summit, taking place this week.
“Last year was great. It was the best year ever [for c-store retailers],” he said. “Every single month in 2015 eclipsed 2014 in terms of total transactions (fuel and inside transactions). EBITDA was up 32.3 percent last year.”
Western Washington University Professor of Economics David M. Nelson, Ph.D., provided more good news to the record 600-plus convenience store retailer and supplier executives who assembled at Chicago’s Hyatt Regency O’Hare hotel April 4-6. Although a seven-year economic recovery is often considered long-in-the-tooth, Nelson expressed no concerns whatsoever that the United States is currently on the brink of a recession.
“Economic data does not suggest that,” he said. “Areas of the economy continue to expand, with manufacturing the only area seeing any decline.”
Nelson did acknowledge that annual growth in the U.S. economy is slow on an annual basis, but he stressed this is actually good news. He equated the growth to a running joke in the movie “Zootopia,” which shows slow-moving sloths working at a Department of Motor Vehicles.
“In a word, the economy is slow. But it is better to go slow in the right direction than fast in the wrong direction,” the professor stated.
Nelson pointed to three other factors that should greatly benefit c-store retailers moving forward:
Strong housing starts that lead to more construction workers frequenting c-stores;
Robust new vehicle sales, forecasted to reach 18 million new car sales in 2016; and
A low inflation rate.
Still, despite the c-store industry having one of its best years ever in 2015 — including posting a record $225.8 billion in in-store sales, according to the SOI data released by NACS, the Association for Convenience & Fuel Retailing — convenience retailers face plenty of headwinds going forward.
“We’ve been incredibly blessed with fuel margins for the past two years,” Milam said. “At some point, a reckoning will come. I want us to be prepared for that.”
INDUSTRY RISKS
In the past year, the c-store industry’s Achilles heel has been direct-store operating expenses. This expense area grew faster than gross profits in every month of 2015, the data revealed.
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