Q3 2023 Murphy USA Inc Earnings Call
Thank you for standing by my name is Kayla Baker and I'll be your conference operator today at this time I would like to welcome everyone to the Murphy USA third quarter 2023 earnings Conference call.
All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session. If you'd like to ask a question. During this time simply press star followed by the number one on your telephone keypad if.
If you would like to withdraw your question again press Star and one I would now like to turn the call over to Vice President of Investor Relations Christian Pikul you may begin.
Hey, Thank you Kayla and good morning, everybody. Thanks for joining us today with me as usual are Andrew Clyde, President and Chief Executive Officer, Mindy West Executive Vice President and Chief Financial Officer, and Donnie Smith, Vice President and controller. After our opening comments Mindy will provide an overview of the financial results and then Andrew will provide a quick overview of our guidance and then.
We will open up the call to Q&A. Please keep in mind that some of the comments made during this call, including the Q&A portion will be considered forward looking statements as defined in the private Securities Litigation Reform Act of 90 to 95 as such no assurances can be given that these events will occur or that the projections will be attained a variety of factors exist that may cause actual results to differ.
For further discussion of risk factors. Please see the latest Murphy USA forms 10-K, 10-Q, 8-K, and other recent SEC filings Murphy USA takes no duty to publicly update or revise any forward looking statements. During today's call. We may also provide certain performance measures that do not conform to generally accepted accounting principles or GAAP, we have provided schedules to reconcile that.
non-GAAP measures with our reported results on a GAAP basis as part of our earnings press release, which can be found on the investors section of our website with that I will turn the call over to Andrew.
Thank you Christian Thank you everyone on the call for joining us today.
Over the course of any quarter, we're constantly reflecting on our performance and our outlook as we shape the narrative for the quarterly earnings call and the key messages to convey to investors as well as our employees partners and others that tune in for an update.
Well. This is just a point in time in our ongoing path to sustainable long term value creation, we truly look forward to the opportunity to provide updates on our path and more importantly, reinforce the messages. We believe are most instructive for investors.
I know the various scraping services in box below automatically generated there quarter over quarter headlines about lower revenues and profits without any insight into the price of gasoline the structure and direction of the commodity market the evolution of the industry structure or the relative advantage amongst competitors.
We too could spend a lot of time. This morning discussing this year's third quarter results compared to last year's record results, but we don't think that's especially helpful.
What is helpful and important for investors to understand is that third quarter performance has evolved from an extraordinary set of conditions in the prior year. What we previously described as a once in every six to eight year price drop to sustainable and durable financial performance in 2023 and <unk>.
Sure we do not expect full year results in 2023 will exceed those of 2022, but that really shouldnt be news to anyone except the bots.
Instead, we believe investors should be focused on two fundamental questions. What is the sustainable trajectory given the advantage competitive positioning of the Murphy USA business model in the years ahead.
How does the current momentum and initiatives underpin and support that view.
So today's call seeks to continue our ongoing discussion with investors on these important questions.
Our sustainable trajectory and current momentum reflect three unique and differentiated value drivers.
Channeling the advantage generated from heightened fuel volatility into value for our growing customer base to sustain gallon growth and market share gains.
Optimizing the in store performance of the existing network, while transforming the future network to efficiently deliver new and innovative offers.
And investing and distinctive capabilities to accelerate customer trial and adoption to enhance returns on capital.
Starting with fuel one of the greatest sources of value in our business is derived from underlying price volatility weather created by large scale macroeconomic or geopolitical price shocks or refining and let just logistics.
Disruptions or supply demand imbalances.
In the current environment, the macro setup continues to be a headwind for our customers as higher volatility at higher price levels with persistent inflationary pressures means Murphy USA has more and more value seeking customers trading down to our stores.
This benefit accrues to us at the expense of the marginal players who in this environment.
Our themselves forced to raise prices perpetuating the cycle that drives fuel breakeven requirement is higher for the industry and shifts gallons and market share to value oriented retailers like Murphy USA.
Third quarter and year to date results reflect the impact of foundational share gains we have achieved while same store fuel volumes were down four 7% versus the prior year quarter. The two year stack remained strong up four 3% and a telling commentary on the goodwill we have generated with customers do.
Our ongoing commitment to bottom of market pricing.
While we expect unexpected some set of subset of consumers to be a little less price sensitive and lower price periods.
Our ability to attract more customers and high price periods and retain them through our loyalty benefits incredible customer service and other great products at great value is clearly evident.
Within this broader context, we sustained annual volumes within our guided range at margins above our suggested range year to date all in margins were 31 cents per gallon below the 22 year to date average of $35.06 per gallon, but still attractive given the low relative volatility.
In the first half of 2023.
And importantly margin dynamics remain rational and have even improved in certain regions like the northeast.
And while we certainly hope and pray that global risk diminishes and domestic supply helps to balance prices.
Our job indeed, our purpose is to generate the most value for our customer in any environment, we win because we provide our customers value and affordability during the most difficult times.
As we think about year to date margins, we have experience coupled with a strong start to the fourth quarter. We think the equilibrium margin range for the nearly 5 billion gallons of refined product we sell in our stores will likely be even higher in 2024.
Turning to in store performance as we look back over our history as a standalone public company I would.
<unk>. The first 10 years since our spinoff is transforming how we conduct business in our stores optimizing our high volume formats, reducing our breakeven requirement through enhanced merchandising and reduce cost channeling the incredible spirit of our associates towards aligned objectives, and creating a unique everyday low price loyalty.
Platform with Murphy drive rewards.
As we think about the next 10 years. It is a continuation of this foundation and transforming the kinds of stores, we do business in and how we interact with our customers.
It is through this lens that I wanted to discuss our trajectory and momentum and merchandise performance as well as operating expenses.
The new stores, we were building our strongly accretive to the network average as shown in our earnings release, comparing a PSM performance, which captures all stores compared to same store sales performance, which excludes stores opened since January one 2022.
These new stores come with higher volumes higher merchandise sales and margins, but also come with higher operating costs as you would expect given the larger store footprint.
More importantly, these stores deliver higher returns or better coverage ratio and a more attractive offer for our customers, helping us to sustain and grow market share.
These in store results are underpinned by continued learning through innovation and a focus on growing food and beverage contribution in addition to the underlying strength in our nicotine business and.
In this quarter, we saw significant momentum in food and beverage sales driven by our partnership with the New York Giants, where we have developed signature subs a quick check.
And by our improved grab and go and co branded frozen beverage results at Murphy USA.
Not home runs in any individual quarter, the singles and doubles generate cumulative and enduring benefits. While also demonstrating tangible results of our innovative mindset and relentless commitment to our customers.
In total these efforts grew food and beverage sales and contribution dollars for the quarter by six 1% and five 7% respectively.
Our nicotine business continues to outperform gaining share in all key categories, while strong tobacco performance makes it relatively more difficult to shift our merchandise mix as a percentage and remember we take dollar signs to the bank not percentage signs.
The steady growth in contribution margin dollars supports ratable growth and our merchandise business in.
In fact over the past four years through the impact of Covid and our acquisition of quick check we have altered the trajectory of our merchandise business generating high single digit growth rates in sales and margin dollars a trend we expect to continue into 2024.
With respect to store level costs, we think about the impacts from both a people perspective, and an operating cost perspective.
We're investing in our people and improving our staffing metrics getting the right store leaders in place supporting the assistant manager cohort and establishing career pathing to identify talent and develop people.
These efforts generate benefits in reducing the number of stores at risk from a staffing perspective, improving hours of operations, reducing over time as well as the costs associated with higher turnover.
For the quarter.
People costs were up three 6% on a per store basis.
Store operating costs also reflect the impact of multiyear contracts that have come up for renewal warranty expirations from our earlier E. M D investments in dispensers higher shrink largely due to higher retail prices as well as the added square footage and number of stores in our network. These non people costs were up.
<unk> nine 6% on a per store basis, driving the total cost increase of five 8% per store.
Wrapping up the discussion with our capability investments our trajectory and decade long track record of merchandise improvement directly reflects the investments we've made to understand our customer.
This journey started with Murphy drive rewards, which we believe has generated over $250 million of incremental margin contribution since 2018, largely in tobacco considering the market share gains since its inception.
Similar capability investments in retail pricing excellence have enabled us to capture more value from fuel price volatility.
In fact, if we evaluate our SG&A investments and capabilities they've generated by far the highest returns of any investment made in the past decade.
Going forward, our corporate cost reflects new investments, we're making across the business to extend our competitive advantage over the next decade and include our digital transformation and in store experience campaigns, we have been able to get the right talent at the right time, and El Dorado and in New Jersey to help us drive some critical initiatives over the <unk>.
Coming years. These costs are reflected in our G&A expense and we expect to Ratably continue this pace of growth into 2024 and.
In summary, we're very pleased with third quarter results the sustainable trajectory of the business and the current momentum we are seeing in the fourth quarter as we head into the new year, the strength and agility of our business model has once again demonstrated resilience and generated success over the past 10 years not to mentioned about a 10.
Fold increase in shareholder value for investors since the spin.
I'm now going to hand, the call over to Mindy to briefly review the financial results and discuss our capital spending after which I'll review the elements of our 2023 guidance and then open up the call for some questions.
Thank you Andrew and good morning, everyone.
Revenue for the third quarter of 2023 was $5 8 billion versus $6 2 billion in the year ago period, adjusted EBITDA was $306 million versus $367 million and net income was $167 7 million or $7 69 per share versus 219.
$10 5 million or $9 28 per share average retail gasoline prices or $3.41 per gallon versus $3 67 per gallon in the year ago period.
Total debt on the balance sheet as of September 30th was approximately $1 8 billion of which approximately $15 million is captured in current liabilities, representing the 1% per annum amortization of the term loan and the remainder of reduction in long term lease obligations as they are paid through operating expense.
Our $350 million revolving credit facility had a once again zero outstanding balance at quarter end and is currently Undrawn. These figures result in gross adjusted leverage that we report to our lenders of approximately one eight times.
Cash and cash equivalents totaled $125 million up from 93 million as of June 30th after Capex of $79 million and share repurchases of 65 million clearly demonstrating the accretive benefits of our positive free cash flow business.
Now I also want to add some color around the store count table in the earnings release, you will notice for a quick check stores were closed during the quarter totaling six year to date. These closures represent non fuel stores that reached the end of their useful life and we are allowing the lease to expire.
Strong markets, where we want to maintain and grow the quick check brand, we will build brand new stores with a fuel offer and a better location with better economics.
Andrew is going to address the remaining elements of our guidance, but I will kick off the conversation and then go ahead and discuss our 2023 capital spend was for the full year 'twenty three is likely to come in between $325 million and $375 million or $50 million below our guided range. We expect most of the spend to carry.
Over into 2024, as our new to industry stores are experiencing longer cycle times than anticipated.
And some maintenance initiatives and corporate project spend has now been deferred into 2024 and with that I will turn the call back over to Andrea. Thanks, Mindy, That's a great segue into a quick review of how we're tracking against 2023 guidance. So let's start with our organic growth. The 2023 plan include.
<unk> up to 45, new to industry stores as cycle times for new construction projects has lengthened over the past two years, we have not been able to put new stores into service as quickly as we would like permitting continues to be an issue for both our project developers as well as when we're building opening individual stores.
Contractors continue to face a variety of challenges, including labor shortages and supply chain constraints hooking up utilities has also been an issue in getting new stores across the finish line.
So taken together, we are estimating 9% to 11, new stores will be put into service in the fourth quarter, resulting in a total of 27% to 30, new stores for the year and that includes six new quick Tech stores, we will end the year with four new stores under construction with another 10, beginning in Q1 of next year. So hopefully that gives you some sense.
So the lag effect we are experiencing.
We expect these conditions to largely continue into 2024 impeding our ability to grow as fast as we would like next year. Nevertheless, we maintain a robust land pipeline and an ambitious build schedule and expect at least 30% to 35, new stores to open in 2024 with activity expected to accelerate.
In 2025.
While we think about capital allocation on it up two basis, knowing that the longer term trend will catch up in reverse over time, we think it will be more helpful to provide annual guidance on an at least basis.
Despite the challenges around new store growth as our network matures and our formats continue to evolve we have new opportunities to direct growth capital with a return potential that is equally or more compelling as new stores. These projects include raze and rebuilds, which we were able to accelerate in 2023 converting 33 key.
Ask into <unk> thousand 500 square foot stores with more dispensers, a boutique fuel offer an expanded higher margin in store merchandise offer. This figure was above our guided range of up to 30 raze and rebuilds.
Additionally, we are in the early stages of renovating our 2800 square foot stores to better serve our customers with a redesigned interior that provides a better shopping experience focusing on improved food and beverage offer early results from nine pilot stores suggest customer uptake is strong and we are committing capital to renovate up to <unk>.
<unk> 50 stores in 2024.
So in addition to be able to flex our growth capital with more raze and rebuilds to backfill delays in the LTI program. We're also investing in store renovations and other projects that will be an integral part of our capital plans moving forward and we can update you in February with more details on what that will look like in 2024.
Turning to the remaining elements of our guidance fuel volumes are trending to be slightly above the midpoint of our guided range merchandise contribution dollars also should be slightly above the midpoint of the guided range.
<unk> level Opex is trending just above the midpoint of the guided range approximating about a five 5% year over year increase and we expect that trend to continue as we build and rebuild larger stores next year.
SG&A expense will also be above the midpoint of the guided range largely representing multiyear capability investments. We are making this year, where we are ahead of schedule on both execution and delivery our tax rate also remains within the guided range.
Mindy for Alt already addressing the 2023 Capex program.
In keeping with tradition I'd like to just close with some insights around preliminary October performance, where I'm happy to say volumes have improved on a year over year basis running just shy of prior year volumes at retail margins of about 33 cents per gallon. So we're off to a great start in the fourth quarter and are excited to enter 2024.
With significant operational and financial momentum.
With that we can open up the lines for questions operator.
Yes.
And at this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad. Our first question comes from the line of Anthony Bonadio with Wells Fargo. Your line is open.
Yeah, Hey, good morning, guys nice quarter.
I just wanted to drill in a little bit on the <unk> margin contribution.
Can you just talk us through the underlying components. There I know you've talked about a modest benefit from supply tightness I think to the tune of around one cent per gallon in recent quarters is that still the right way to think about it.
And then it looks like our Bob was net down in Q3, so just maybe more on what drove the upside there this quarter.
Yes, Linda you want to take that one.
Service of the <unk>.
Results Anthony are reflective of mostly the direction of prices as we looked at last year, where we saw the big price fall, we would expect given the direction of prices and the way we account for inventories to have a negative impact from product supply and wholesale. Conversely. This year was kind of the opposite of that low volatility.
The business.
Which resulted in us being able to capture some gains in the inventory variances. So really the fluctuation in product plan has the results quarter to quarter, mostly in any quarter as similar as just based on the direction of our overall product pricing it's Matt.
Okay. Thanks, and then.
Just on breakeven.
I wanted to dig in a little there and more specifically.
The recent narrative around support from weaker trends in tobacco.
If we look at industry data it seems like sales have softened but.
We've also got this ongoing shift out of cigarettes into higher and higher margin alternative products.
That seems to be at least partly offsetting as I think about gross profit dollars earned by the marginal player.
Is there anything you can do to help us sort of quantify or frame.
What's going on there and then is it fair to say that the marginal players just doing.
Worse in capturing that transition.
Yes so.
In terms of.
Traditional combustible cigarettes Noncombustible smokeless.
The I.
I guess, the more premium paper products et cetera, I would expect to see brands like Murphy USA and the larger chains, continuing to grow and take share in those categories relative.
To the marginal players.
One of the things that I know has been localized by some of the tobacco manufacturers as the frustration.
With a lot of the illicit vapor products that are being sold out there.
Did a survey of many of our rural markets, you'll find that.
Many of those smaller operators are selling products that were not approved by the FDA did not get a stay in court.
We may even be the only retailer responsible in that market not selling those products.
No that is having.
Effect on.
Yes.
Combustible products as well as some of the other vapor products. So.
Unfortunately, you see some of the marginal players reverting to tactics.
Like that unfortunately.
Part of their means to sustained profitability.
Beyond that so I don't have as much insight into there.
The details of their tobacco mix all types. The particular issue that you were getting at are not Anthony.
Yes, that's right thanks, guys.
Thank you.
And your next question comes from the line of Ben <unk>. Your line is open.
Hey, Thanks, good morning, everybody.
Good morning, So I wanted to start if I could just on the fuel gallons, which despite lapping a huge growth number last year up 11% on a same store basis was only down for that.
4% to two year stack accelerated sequentially.
Despite having kind of a similar fall off in pricing that led to a favorable consumer response last year.
Can you talk about the things you're seeing from your consumers.
That.
Kind of in concert with the moves you're making around price.
Our leading to the stickier share gains and how you think that informs kind of what the new baseline.
Fuel productivity of your stores looks like going forward.
Yes, Thanks Ben.
And look I think the.
Last quarter, we kind of said look if volumes were down 4% to 5% we would consider that a win.
Considering the significant gains that we got last year in a really high price environment.
And we know look on the margins some customers arent going to be as price sensitive.
In lower price environments like we're experiencing.
Right now, but I do believe when customers come to us and those high price environments. They sign up and become a member of Murphy drive rewards and get those benefits they get into our stores and they see the incredible value and great service that they can expect.
There it just creates a stickiness.
I believe this consumer segment continues to feel the brunt of the inflationary pressures that remain.
Persistent so even at the lower prices.
They're still feeling that pain, and I believe that bodes well for everyday low price our retailers, especially in categories like ours, where they don't view our products.
As discretionary they need our product to get to work and.
For their simple pleasures in life. So I think a lot of it speaks to who our customer is and the pressures that they continue to face and we just continue to see.
More customers trading down to Murphy USA, and we can see have been not just in the fuel category, but other categories.
As well, where we can look at a panel of same customers over a period of time, how their mix shifts and how we get new customers in both premium and discount categories of tobacco for.
For example.
So I think we continue to see volatility as we continue to see inflation as we continue to see high interest rates.
These pressures are going to build up and I think that just bodes well for a business like ours.
Yes, Okay makes sense.
My second question is kind of following up on a comment Andrew that you made around the new midpoint or equilibrium for margins as we look forward kind of reassessing that in 2024.
If we look at the third quarter.
Really there was kind of every reason for margins not to be very good yet.
Margins, you delivered sort of appears through the headwinds of rising or Bob prices during the quarter sequentially and so I'm wondering.
Are you willing to put more specificity around the new range or is that something you'd like to do more formulary next year.
Well I think we will put more specificity around the suggested range, but I don't think we're going to go back to guiding fuel margins.
Because it just led to so many short term.
Conversations as opposed to maintaining that.
The dialogue on a much longer term sustainable basis, so by providing a range.
This year that.
Bandwidth kind of data.
A walk down from the 34 from the prior year to get to the upper end of the range. We developed a slide five that highlighted why we thought in.
In the Investor presentation, why the 26 cents was sustainable and that was the basis for.
The range, we will continue to do that type of analysis to provide the range.
But there are so many factors that ultimately influence it right as Mindy highlighted.
The structure of prices rising.
And falling.
When prices get high the impact that has especially.
Especially with volatility on the marginal player wanting to move.
Move prices up more quickly.
Because of the <unk>.
<unk>.
We're facing the broader competitive dynamic as rational, but it varies regionally as new competitors move into a market certainly when we build new stores.
We may be more aggressive in those markets to establish top of mind awareness with consumers and we've seen that in some of our markets and then all of a sudden those markets become a little bit more.
Rational so theres so many variables in there so I'd like to think we were thoughtful in the 26% to 30 range I'll admit we got it wrong.
But fortunately on the high end and I hope to be as thoughtful on the.
<unk>, we provide next year, but it's going to be more of a again a suggested range. So we avoid the short term.
Margin focus of the.
Discussions with investors.
Yes, Okay, great and we'll stay tuned until then best of luck with the rest of the year.
Thank you.
And your next question comes from the line of Bobby Griffin with Raymond James Your line is open.
Hey, good morning, Bernie Congrats on another great quarter.
Andrew first I wanted to touch on just the non cigarette same store sales growth.
Modestly negative understanding went up against a very big comparison in the prior year.
Is it really just a comparison, that's driving that or was there some pay down behavior from consumers. There are some opportunities in certain categories that you might look at and say hey, that's a good opportunity for us to do a little better in 2024.
Bobby Thats a great question.
Certainly if you've got a two year stack you could just kind of rest on that and make that your answer.
As you know we're not complacent.
Complacent when we look at our business I mean, I'll give you an example.
On a.
On a sales basis.
Center of store.
<unk> was down.
And on a two year stack only up 2% food and beverage was up 7% on a two year stack, but only up one 1%.
On a margin basis, and so as I think about the big initiatives that we are in the midst of and as I noted. We are ahead of schedule in terms of both execution and delivery, they're all focused on non tobacco sorry. They are all focused on non tobacco merchandise, including food and beverage some examples.
<unk>.
Price and SKU optimization for the center of the store, we've gotten really good at fuel pricing and tobacco pricing.
We're now applying that to the center of the store.
Demand forecasting work, we've done a quick checks can improve production planning and labor planning world already seen it flow to the bottom line from both a margin and a cost standpoint.
Along with the pricing improvements that.
We've made that will flow through and full year results next year.
MTR is great. We're now personalizing offers and a much more sophisticated way than we've ever done before everyone knows Murphy USA is great for Upselling now, we're doing better job of doing that it quick check, especially on the food and beverage side with the digital customer orders.
Screens.
Our in store experience campaign, we've got 17% more selling space in the center of the store we've adopted queue lines from quick check.
Food and beverage lay out.
Has been redesigned for an expanded grab and go and dispense beverage area. So.
I think your point is spot on and Thats, where a significant amount of our focus has been this year on improving.
That part of the business and I expect to see really good results on that in 2024.
Thank you My second question was actually on MTR, but you hit on one that response I'll go ahead and jump back into queue and best of luck in the fourth quarter guys.
Alright, Thanks, Bobby.
And your next question comes from the line of Bonnie Herzog Your line is open.
Hi, Good morning. This is Ethan Huntley on for Bonnie Herzog, Thanks for taking our questions.
I guess first maybe a topic of discussion lately has been <unk> one drugs.
Curious to hear your thoughts on the potential impact on your business.
The growing use of these drugs.
Have you seen any impact on your inside sales or any changes in consumer behavior, either from a basket traffic or maybe a category perspective.
And then maybe if you could touch on your initiatives you could implement.
Just wanted to mitigate these potential impacts over the next say five to 10 years.
Yes, I think it's way too early to.
The detail.
Okay.
Okay, Alright got it and then maybe.
Maybe let's talk about fuel margins again covenant quite a bit but.
I'm curious if you can maybe.
Help outline the impact of the tight diesel fuel supply market had on your margins and volumes during the quarter and.
And I guess sort of any color you can provide on that dynamic more recently.
So I don't know if Glenn if you want to speak to the diesel gas oil side.
As you know.
Are more are Bob focus more gasoline focus versus diesel so while that had an impact that was really just on the margin for the most part.
The margins that we were able to drive home and the quarter were really more a function of our execution against our strategy.
Also the persistent market structure equilibrium, which continues to pressure retailers as Andrew said to raise margin to cover costs.
Margins coming into July yes, we're a little soft and we had.
Three separate price moves on a Friday, what's challenged us, but we were able to recover from that in the months of August and September posting really strong results and so.
Really it's just that are executing against our strategy in that market equilibrium, which is allowing us to continue to generate strong cash flow and earnings even at a relatively stable market environment and of course, we would be able to we would have to be able to have.
Significant upside if we ever get a return to volatility, which we certainly well so as Andrew said as we look out into October in the fourth quarter. We continued to be encouraged by the traffic in our store with volumes right near last years and at much higher margins at least so far in the fourth quarter, So diesel not really having a material impact on the bottom.
In line for for our results at least yeah, I think the other thing you have to.
Think about us.
I drive a diesel truck.
Most of our customers, who are driving a diesel truck on a farm or a ranch on the oilfield or something like that they are not switching out because of the mission of that vehicle.
Gasoline vehicle because of the requirements. They have so it's really a non discretionary purchase for them. Fortunately, we're not having supply outages or anything else because of the tightness as well in the AG season has kicked off to a good start in that.
Certainly helping volumes out of our proprietary terminals so.
You keep an eye on but it's not impacting the business.
Any.
Negative or major way.
Got it that's helpful. Thank you very much.
And your next question comes from the line of Cory <unk> with Jefferies. Your line is open.
Hi, good morning, and thank you for taking my questions.
Firstly, Andrew I believe you had mentioned that you're piloting I believe nine stores at the redesigned interior and improved food and beverage with the potential to.
Scale that or renovate up to 50 stores next year could you talk a little bit about the early performance that you're seeing from these stores and what's different in these stores versus your more traditional stores.
Yes, so it's too early to give you.
A detailed performance data, we're kind of a month or so into that but so far customer feedback is extremely.
Yes.
Encouraging as well as feedback from our staff in fact, we have teams out there part of our leadership teams visiting the three markets. Those are in so part of the feedback we got is our food and beverage strategy was around.
How the stores are organized for the food and beverage offer as presented in the store.
And so if you walk in now Youll see.
Robyn go.
At the back of the store.
Versus where it was closer to the front one of the things that we had to do because it was in the front was put more shading on the windows to keep the refrigeration.
The stable customers Didnt like all the shading on the windows because the store wasn't as.
<unk>.
Open transparent and lit from a perceived.
The outlook in the store if it looks dark.
That's not as good a sense by moving it to the back you've got a.
Yeah.
Grabbing.
Kind of prepare reheat.
Counter area that significantly larger I think before you had one small microwave that was down low now you've got two larger ones upon a counter and so.
More people are using that feature than.
Than ever before we set up queuing lines like we had trialed a quick check that were highly successful and it took about a couple of weeks for customers to get used to it.
And one of the stores.
On Monday, and there were six customers in the queue line. They all lined up exactly like they were supposed to in.
That's an opportunity too.
Sell more impulse items that way so is largely centered around the reef.
Locating.
The grab and go food and beverage, which is what Murphy USA has the right to win with the customers because it's the best National and regional brands.
Better space for them to grab an AD condiments or to reheat those items.
Similarly from a coffee standpoint, with the being the cup and dispense beverage.
That.
The condiments that go with the coffee.
Are better positioned for them. So it's just a better overall experience, but now the lay out flows better you've got the queuing lanes, which then adds more selling space.
And then it just opens up the store both from a safety line of sight for the store.
<unk> and for the customers to be able to seen as well.
And again look some of this isn't.
Highly innovative kind of Earth shattering.
Findings, but again there are examples of the singles that we can hit like so many of our initiatives over the year and so we have the opportunity to one.
<unk> addressed that and all of the existing 2800 square foot stores.
And then we will be building.
We call it store of Tomorrow.
For next year.
Which takes all the learnings from our consumer research and strategy work into a format that enhances this further.
Okay.
That's great very helpful. Thank you so much for all the color and then I just wanted to follow up I think early on in your prepared remarks, you had mentioned that you had seen an improvement in the northeast I was wondering if you could provide any additional context or color as to what drove that improvement. Thank you. So much.
Yes look I think.
As we look across our various markets.
We see.
Volume margin traffic.
Et cetera, very do a variety of factors it's no.
Surprise anyone that the northeast demand.
Has not picked up as.
As much as other parts of the business.
We see that not only in some of our data, but other industry data and services that provide insights on broader consumer.
Consumer spending.
I believe.
That are <unk>.
Promotional activity or New York Giants.
Launch with those subs, which have had a meaningful impact on the.
Food sales a quick check some of our innovative <unk>.
Frozen energy drink concepts et cetera have really helped from a.
Traffic standpoint for quick check in particular, and then the margin environment is just.
Improved there were it was a little bit.
Weaker over the summer.
It is now and improve we're consistent with what we've seen in <unk>.
Some prior quarters.
Great. Thank you so much and best of luck.
Thank you.
Okay.
And there are no further questions at this time, Andrew Clyde I'll turn it back turn the call back over to you.
Great well, thanks to everyone for tuning in and as.
As I said, we truly look forward to these opportunities to provide updates on.
Our journey towards long term value creation.
We're excited about.
All of the opportunities that we have in front of us and look forward to our next update thank you.
And this concludes today's conference call you may now disconnect.
Please wait the conference will begin shortly.
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