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    The convenience store industry's rapid sales growth of the past five years hit the brakes in 2007, as yearly in-store sales per store -- the best barometer of the industry's health because it ignores store count growth and the inflationary effects of rising gas prices -- increased by the lowest percentage since 2002.

    According to the 2008 Convenience Store News Industry Report, yearly in-store sales per store rose 3 percent last year to $1,133,158. That's a significant slowdown from the growth rates of 7.3 percent, 7.1 percent and 6.6 percent in each of the previous three years, and the smallest increase since a steep 7.2 percent decline recorded in 2002.

    The profit picture is not much better. In-store gross margin dollars per store were $319,567, an increase of only 3.8 percent in 2007 after profit gains of 6.3 percent, 5.2 percent and 10.7 percent in the previous three years.

    The 2008 CSNews Industry Report reveals an industry that is still highly fragmented, with a high percentage of single-store owners, despite continued merger and acquisition activity by many of the larger retailers. Rising expenses in the form of skyrocketing credit card transaction fees, labor, health care and utility costs put a damper on what could have been another strong year in profit growth.

    Total industry sales, including motor fuels, rose 8.6 percent last year to a record $568.8 billion. Driven by the rising price of gasoline, motor fuel sales ballooned to $406.9 billion, a 10.6 percent increase over 2006. Total gross profits per store increased from $455,586 in 2006 to $472,811 last year, but the gross margin percent per store fell from 12.3 percent to 11.9 percent.

    The total number of stores in the industry increased less than 1 percent, to 146,294, and the number of single-owner c-stores held steady at 62 percent of the total -- a segment that had increased in each of the previous four years.

    The Top 10 product categories slipped somewhat in percentage of in-store sales, comprising 88 percent of sales, down one point from 2006. Cigarettes, despite declining gross margins, was still the No. 1 in-store category, with 31.4 percent of sales, followed by foodservice (12.3 percent of in-store sales, up from 11.6 percent), packaged beverages (12.1 percent, up from 11.5 percent) and beer/malt beverages (10.7 percent, up from 10.6 percent). OTP (other tobacco products), which was also a bright spot last year, moved up two notches on the Top 10 list to No. 6, with 3.8 percent of in-store sales.

    Indicative of the continued attack on the cigarette category via higher taxes and anti-smoking regulations, as well as operators' increased focus on foodservice, the two categories switched places in terms of their gross margin dollar contribution. For the first time, foodservice ranked No. 1 in percent of profit dollar contribution (21.6 percent of gross margin dollar contribution, up from 20.2 percent). Cigarettes fell to second place, contributing only 18.8 percent of the average store's total gross margin dollars, a decline from 20.4 percent in 2006.

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