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    Tesoro Completes Shift to Multi-Site Operator Model

    Company no longer directly operates c-stores.

    By Brian Berk, Convenience Store News

    SAN ANTONIO — Tesoro Corp. completed the transition of all of its company-operated convenience stores to multi-site operator (MSO) locations at the end of December. 

    Under this model, Tesoro provides fuel at the forecourt and also prices the fuel, but independent operators are responsible for in-store operations. Therefore, Tesoro no longer handles the entire operation at any retail sites.

    “There’s a slight improvement in operating our business that way,” Greg Goff, chairman, president and CEO, said during the company’s 2014 fiscal fourth-quarter earnings call Thursday.

    San Antonio-based Tesoro now has 586 MSO convenience stores and gas stations operating under the ARCO, ampm, Shell, Exxon and Mobil brand names. The company also has 1,687 branded dealer/jobber sites, for a total of 2,273 locations.

    All of these locations performed well in Tesoro’s fourth quarter, with its retail division seeing net earnings more than octuple from $24 million in 2013’s fourth quarter to $195 million in the most recent three-month period. Favorable market conditions, specifically low gas prices, were credited for the massive net-profit improvement.

    The $195 million earned for the three-month period ended Dec. 31 was a record for Tesoro’s retail division. Also a record was the $424 million the retail division earned for all of 2014.

    Same-store fuel sales in Q4 increased 1.5 percent year over year. Total fuel sales grew by 330 million gallons to 1.06 billion gallons. Gross margins rose to $277 million in the quarter, a significant increase vs. the $96 million earned in the year-ago quarter. And fuel margins per gallon rocketed by 17 cents per gallon to 26 cents per gallon.

    The only real weakness in Tesoro’s retail division was merchandise and other non-fuel margins, which declined by $9 million to $19 million in the company’s 2014 fourth quarter.

    Looking thus far at 2015, Goff noted same-store retail sales are up slightly compared to last year, but it's “not a significant uptick.”

    Tesoro’s retail division was not the only one to set records. The overall company achieved record net earnings of $872 million for full-year 2014, compared to $412 million in 2013. In the fourth quarter alone, Tesoro reported net earnings of $145 million vs. a loss of $7 million during the year-ago period.

    “2014 was a very successful year for the company — not only from a financial standpoint, but also from our excellent safety and operating performance," said Goff. "We exceeded the Distinctive Performance Objectives we laid out for the company and have continued to transform Tesoro with the acquisition of the natural gas business within Tesoro Logistics LP.”

    By Brian Berk, Convenience Store News
    • About Brian Berk Brian Berk is managing editor of Stagnito Business Information's Convenience Store News and Convenience Store News for the Single Store Owner, where he specializes in covering motor fuels, technology and financial news. He has served the magazine industry for 14 years and has also worked in the radio and newspaper fields. Berk holds a bachelor's degree in communications from the State University of New York at Cortland and a master's degree in journalism from Quinnipiac University in Hamden, Conn.

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