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    Fuel Prices Hurt MAPCO Numbers, But Fresh Food Concept Grows in Q2

    In addition, the company anticipates having five to 10 new formats under construction by the end of this year.

    By Melissa Kress, Convenience Store News

    BRENTWOOD, Tenn. -- Fuel prices that reached nearly $4 a gallon -- and inched past that magic number in some states -- affected the second-quarter results for MAPCO Express, the retail arm of Delek U.S. Holdings.

    Speaking during Delek U.S. Holdings' second-quarter earnings call this morning, Mark Cox, executive vice president and CFO, said MAPCO's retail segment contribution decreased to $14.6 million in the second quarter of 2011 compared to $18.1 million in the same quarter in 2010 -- a drop he attributed to rising fuel prices that gripped the country this spring.

    "Elevated retail fuel prices impacted retail fuel demand during the second quarter, offsetting continued strength in same-store merchandise sales," Cox explained.

    Uzi Yemin, president and CEO, added that "customers continue to choke" on the price of more than $3 a gallon, and he believes anywhere between $2.25 and $2.75 a gallon is the sweet spot for growth.

    MAPCO's same-store merchandise sales rose 0.6 percent in the second quarter of 2011, compared to a 4.6-percent increase in the same quarter 2010. The slight increase could be attributed to ongoing promotion activity, consumer demand for private label and the continued growth of fresh food sales, Cox said.

    Specifically, foodservice saw a notable increase -- 9.7 percent -- for the three months ending June 30, he said. The growth comes as the company notched up its concentration of fresh-food QSR (quick-service restaurant) concepts to 19 percent. That's up from 14 percent in the second quarter of 2010, he explained.

    Furthermore, same-store sales of private label products increased more than 70 percent in the second quarter of 2011, compared to the same time period in 2010, and comprised more than 4 percent of total merchandise sales in the period. However, merchandise margins dropped slightly to 30.2 percent (vs. 31.3 percent in second quarter 2010), Cox said, adding the decrease is partly due to lower margins in the cigarette category and ongoing promotional efforts.

    Also on the retail front, Cox said the company anticipates having five to 10 new format locations under construction by the end of 2011. Construction for this year has slowed down, he said; however, that has more to do with the development process and not a decision made by the company.

    "The delay in store construction is not related to market conditions so much as us going through the process," Cox said. Moving forward, he added that the company's target is to open 10 to 20 new stores each year.

    Overall this quarter, Delek U.S. Holdings reported net income from continuing operations of $54.9 million vs. $15 million in the second quarter of 2010 -- primarily based on the improved numbers in the refining segment, which saw its contribution margin increase by $110.4 million, compared to $38.7 million in the same quarter of 2010.

    "So far, 2011 has been an outstanding year for Delek U.S.," Yemin said.

     

    By Melissa Kress, Convenience Store News
    • About Melissa Kress Melissa Kress joined EnsembleIQ's Convenience Store News and Convenience Store News for the Single Store Owner in November 2010. Her primary beats include alcoholic beverages and tobacco. Kress has been a professional journalist since 1995. A graduate of West Virginia University, she began her career in community journalism before moving to business-to-business publishing in 2000, covering commercial real estate.

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