CST Brands Plans Double the Store Openings in 2014

SAN ANTONIO – While it's only been six months since CST Brands Inc. was spun off from Valero Energy Corp., the convenience store and fuel retailer is making great strides as its own public company, Chairman and CEO Kim Bowers said today during its 2013 fiscal third-quarter earnings call.

CST Brands earned a net profit of $41 million in its latest quarter, ended Sept. 30. The San Antonio-based business achieved a profit of $24 million during the same quarter in 2012.

Helping to boost profits was the opening of new stores, which Bowers noted are much larger than CST Brands’ legacy stores. "We opened eight new stores in the third quarter," she said. "These stores are performing very well in high-margin areas, such as foodservice."

The retailer is so pleased with the results of these stores, in fact, that it plans to double new U.S. store openings -- which it refers to as New to Industry (NTI) locations -- in 2014. CST Brands has opened a total of 15 new stores in the first nine months of this year.

Along with growing its store count, another key initiative that CST Brands -- operator of 1,041 Corner Store locations in the United States -- has been able to execute since its May 1 spinoff is to develop a new fuel pricing strategy that maximizes fuel margins without needing to worry about refining margins -- a prime concern when it was a division of Valero.

This effort appears to be paying off as motor fuel gross margins increased to 16 cents per gallon in the company's latest quarter, a dramatic ramp-up from 9 cents per gallon in 2012's third quarter.

Executives also reported on today’s call that the company has plenty of cash to continue growing the business. CST Brands currently holds $424 million of cash in its coffers, as well as nearly all of its $300 million obtained in a credit facility.

As for the final quarter of 2013, Bowers acknowledged that the fourth quarter is seasonably weaker than the prior two quarters, primarily due to weather. However, she said she is "encouraged about the future" as CST Brands continues to open new Corner Store locations.

Stellar results at its Texas sites is another reason to be enthusiastic, she added. "Texas is doing extremely well as we've seen strong employment and merchandise sales," concluded Bowers. "Texas is very competitive, but we believe our stores can compete on any corner, anywhere."

In addition to its 1,041 Corner Store locations in the U.S., CST Brands also operated 840 Canadian c-stores as of Sept. 30.