Arko Corp., which is one of the most active acquirers in the fuel marketing industry, will focus on organic growth rather than acquisitions this year, Chief Executive Officer Arie Kotler told analysts on a Wednesday call for discuss the company’s fourth quarter financial results.
Arko has made 25 acquisitions since 2013 and five in the last 18 months. The company now has 1,543 retail stores in more than 30 states, operates 298 Cardlock locations and delivers fuel to 1,825 dealerships, the company said in its fourth-quarter presentation.
Kotler said Arko was not “slowing down” on mergers and acquisitions, but wanted to “unlock the value of current assets.” The company has more than $2 billion in cash to pursue mergers and acquisitions, but it will be “disciplined,” he added.
“We bought a lot of them,” Kotler said. But “there are opportunities (to increase sales) inside stores, given the scale we have built.”
He said the company’s organic growth should come from:
–Promote six key product categories (packaged beverages, candy, salty snacks, packaged sweet snacks, alternative snacks, and beer) that accounted for 53% of merchandise contribution in 2023. Merchandise contribution is revenue minus merchandise costs .
–Attract more loyalty club members. Arko added 730,000 members, reaching its goal of 2 million members in 2023 and is aiming for 3 million members. The average dollar transaction is 32% higher for loyalty program members than non-members. Loyalty club members also visit stores more frequently, Kotler said.
–Develop your catering offering. The company launched a new pizza offering in January, available as a grab-and-go item in 1,000 stores and as a hot item in approximately 225 of those locations. Loyalty club members get special deals on food items, like $4.99 for a whole pizza, compared to $7.99 for non-members. Arko also plans to install restaurant areas, or “pizza lounges”, in certain stores.
–Build new stores on vacant land owned by some of the companies Arko recently purchased. Three stores are in the works so far this year.
–Renovation of certain stores to make way for catering operations. Kotler hinted that Arko is discussing remodeling plans and may launch a remodeling initiative later this year.
Arko sold about 279 million gallons of fuel in the fourth quarter, up nearly 11% from 251.7 million a year ago. In 2023, the company sold 1.12 billion gallons of fuel, up about 11% from 1.01 billion gallons a year ago.
Its same-store retail fuel volume declined 7.5% year-over-year in the fourth quarter and 5.3% in 2023 compared to 2022. The national average retail fuel sales in same-store OPIS declined 4.7% year-over-year in the fourth quarter and 3.4% year-over-year. year in 2023, according to OPIS DemandPro.
The company’s fuel margin averaged 39.2 cents/gal in the fourth quarter and 38.8 cents/gal in 2023, compared to 41.4 cents/gal in the fourth quarter of 2022 and 41.4 cents/gal in 2023. gal in 2022. The national average margin for regular gasoline was 49.1 cents/gal. in the fourth quarter, down from 49.7 cts/gal a year earlier, according to OPIS DemandPro.
Merchandise revenue in the fourth quarter was $446.7 million, an increase of $43.6 million from last year. Merchandise revenue for 2023 was $1.84 billion, up $190.4 million from 2022. Merchandise margin increased approximately 240 basis points year-over-year. ‘other to reach 32.9% for the quarter and 140 basis points for the full year.
Arko reported fourth-quarter net income of $1.1 million, up from $12.9 million a year ago. Net income for the year was $34.6 million, compared to $72 million the previous year.
This content was created by Oil Price Information Service, which is operated by Dow Jones & Co. OPIS is operated independently of Dow Jones Newswires and the Wall Street Journal.
–Reporting by Donna Harris, dharris@opisnet.com; Editing by Jeff Barber, jbarber@opisnet.com
