NACS SOI Reveals Mixed Results

Convenience store industry sales reached a new high of $577.4 billion in 2007, but profits dropped by $1.4 billion, largely because of higher credit card fees, the 2008 NACS State of the Industry report found.

Overall, industry revenues climbed only 1.4%, leveling off an extraordinary decade of growth that saw industry revenue grow more than three-fold from $174.2 billion in 1997.

In a mixed year of industry performance, the biggest concern for convenience retailers remains escalating credit card fees, which surged $1 billion, or 15.2%, to reach $7.6 billion. Meanwhile, industry pretax profits dropped by roughly the same amount, $1.4 billion, falling to $3.4 billion. "The net effect is that the industry’s credit card fees are now more than double the industry’s pretax profits, an extraordinary development considering that credit card fees surpassed industry profits for the first time ever last year," the NACS report said.

Motor fuels prices increased 8.8% in 2007 but industry motor fuels sales increased only 0.7% to reach $408.9 billion. The convenience store industry sells an estimated 80% of the fuels purchased in the U.S., and motor fuels sales continue to dominate industry revenues, comprising 70.8% of the industry’s sales. However, because of low gross margins, motor fuels are only 33.8% of the industry’s gross profit dollars.

On a cents-per-gallon basis, motor fuels gross margins were 14.3 cents, but only 10.1 cents per gallon before store expenses after factoring in credit card costs across all fuels transactions.

In-store, cigarettes again dominated sales, accounting for more than one in every three dollars spent in stores, but were second to packaged beverages (non-alcohol) with respect to overall contribution to gross margin. The continuing growth of coffee sales in the channel led to its being pulled out of the traditional catch-all category of foodservice, which included food prepared on site as well as hot, cold and frozen dispensed beverages. By itself, hot dispensed beverages (which includes coffee) now ranks in the top five in both sales dollars and gross margins dollars.

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