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ATLANTA -- As the 2013 NACS Show was winding down at the Georgia World Congress Center here on Oct. 15, the inaugural Wells Fargo Securities Convenience Store Forum was just heating up a couple of miles away.
Bonnie Herzog, managing director of Wells Fargo Securities LLC, began by painting a positive picture of the entire convenience industry. "I am quite bullish about the industry," she said. "I expect a consolidation trend and an opportunity for acquisitions moving forward. The growing Hispanic population and a shift to higher margin items, such as foodservice, can be a great help to convenience stores."
Backing up Herzog’s positive outlook were four top industry executives who spoke individually during the three-plus-hour event. Sam Susser, president and CEO of Susser Holdings Corp.; Dennis Hatchell, president and CEO of The Pantry Inc.; Brian Johnson, vice president of finance and corporate secretary at Casey's General Stores Inc.; and Tom Perkins, CEO of Core-Mark Holding Co. Inc., joined Herzog on stage to make prepared remarks, answer her questions and respond to queries from the audience at Atlanta's Four Seasons Hotel.
Sam Susser picked up on Herzog's comments about the Hispanic population and said Susser Holdings’ Stripes stores will place a heavy emphasis on this demographic. "That's where the growth is," he said.
The chief executive has often touted his love for the Texas market, where a majority of the Corpus Christi-based retailer's stores are located. He did so again during his presentation, citing tremendous population growth. However, at the forum, he stated for the first time that he is more upbeat about the Stripes business than just a couple of quarters ago.
"We are seeing improved traffic and the real estate market is improving in many places," he stated. "We will continue to grow same-store sales."
As for acquisitions, Susser Holdings’ leader claimed that quality real estate is the first thing the operator of 570 c-stores looks at. "We're pretty bullish we will be able to find selective acquisitions," Sam Susser said. "But we are disciplined. We walk away a lot [from deals]."
He also noted the following during his speech:
- Laredo Taco Co., Stripes’ proprietary quick-service restaurant operation, would work in many other states in addition to its core markets, but the company has not thought about expanding this business.
- Stripes would be "dead ducks" without foodservice. "It's been a godsend for our business."
- The real estate market will thrive in the future. "It will be awesome 20 years from now."
Hatchell, CEO of The Pantry, operator of 1,562 Kangaroo Express stores in the Southeast, acknowledged the company was not performing as well as it should have before his arrival at the Cary, N.C.-based retailer in 2012.
But he said during the forum, "Those days are in the past. We have a different approach."
As for why The Pantry is better off today, he pointed to an impressive new leadership team. "The new team is committed to The Pantry," said Hatchell. "I'm very proud of the team we have brought on." The man known within the company affectionately as "Chief Roo" added that the only position left to fill is that of chief information officer (CIO). Hatchell is currently serving as interim CIO.
When asked by Herzog how he would grade his first 18 months as CEO, Hatchell said he would give himself a “C” for the first six months because we was "scrambling" to learn all aspects of the company. "For the second six months, I'd give myself a better grade," he said. "And for the third six-month period, I'd give myself an “A plus” because of the great team we have."
Hatchell also mentioned the following in his speech:
- The Pantry will not make acquisitions simply for acquisitions sake, but the chain will take a strong look at making a purchase that cements its presence in a particular market.
- The chain is spending a lot of time researching the possibility of offering a loyalty program. "It needs to be something that appeals to all customers in the 13 states [in which we have stores]." In addition, The Pantry is currently talking to grocery chains about a possible partnership centered around a fuel loyalty program.
- Following its successful Roo Cup promotion this summer, The Pantry will offer a Roo Mug promotion this winter, where customers can buy a mug and refill it for 50 cents.
- Kangaroo Express will continue to go “full speed ahead” in regards to its foodservice offer. "There's a big opportunity for us in foodservice.”
- Obamacare will be a large expense for the retailer, but The Pantry will "do what's right for [our] people."
Casey's General Stores
Pizza delivery -- now available at 325 of its 1,749 convenience stores -- has separated Casey's General Stores from its c-store competitors, Johnson stressed during the Wells Fargo Securities event.
"We are reaching new customers who never tried our pizza before," he said. "We are already a top 10 purveyor of pizza in the United States."
The vice president also reiterated comments made by Chief Financial Officer Bill Walljasper last month that the Ankeny-Iowa-based chain is looking south and east of its footprint for expansion, including Kentucky and Tennessee.
However, Johnson revealed a new tidbit that Casey's will only add new stores in small towns. "We always thought we would need to acquire stores to make our way into new states," the exec said. "But we have been able to expand instead."
Despite this fact, Johnson said Casey's will remain active in the acquisition market. "The acquisition market is strong," he said. "We have been outbid on some chains [we attempted to acquire]. One was in the St. Louis market. Another one was in Indiana."
As for where its second distribution center will be located, Johnson did not reveal a location. However, he did offer some clues. "At the end of [the 2014] fiscal year, we expect to know where the distribution center will be. Southern Illinois and southern Indiana are both possibilities."
Casey's 2014 fiscal year ends on or near April 30. By April 30, 2015, Casey's expects the second distribution center to be up and running.
Johnson also offer offered the following statements during his speech:
- The retailer's fuel loyalty partnership with Hy-Vee Inc. is going extremely well, but the chain has not yet been able to convert the new fuel customers into in-store customers.
- High single-digit sales growth in its prepared food segment is "sustainable."
- Electronic cigarettes comprise a small amount of Casey's tobacco sales but are doing extremely well.
- Casey's customers would like to buy healthy items, but they rarely end up purchasing such products.
Distribution company Core-Mark is celebrating its 125th year, and the company is excited about what lies ahead, according to Perkins. Hence, it will seek to raise its dividend, repurchase shares and heavily consider acquisitions.
E-cigarettes are one thing Perkins is specifically excited about for the future. "E-cigs are in their infancy, but we are seeing dramatic growth," he said, adding that the products carry at least three times the profit margin of traditional cigarettes. "This is great news for both us and the c-store retailer."