CHICAGO – The convenience store industry saw record sales of $700.3 billion last year. In-store sales increased 2.2 percent to reach a record $199.3 billion, while motor fuels sales increased 2.9 percent to hit a record $501 billion, according to figures revealed today at the NACS State of the Industry Summit.
The industry’s overall sales in 2012 reflected real growth per store, with sales outpacing the 0.7-percent increase in the number of U.S. c-stores last year, noted NACS, the Association for Convenience & Fuel Retailing.
In-store sales growth was driven by double-digit sales gains in several product segments: alternative snacks, which includes meat snacks and health, energy and protein bars (up 12.2 percent); liquor, a relatively small subcategory (up 11.6 percent); cold dispensed beverages (up 11.3 percent); and sweet snacks (up 10.3 percent).
Convenience store pretax profits reached a record $7.2 billion in 2012, but taken as a percent of total sales, profits only moved from 1.027 percent to 1.028 percent of total sales.
As in recent years, motor fuels continued to drive sales dollars, as in-store sales drove profit dollars. Overall, 71.5 percent of the industry's total sales were motor fuels, yet motor fuels only accounted for 35 percent of profit dollars. Motor fuels gross margins decreased from 18.2 cents to 17.8 cents per gallon before expenses, and also dipped on a percentage basis falling from 5.23 percent to 4.94 percent. This marks the lowest that fuel margins have been on a percentage basis in decades.
Regarding in-store sales, NACS' breakout showed:
- Tobacco (cigarettes and other tobacco products) accounted for 40.7 percent of the total;
- Foodservice (prepared food and hot, cold and dispensed beverages): 15.8 percent;
- Packaged beverages: 14.7 percent;
- Center of the store (candy and sweet, salty and alternative snacks): 10.4 percent;
- Beer: 7.6 percent; and
- Other: 10.8 percent.
Foodservice again drove profits, accounting for 27.1 percent of gross profit dollars. Tobacco products followed, accounting for 21 percent of gross margin dollars. Packaged beverages ranked third, accounting for 18.8 percent of gross profit dollars, NACS reported.
THE BAD NEWS
While sales and profits were strong, the 2012 numbers highlight several concerns for the convenience retailing industry. Total credit and debit card fees hit a record $11.2 billion and surpassed overall c-store industry profits for the seventh straight year. Card fees increased 1.5 percent, a much slower pace than the double-digit increases that have been routine over the past decade.
Passage and implementation of new debit card swipe fee limits played a significant role in reducing card fees. However, the fees were still significant. Just looking at motor fuels sales, credit and debit card fees added 5.1 cents to every gallon of gasoline sold at convenience stores in 2012.
Several other expense lines also saw increases, led by health insurance costs rising 6.3 percent.
Last year's results also show a continuation of the industry’s bifurcation, with a considerable difference between top-quartile and bottom-quartile performers. Top-quartile performers had hot dispensed profits that were 4.4 times greater than those in the bottom quartile; prepared food profits 2.4 times greater than the bottom quartile; cold dispensed profits 2.3 times greater than the bottom quartile; and packaged beverage sales that were 2.3 times greater than the bottom quartile.
Of greater concern to all retailers, there was a major difference in sales and profits by quarter. First-quarter 2012 results were considerably better than those of any other quarter, while fourth-quarter figures lagged behind the other quarters. Weather was likely a major factor in the variations. The first quarter was unusually warm and dry, which is conductive to growing on-the-go sales, while the fourth quarter had much poorer weather and significant storms, most notably Superstorm Sandy.
The NACS State of the Industry Summit continues tomorrow.