Speedway's Hess Acquisition Has Been Seamless
FINDLAY, Ohio — Speedway LLC's acquisition of Hess Corp.'s retail division has been "seamless" and customer feedback has been "very good" thus far, Speedway LLC President Tony Kenney said Wednesday during parent company Marathon Petroleum Corp.'s (MPC) 2014 fiscal fourth-quarter earnings call.
"So far, so good," Kenney said of Speedway's addition of 1,245 Hess convenience stores and gas stations in 13 states, primarily on the East Coast.
As of Jan. 31, Speedway had converted 134 of the 1,245 acquired Hess locations to the Speedway brand name. "Conversions of these new locations and the deployment of Speedway's highly successful merchandise model are progressing well," MPC President and CEO Gary R. Heminger stated.
Heminger added that the Hess acquisition was immediately accretive to Speedway's bottom line for its fourth quarter, which ended Dec. 31. Speedway earned a net profit of $273 million for its most recent quarter, compared to a profit of $83 million in the same quarter in 2013.
The acquired Hess retail division accounted for approximately $118 million in profit for the quarter, while Speedway's legacy stores — which consisted of 1,501 convenience stores as of Dec. 31 — accounted for $155 million in net profits.
Heminger stressed that earnings from Speedway's legacy stores would have been a record for the company by itself if the acquired Hess stores were removed from the equation.
Strong merchandise margins during a low fuel price environment was the main reason for the record earnings achievement. Merchandise sales were $1.19 billion in Speedway's most recent quarter, vs. $775 million in 2013's fourth quarter. Merchandise gross margins rocketed by $119 million to $324 million.
In addition, merchandise gross margin percentage rose 0.7 percentage points to 27.2 percent, while same-store merchandise sales increased by 5.4 percent.
Gasoline and distillate sales were also a strong point, improving by more than 700 million gallons to 1.52 billion gallons. Gasoline and distillate gross margins were higher by an impressive 11 cents per gallon year over year, to 24.51 cents per gallon.
Kenney did acknowledge that same-store fuel sales at legacy Speedway stores saw a 0.8-percent decline in the month of January, however. The company is not yet tracking this data for its newly acquired Hess locations.
OVERALL STRENGTH
Speedway's strong fourth-quarter earnings heavily contributed to Findlay-based MPC's overall fourth-quarter profit, which advanced $172 million to $798 million.
"While crude oil prices fell and crack spreads narrowed during the fourth quarter, MPC experienced strong product price realizations at both the wholesale and retail level," said Heminger.
Speedway LLC operated a total of 2,746 convenience stores and gas stations in 22 states as of Dec. 31.