Susser Holdings Corp. released its first quarter results, reporting that same-store merchandise sales for the first quarter of 2010 increased by 2.5%, compared with a 1.2% decline for the fourth quarter of 2009 and growth of 6.0% during the first quarter of 2009.
Retail merchandise margin was flat versus the fourth quarter at 32.7%, and down from 34.3% for the first quarter of 2009.
Adjusted EBITDA for the three months ended April 4 totaled $13.9 million, compared with $19.3 million a year ago, which primarily reflects the impact of lower retail fuel margins and higher credit card fees. Companywide gross profit was slightly up year-over-year at $97.6 million. Total revenues increased 37.8% from a year ago to $938.1 million, reflecting the significantly higher price of fuel, along with a 5.0% increase in total merchandise sales.
The company had a net loss of $5.0 million, or $0.29 per diluted share, versus a net loss of $931,000 or $0.05 per diluted share, for the first quarter of last year.
“After a very challenging fourth quarter, it appears we have turned the corner, based on the steady rebound we’ve seen in merchandise sales and margins as the first quarter has progressed,” said Sam Susser, president and CEO. “Preliminary results in the second quarter also suggest the worst of the recession is behind us.”
He added that the Texas economy in general is showing signs of recovery in several areas. “Existing home sales and home prices increased in March both sequentially and year-over year, the drilling rig count is climbing, and the index of leading economic indicators is rising. Same store sales growth was highest in West Texas, which is being spurred primarily by growing oilfield activity. The ongoing rebranding of Town & Country stores to the Stripes brand in West Texas is also having a positive effect on the performance of our West Texas locations. Although South Texas has rebounded more slowly, we hope to see a pickup in economic activity later this year, which should improve food and beverage sales at our South Texas stores,” Susser said.
Fuel costs, meanwhile continued the upward trend from 2009, which typically compresses fuel margins. ”Retail fuel margins and higher credit card costs negatively impacted our overall gross margin and EBITDA for the quarter, but at 11.1 cents they were still in range of our five-year average for the first quarter, when we normally experience our lowest fuel margins,” he said. Over the previous five years first quarter margins have ranged from 8.7 to 12.0 cents per gallon and averaged 10.7 cents.
“We remain very focused on cost control, and saw our efforts reflected in better store labor utilization and reduced G&A expenses this quarter,” Susser added.
The company added two retail stores during the latest quarter, bringing the total number of stores in operation to 527. Three more stores are currently under construction. In its wholesale operations, Susser added three new dealer sites, for a total of 393 in operation at the end of the first quarter.
On May 7, Susser closed on a private placement of $425 million of senior unsecured notes with a coupon rate of 8.5% at a price of 98.845% of the principal amount to yield 8.75%. The new notes mature May 15, 2016 and are callable beginning May 15, 2013 at specified premiums. The new notes are rated B2/B+ by Moody’s and Standard and Poor’s respectively. Net proceeds from the sale of the notes, together with cash on hand and borrowings under the company’s revolving credit facility, were used to redeem the outstanding 10⅝% Senior Notes due 2013, to repay the outstanding amounts under the term credit facility and for related fees and expenses. The company also entered into an amended revolving credit facility and extended the maturity to May 2014. The refinancing extends the maturities of the company’s debt, increases availability under the revolver to the full $120 million and also provides additional flexibility under the new covenants.
In addition, Susser completed sale/leaseback transactions for properties totaling $5.8 million during the first quarter and executed build-to-suit contracts for two new convenience stores.
Same-store merchandise sales increased by 2.5% compared with an increase of 6.0% in the first quarter of 2009. Merchandise gross profit, net of shortages, totaled $62.4 million, which was flat versus the first quarter of 2009. Net merchandise margin was 32.7%, compared with 34.3% a year ago. The decline in merchandise margin is partly due to higher cigarette prices as well as continued margin pressure across several other categories, such as packaged beverages. Total company merchandise sales were $191.0 million, an increase of 5.0% from a year ago.
Retail store fuel volumes increased 2.0% from a year ago to 183.1 million gallons for the first quarter. Average gallons sold per store declined 0.2% to 355,200, as compared to a 4.6% increase in the first quarter of 2009. Retail fuel revenues totaled $478.6 million, up 48.6%, primarily as a result of an 81-cent-a-gallon increase in motor fuel prices at the pump. Retail fuel gross margins in the first quarter were 11.1 cents per gallon, or 7.0 cents after deducting credit card expense, compared with 11.8 cents per gallon a year ago, or 9.1 cents after credit card expense. Retail fuel gross profit was $20.3 million, down 4.3% from the first quarter of 2009.
Wholesale fuel volumes sold to Susser’s 393 dealers and other third-party customers during the first quarter declined 2.0% from a year ago to 120.0 million gallons. Wholesale fuel revenues increased by 54.3% to $258.2 million as a result of a 78-cent-per-gallon increase in the selling price of fuel. Wholesale gross margin was 4.2 cents per gallon, compared with 3.5 cents per gallon a year ago, which increased wholesale fuel gross profit by 18.3% to $5.0 million.
Susser has entered into an agreement to sell its seven Village Market grocery stores and expects the closing to occur during the second quarter. The transaction is not material to the company’s assets and terms are subject to a confidentiality agreement. The transaction is accretive and allows Susser to bring more focus to its core convenience store and Laredo Taco Company operations.
Source: Susser Holdings Inc.