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    Fuel Sales Plunge on Lower Prices, Less Volatility

    The stunning 20-percent decline in convenience industry sales last year was mostly due to a 29-percent plunge in motor fuel revenues. To put that drop in perspective, motor fuel sales rose 15.2 percent in 2008 to almost $4.2 million per store. A 27.6-percent decline in fuel prices last year, however, drove motor fuel sales down to $2.9 million per store in 2009.

    The stunning 20-percent decline in convenience industry sales last year was mostly due to a 29-percent plunge in motor fuel revenues. To put that drop in perspective, motor fuel sales rose 15.2 percent in 2008 to almost $4.2 million per store. A 27.6-percent decline in fuel prices last year, however, drove motor fuel sales down to $2.9 million per store in 2009.

    Besides the price drop, fuel consumption was also down as gallons sold per store declined 2.4 percent last year to an average of roughly 1.26 million gallons a station. Some experts theorized that 2008's sky-high gas prices (the national average peaked at $4.10 per gallon July 14, 2008) shocked Americans into driving less and buying more fuel-efficient vehicles, such as hybrids. In 2009, the recession resulted in millions of layoffs, which greatly reduced commuter traffic, while the tepid economy also hurt the trucking business, which adversely affected diesel sales. Diesel gallons plunged more than 10 percent last year.

    Motor fuels are so important to convenience stores — not just because they comprise a huge portion (66 percent) of total c-store revenue — but also because fuel drives traffic that produces highly profitable in-store sales. Economist David Nelson, speaking at the recent NACS SOI conference, noted every 1 percent increase in fuel volume results in a 0.36-percent to 0.57-percent increase in real inside sales growth.

    Taking a look at pricing trends, 2009 stands out for its low and rather less-volatile-than-usual fuel prices. The national average sales price per gallon at c-stores was $2.34, in comparison to $3.23 per gallon in 2008 and $2.75 per gallon in 2007. The low point was right at the beginning of the year — January 2009 — when the national average price, according to the U.S. Department of Energy, was $1.72 during the depth of the recession and banking crisis. Prices didn't go back above $2 per gallon until March 30, and peaked at $2.71 Nov. 2. They ended the year at $2.61 per gallon — less than a dollar higher than the beginning of the year. The relatively smooth price ride contributed to a 10.2-percent decline in gross margin cents per gallon for c-stores, as retailers had fewer opportunities to make money on the up-and-down swings in prices. Gross margin cents per gallon last year was 15.03, compared to 16.74 in 2008. That resulted in gross margin dollars per store falling to $189,345 last year.

    In comparison, in 2008, gas prices began the year at $3.135 per gallon, cracked the $4 per gallon barrier in June and then plunged down to $1.642 per gallon by the end of the year. Gross margin dollars per store was $216,043 in 2008.

    The number of convenience stores selling motor fuel fell slightly last year. Of the total 144,541 units, 80 percent (or 115,340) sell fuel. That's a slight increase from 79.2 percent in 2008.

    A larger percentage of single-owned stores sell motor fuel than chain-owned stores. More than half, 56.8 percent, of single-owned stores sell gas, while 43.2 percent of chain-owned stores sell motor fuel.

    By region, the South has the largest number of convenience stores selling motor fuel with 58,138, but by percentage, the Midwest is tops with 85.7 percent of its total stores, or 25,795, selling fuel.

    By state, Texas has the largest number of convenience stores selling fuel with 11,994. By percentage, Iowa, North Dakota, Nebraska and South Dakota all have more than 95 percent of their c-stores selling motor fuels.

    For 2010, Nelson predicted a moderate recovery in the economy will result in improved fuel sales and margins. However, the decline in gas consumption is not expected to reverse itself. Expect another 1-percent to 2-percent drop in gallons sold this year, said Nelson.

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