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    Petro-Canada to Shut Down 125 Stores

    The sites tagged to be cut represent about 3 percent of retail gasoline sales volume.

    CALGARY, Alberta -- Petro-Canada Inc., operated operator of more than 500 convenience stores under brands such Super Stop, Neighbours and Super Stop Express, yesterday said it plans to close 125 convenience stores in Eastern Canada over the next two years.

    The company announced the closings during a conference call, when it announced plans to shut its refinery at Oakville, Ont. The move will trim about 8 percent of the company's nationwide network of 1,500 stations, according to the Calgary Herald. The sites tagged to be cut represent about 3 percent of retail gasoline sales volume, the company said.

    "The future of the business is quality, not quantity," explained Jon Hamilton, a spokesman for Petro-Canada. "The entire industry kind of realized that in the early 1990s, Canada was overbuilt. It was inefficient; you had a lot of sites, selling a little bit of gasoline."

    Petro-Canada has halved its number of retail stations since 1991, when it operated 3,200 sites.

    The number of gas stations in Canada has dropped steadily for the last decade, as integrated producers have attempted to boost profits in retail businesses that offer only razor-thin margins on each sale.

    "Today's consumer wants more than just a gas station, they want convenience stores, they want a car wash, they want large, brightly lit sites that are easy to get in and out of," Hamilton said. "On average, you're looking at one, maybe two cents a liter in terms of profit, so you need sites that have increased volumes in order to make some money."

    Martin Molyneaux, an analyst at First Energy Capital Corp., explained that it's tough to justify operating stations with low sales volumes, given the option of opening larger, more appealing locations.

    "You've probably seen 30 percent of the service stations shut down over the last 10 years," Molyneaux said. "A six-pump station no longer makes sense. You need 15- to 20-pump stations to be profitable."

    The integrated companies in Canada are all drifting toward stations that can do more than 650,000 gallons in annual sales, while offering a variety of other services, Molyneaux added. "These guys have scraped and scampered to get up to the low double-digit returns as an industry over the past decade," he said. "It's hard to extract capital out of the parent company when you have competing projects that offer 20 percent plus returns."

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