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EL PASO, Texas -- Petro Stopping Centers LP reported net income for the second quarter of 2002 was $2.7 million, a sharp increase from a net loss of $899,000 for the same period last year.
Revenue for the quarter was $229.2 million, which was $9.5 million less than the second quarter last year.
The decline in revenues was primarily due to a decrease in the retail selling price of fuel. The improvement in earnings was due primarily to higher non-fuel profit, lower interest expense and lower general and administrative costs, said Jack Cardwell, Petro's chairman and CEO.
"In spite of an uncertain economy, we posted strong growth over the first half of last year. This improved performance reflects our ongoing commitment to maintaining our high standard of quality while working to improve the efficiency of our operations," Cardwell said.
Net income for the first two quarters of 2002 was $1.8 million, compared to a net loss of $4 million in 2001. Revenue for the period was $437.8 million, compared to $474.9 million in 2001.
The drop in earnings wasn't an entire surprise for the El Paso, Texas-based chain. Refining margins have caused sharp drops for virtually all Big Oil and traditional convenience store chains. In addition, Petro Stopping Centers said the company lowered its per-gallon margin intake to drive traffic and prop up other areas of operation.
"Margins on fuel have gone down from representing 80 percent of our total revenues to 50 percent," David McClure, Petro Stopping Centers' marketing director, said in an interview with Convenience Store News last month.
Diminishing margins have imposed greater strains on the company's other profit centers, which now yield half of Petro's net profit. "Our truck repair, restaurant, fast food and travel merchandise all have to do that much better to make up for what we're losing on fuel," said McClure.
"Falling [fuel] margins have led to needing larger locations to generate more traffic," he said. "The last five locations we've opened have been larger in terms of parking. We're building more stand-alone c-stores on our lots. We're adding more MPDs [multi-pump dispensers] for the four-wheeler."
To stimulate traffic at its other profit centers, Petro has dropped fuel margins in a bid to attract more customers. "If you can drop your fuel margin from 8 cents a gallon to 4 cents and double your volume, you have twice as many customers coming in," McClure said. "You're cutting your fuel margins to double your volume and they're spending just as much money in the store. So in the end, there's a net gain."
Like the rest of the travel-center industry, Petro has been hurt by trucking consolidation that has given fewer, yet larger fleet companies enhanced leverage in negotiating diesel deals. In addition, these operators have seen third-party credit/debit fees jump substantially, further cutting into already slim fuel margins.