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FINDLAY, Ohio — Marathon Petroleum Corp.'s (MPC) Speedway LLC division is excited to introduce its "focused merchandise approach" to the 1,245 convenience stores on the eastern seaboard it acquired from Hess Corp., said CEO Gary R. Heminger during Thursday's 2014 fiscal third-quarter earnings conference call. Following the recently closed transaction, Speedway now has 2,744 c-stores and gas stations in 22 states.
Although only operating Hess' former retail division for just 30 days, Speedway already identified in-store operations as the primary way to raise profits at the newly acquired assets.
"Hess always did well outside the store," Speedway President Tony Kenney said during the call. "We will implement our loyalty program and focus on good partnerships we have with our key suppliers to improve in-store operations."
Kenney added that Speedway's No. 1 goal was to make sure the Hess transition didn't affect its customers. "We believe we've accomplished that." He also noted that Speedway will continue with its plan to open 60 new or rebuilt stores this year, implemented prior to the Hess acquisition.
Based upon its 2014 fiscal third-quarter earnings, Speedway was performing well even before the Hess acquisition. When backing out $6 million in charges related to the Hess retail transaction, Speedway earned a net profit of $125 million in the quarter ended Sept. 30, a record for the c-store retailer. This compares to a $102-million profit during the same period in 2013.
"MPC's retail subsidiary, Speedway LLC, achieved outstanding performance during the quarter while preparing for the acquisition of Hess' retail operations, which closed on Sept. 30," Heminger said. "Speedway's consistent ability to generate strong merchandise margins provides great synergy with the fuel volumes and margins of the acquired Hess locations. We believe we will deliver value from these synergies, and we welcome our new employees as we begin serving our customers in these new markets."
For its third quarter, Speedway achieved $870 million in merchandise sales, a $27-million year-over-year increase. Merchandise gross margins rose $11 million to $235 million. Also on the upswing was merchandise gross margin percentage, which increased 0.5 percent to 27 percent.
Same-store merchandise sales decreased by 0.8 percent to 4.8 percent, however.
Regarding fuel, sales increased $39 million to $842 million in Speedway's latest quarter. Gasoline gross margins rose by nearly 2 cents per gallon to 15.96 cents per gallon.
Companywide, Findlay, Ohio-based MPC earned $672 million, exactly quadruple the $168 million the company earned in its 2013 fiscal third quarter.
"The efficiency and flexibility of our integrated downstream system enabled us to continue capturing opportunities in the markets we serve," stated Heminger. "Our ability to quickly adjust and direct refined products to the markets of greatest value has served consumers and MPC shareholders well."