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FINDLAY, Ohio — Speedway LLC substantially completed the conversion of all 1,245 Hess Retail locations it acquired along the East Coast and in the Southeast, which put it well ahead of schedule, Gary Heminger, president and CEO of parent company Marathon Petroleum Corp. (MPC), announced during the company’s 2015 fiscal fourth-quarter earnings call Wednesday.
“The acquisition of these retail locations has exceeded our expectations and has been a tremendous value driver for MPC,” said Heminger.
The former Hess convenience stores and gas stations, acquired Sept. 30, 2014, were solid contributors to Speedway having a strong fiscal 2015. For the year ended Dec. 31, Speedway reported net income totaling $673 million, compared to $544 million for the 2014 fiscal year.
“Speedway continued its solid performance,” said Heminger. “Lower prices at the pump will remain constructive for retail demand.”
For the fourth quarter of 2015, however, Speedway’s income declined, coming in at $135 million vs. $273 million in 2014’s fourth quarter. MPC cited a lower light-product margin, a $25-million non-cash charge and an increase in operating expenses as reasons for the Q4 earnings drop.
On the fuel side, gasoline and distillate gross margins declined by more than 6 cents per gallon year over year to 18.23 cents. Same-store gasoline sales volume declined by 0.3 percent year over year. Speedway President Tony Kenney stressed during Wednesday's call that he is not concerned about the same-store volume decrease as it is due to a number of factors, including a balance between volumes and margins.
Heminger noted that the month of January showed improvement in this category, with same-store gasoline sales rising by more than 1 percent year over year. “We are very bullish on gasoline demand going into the second half of this year,” he said.
Despite some declines at the forecourt, Speedway had a solid fourth quarter inside the store, with merchandise sales rising from $1.19 billion to $1.21 billion when comparing the fourth quarters of 2014 and 2015. Merchandise gross margins rose by $16 million year over year to $340 million, and merchandise gross margin percentage improved by 0.8 points to 28 percent.
Same-store merchandise sales were also solid, rising 2.7 percent year over year, although this increase trailed the gain seen in each of Speedway’s three prior fourth quarters.
As of Dec. 31, Speedway operated 2,766 convenience stores, a gain of 20 stores year over year.
Companywide, Findlay-based MPC earned $2.85 billion for its 2015 fiscal year, vs. $2.52 billion in 2014. Fourth-quarter 2015 earnings came in at $187 million, compared to $798 million during the same period in 2014. A pretax charge of $340 million was cited as one reason for MPC's earnings decline.
“We are optimistic about the long-term for the company,” concluded Heminger.