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BRENTWOOD, Tenn. -- Several months into its program to replace smaller existing stores with "mega stores," MAPCO Express is starting to see results.
Uzi Yemin, president and CEO of Delek US Holdings Inc., parent company of MAPCO Express, explained that the retailer's mega store program "is coming along very nicely." In general, the company is replacing existing stores that sell one million gallons of fuel and record $1 million in inside sales with mega stores that sell four to five million gallons of fuel and record $2 million to $3 million in inside sales, he said.
As CSNews Online previously reported, the mega stores are roughly double the size of MAPCO's traditional store footprint, and the layout is more distinctive as well. At the chain's first mega store prototype in central Arkansas, CSNews Online observed firsthand a clear separation of packaged goods vs. foodservice offerings, with packaged items filling the left-hand side of the store and foodservice taking up the right side. Running down the center is a divider featuring a grab-and-go cold case on one side and a seating bar on the other. Private label is featured heavily throughout the mega store.
Yemin shared his optimism for the mega stores during the company's second-quarter earnings call today. Delek reported record results in what was "clearly a strong quarter," noted CFO Mark Cox. In addition, the company marked the 12th consecutive quarter that its convenience stores registered same-store merchandise growth.
"Our company continues to perform extremely well as all three of our segments delivered year-over-year improvements in contribution margin," said Yemin.
By the numbers, the overall retail segment contribution margin increased to $18.2 million this quarter vs. $14.6 million in the second quarter of 2011. Increases in fuel and merchandise same-store sales, and lower overall operating expenses, contributed to the improved performance, Cox said. Second quarter 2012 results were positively impacted by same-store merchandise sales growth of 4.3 percent, which was supported by same-store foodservice sales growth of 9.3 percent and growth in private label merchandise sales, excluding cigarettes, he added.
In addition, same-store fuel gallons sold increased 2.2 percent as declining fuel prices coincided with the peak driving season. The merchandise margin was 29.7 percent and the fuel margin was 18.2 cents per gallon for the second quarter of 2012. Cox noted that MAPCO's loyalty program also contributed to the increase in overall fuel gallons sold.
At the conclusion of this latest quarter, the retail segment operated 374 locations vs. 390 locations at the end of last year's second quarter. Approximately 60 percent of the stores are company owned.
Yemin added that there are no plans at this time to spin off its retail division.
Overall, for the three months ended June 30, Delek reported net income of $67.8 million vs. net income of $62.1 million in the second quarter of 2011. Excluding special items, the company reported adjusted net income of $69 million. That excludes $1.2 million of after-tax expense incurred in connection with the potential initial public offering (IPO) of its logistics assets. This compares to adjusted net income of $52.9 million in the second quarter of 2011, Cox explained.
The record second-quarter numbers reflect Delek's ownership of its El Dorado refinery for the full quarter, as well as solid performances from the retail and marketing segments, Cox said.