Q4 2024 Murphy USA Inc Earnings Call
Thank you Bruce anybody my name is Julian and I will be your conference operator for today at this time I would like to welcome everyone to the Murphy USA fourth quarter 2024 earnings Conference call.
Things have been placed on mute to prevent any background noise. After today's presentation, there will be an opportunity to ask question.
To ask a question you Best Star one and you touched on phone to withdraw your question. Please press star one again.
Christian: I will now turn the call over to Christian <unk>, Vice President of Investor Relations. Sir. Please go ahead.
Speaker Change: Hey, Thanks, Janine and good morning, everybody. Thanks for joining US today with me are Andrew Clark, Chief Executive Officer, Mindy West Chief Operating Officer, Gallagher, Jeff Chief Financial Officer, and Donnie Smith, Chief Accounting Officer. After some opening comments from Andrew Gallagher will provide an overview of the financial results and our 2025 guidance.
Speaker Change: And then following some closing comments from Andrew we will open the call up 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 1095 as such no assurances can be given that these events will occur or that the projections will be attained.
Speaker Change: 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.
Speaker Change: Subsidy accounting principles or GAAP, we have provided schedules to reconcile these non-GAAP measures with the reported results on a GAAP basis as part of our earnings press release, which can be found in the investors section of our website with that I'll turn the call over to Andrew. Thank you Christian good morning, everyone.
Andrew Clark: I'm very pleased with Murphy USA performance in both the fourth quarter and the full year of 2020 for the business delivered just over $1 billion of EBITDA in 2020 for demonstrating the sustainability of the earnings potential of the business.
Andrew Clark: Plan to grow the base of sustainable earnings in the years to come as we accelerate our new store program remained laser focused on improving store performance across the network and relentlessly challenging ourselves to innovate and better serve our customer.
Andrew Clark: Against that backdrop overall 2024 was a disappointing year for a number of reasons the year got off to a slow start as rising prices and severe weather hindered transactions across most of the move to network.
Andrew Clark: Continued pressure on food inflation in conjunction with <unk> value worth pressured quick check markets.
Andrew Clark: Further well supplied product market with low volatility and minimal logistics challenges impacted the P. S. N W side of our business, leading us to lower than expected all in margins in 2024.
Andrew Clark: Although we finished the year with more new stores in the prior year, we under delivered against our internal schedule targets, which also impacted fuel gallons and merchandise sales due to fewer store months in operation.
Andrew Clark: Consequently, those collective Mrs translated into lower incentive related G&A, because we fell short of some of our own performance goals.
Andrew Clark: That being said there are a lot of bright spots to the Murphy branded network delivered impressive results growing per store merchandise sales and margin dollars by three 5% and five 9% respectively for the full year 2024 with great momentum in the fourth quarter across center store categories.
Andrew Clark: Which delivered total non nicotine margin growth of seven 2% versus the fourth quarter of 2023, reflecting the impact of the key initiatives we've spoken to before.
Andrew Clark: Importantly, looking at fuel performance for the full year, while the supply demand balance and other factors impacting P. S. N. W were less favorable retail margins were up 50 basis points to $28 one per gallon, reflecting structural industry pressures on the marginal player perhaps more.
Andrew Clark: Accordingly, this improvement in retail margins occurred despite conditions that historically have been less favorable to retail margin capture reflecting a more compressed price environment and lower volatility within that environment.
Andrew Clark: Taken together the fundamental thesis that Murphy USA remains an advantage and growing player in an industry with a long term track record of that demand stability not only remains intact, but looks even more favorable from what where you're sitting.
Andrew Clark: The runway remains long for continued margin growth over time high return organic growth investments are accelerating and our core business performance is supported with value creating initiatives. These persistent and powerful drivers strongly support our balanced capital allocation levers of store growth and share repurchase which has delivered.
Andrew Clark: Significant returns to investors since our 2013 spin.
Gallagher: I'm going to turn it over to Gallagher to discuss our 2025 guidance in the context of the quarterly and full year performance Gallagher.
Gallagher: Hello, everyone and thank you Andrew.
Speaker Change: Let me start off by reviewing 2024 performance results and highlights in combination with the elements of our 2025 guidance.
Gallagher: Starting with new store growth.
Gallagher: We completed 32, new to industry stores in 2024 in line with our guided range of 30% to 35 new stores.
Gallagher: Since year end, we've opened four additional stores was 17 stores currently under construction given us a great head start on our 2025 build program as.
Gallagher: As we have discussed we expect to increase new store openings. This year targeting up to 50, new stores in 2025, and our pipeline sets us up well for continued delivery in 2026 and beyond.
Gallagher: We also completed 47, raze and rebuild projects last year, while our construction schedule, allowing for a higher pace of raze and rebuild activity in 2024, we're taking a more measured approach in 2025 planning for no more than 30 products to ensure we're supporting new store development.
Gallagher: Our primary focus remains.
Gallagher: Adding more highly productive 2800 square foot stores the network as part of our long term goal of adding around 500, new stores over the next decade.
Turning to fuel volume.
Gallagher: Average 2024 fuel volumes of 246000 gallons per store month came in closer to the low end of our guidance of 240 to 245000 gallons full.
Gallagher: Full year volumes were pushed a bit lower by softness in Q4 volumes, which were down two 4% on an average per store month basis.
Gallagher: While October volumes were flat to prior year as we mentioned in our third quarter call a flat to rising price profile in November and December limited, our ability to deploy pricing and capture share.
Gallagher: Additionally year end volumes were softer than expected with weather events across the south in late December and the Christmas and new year's holidays, falling on a Wednesday, and 2024 versus Friday in the prior year.
Gallagher: Going forward, we expect total per store fuel volumes to remain relatively flat with the opportunity for high performing new store gallons to more than offset legacy declines and our older smaller format stores.
Gallagher: As such average per store month fuel volumes are expected to remain within a range of 240 to 245000 gallons in.
Gallagher: In 2025, we expect to sell just over 5 billion gallons.
Gallagher: Fuel in total up four 5% from 2024.
Gallagher: Keep in mind, though per store fuel volumes only tell part of the story, we're adding more new stores in 2025 as prior build classes ramp up to maturity, coupled with more productive raze and rebuilds from prior years.
Gallagher: Share of market continues to grow.
Gallagher: Interestingly when compared to the $4 billion total gallons Murphy USA sold in 2014, our first full year as a public company Murphy USA experienced total volume growth of nearly 1 billion gallons or 21% through 2024.
Gallagher: Quick check accounts for a portion of that but Murphy only fuel volumes have grown over 500 million gallons in the past decade that has more than doubled to six 5% total volume growth seen in the states. We operate according to federal Highway administration.
Gallagher: So that means we're taking share in a large and growing market and building highly productive assets in the right areas to capture that growth.
Gallagher: Very excited about the future potential of our business and our strategy and execution puts us in a strong position to compete and win in this growing industry.
Gallagher: Moving to merchandise contribution dollars.
Gallagher: We generated $834 million in merchandising contribution dollars in 2024 up three 8% versus 2023 with notable acceleration and improvement in fourth quarter results.
Gallagher: Fourth quarter merchandising margins $209 million was up $11 million versus the prior year, the largest absolute year over year increase during 2024, driven by strength in both nicotine and non nicotine marketing contribution, which grew six 1% and four 4% respectively.
Gallagher: For the full year 2024 merchandising contribution growth was slower than we originally projected due to some trends that are likely to continue into 2025.
Gallagher: We expect a challenging customer environment and value menu competition to continue pressuring quick check market and their food led offer.
Gallagher: We relaunched quick check rewards in the fourth quarter and are seeing strong early results, but expect a quick check business deliver slightly lower year over year contribution dollars.
Gallagher: However, our merchandising customer remains strong at Murphy USA, driven by our core inside categories, resulting in a six 7% total contribution dollar growth in 2024, we expect that strength to continue at Murphy stores in 2025, and our forecasting around 6% total contribution dollar growth.
Gallagher: Taken together in 2025, we're forecasting a range of 855 million to $875 million.
Gallagher: For nearly 4% growth at the midpoint in line with the rate of growth we saw in 2024.
Gallagher: Moving to Opex in.
In 2020 for operating expenses per store month were up five 2% towards the low end of our guided range of 35 to 30 6K.
Nearly half of the total increase was driven by new and larger stores that opened in 2024.
Gallagher: Our operations team continues to drive efficiencies across labor, which was up only three 9% per store.
Gallagher: Our labor expense was driven by larger format stores targeted wage investment and rising minimum wage requirements in several states.
Gallagher: Looking to 2025 nearly half of our projected per store Opex increase is again, a direct outcome of our decision to both larger format stores, which are more costly to run than the network average, but most importantly, they also contribute more merchandise dollars.
Gallagher: However, do keep in mind that when these tours are put into service operating expenses running very close to the target maturity right.
Gallagher: Merchandising.
Gallagher: While merchandize dollars take about three years to reach maturity thus.
Gallagher: Thus in the early years of accelerating these stores you will see opex growing a little bit more merchandising contribution until the stores reach maturity at which point the coverage ratio it turns positive and our new larger format stores.
Gallagher: Given these factors our 2025 store operating expense guidance range represents a 4% to 6% increase on an average per store metric of $36 5000 per month to 37000 per month.
Gallagher: Now moving the corporate cost.
Gallagher: SG&A expense was $235 million in 2024 down to 1% versus 2023 and below our adjusted guidance range of $240 million to $250 million.
Gallagher: These 2024 results were driven by tightly managing home office expenses, a reduction in professional fees as a major initiative investments wound down and lower incentive based compensation, which Andrew mentioned earlier a component we would expect to return to normal in 2025.
Gallagher: Remember most of the expenses associated with larger scale transformative projects, such as digital transformation and quick check rewards were incurred in 2023 and 2024.
Gallagher: In 2025, we will continue making technology and capability investments to enhance our performance, while driving additional leverage and efficiency from our teams as such we are forecasting a range of 245 million to $255 million and SG&A, ensuring we deliver incremental value to investors as we ramp up our store growth.
Gallagher: Finally to capital spending.
Gallagher: Capital spending in 2024 came in at just over $500 million.
Gallagher: Above our original guided range of $400 million to $450 million and within our revised range of $500 million to $525 million provided on our third quarter call.
Gallagher: Importantly, all of this increase is attributable to a purposeful acceleration of new store growth, allowing us to get a head start on 2025 construction activity.
Gallagher: Our 2025 program will look similar in terms of total capital allocated for growth, resulting in a guided range of 450 million to $500 million importantly, this capital spend will deliver more new stores and more EBIT growth in both 2025 and 2026 as in service towards progress along their three year ramp curve.
Gallagher: The new store pipeline remains in good shape, and we're making steady progress toward achieving a sustainable run rate around 50, new stores, each year, which at maturity should deliver roughly 40 to 45 million of incremental EBITDA annually.
Gallagher: Yeah.
Gallagher: Now before I turn it back to Andrew and as mentioned in the earnings release, we continued our balanced capital allocation strategy and repurchased approximately 240000 shares in Q4, and 988 938000 shares for the full year 2024 for a total of $446 6 million.
Gallagher: Once again, our cash and cash equivalents balance of $47 million at the year end.
Gallagher: The power and impact of our share repurchases are reflected in our year end share count of around 20 million shares.
Gallagher: Meaning we have bought back nearly 60% of our shares outstanding since our spin.
Gallagher: The exact amount of shares we purchased in any given year will depend on a number of factors one of the most important which is the share price.
Gallagher: Given our free cash flow generation, we intend to continue executing a balanced capital allocation strategy, which result in meaningful EPS accretion in both the year of repurchase and preserving that benefit and all future years as we grow net income the accretion impact will be compounded going forward underscoring our strong commitment to ongoing shareholder value.
Gallagher: New creation.
Gallagher: And with that I'll turn it back over to Andrew Thank you Gallagher.
Gallagher: In closing as is our custom we will provide a range of fuel margins representative of our view of the industry.
Gallagher: Around which investors can forecast the earnings power of the business subject to their own beliefs and expectations.
Gallagher: As we referenced on the third quarter call. The most likely range for all in margins and what we call a normal environment.
Gallagher: One was stable supply dynamics and limited price volatility has moderated in the 30 to 32 per gallon range the past few years.
Gallagher: As a reminder, the 34, we saw in 2022 resulted from a steeply falling price environment from a high absolute price level approaching almost $5 a gallon.
Gallagher: Coupled with benefits from a tighter supply market and.
Gallagher: And Thats, what concurrence of events, we might expect only once in every six to eight years.
Gallagher: In 2024, we saw neither of those conditions and as such we would expect margins to remain in a tighter 30% to 32 cents per gallon range and a normal somewhat benign environment.
Gallagher: Within this framework, we do continue to believe challenge in store performance and higher costs for marginal retailers will continue to result in higher equilibrium margins as we experienced in 2024, where we saw retail margins up 50 basis points. This dynamic is highly unlikely to change as the fuel.
Gallagher: Pass through mechanism represents the easiest and most efficient way retailers can pass on their higher overall costs, leading to our strong belief that we would expect to see the structural upward pressure on margins continue over time.
Gallagher: So in 2025, using the midpoint of all other guided ranges, we would expect EBITDA of 1 billion to $1, one 2 billion and an all in margin range of 30, and a half and 32.
Gallagher: To $32.05 per gallon, respectively. We.
Gallagher: We have stated in prior years at 30 <unk> of all in margin would generate about $1 billion in ebitdas.
Gallagher: The difference in 2025 is coming primarily from two factors.
Speaker Change: Headwinds a quick check stores and the three year ramp to maturity of our new stores is Gallagher mentioned, a key component to delivering our earnings potential going forward is the portfolio of initiatives currently underway that are making the business better as evidenced by the strong Q4 <unk> results.
Gallagher: Close out with some comments on preliminary January performance as well.
Gallagher: Per store fuel volumes approximated, 95% of prior year levels impacted by three named storms over the past month Blair Cora and Enzo each of which resulted in several hundred store closures and delayed openings across our network.
Gallagher: We talked about weather was a factor last year, but that environment, while disruptive was nothing compared to the downtime impacting our January performance.
Gallagher: That being said retail margins were trending about two pennies higher than last January largely offsetting the impact from lower volumes and likely resulting in fuel contribution a little bit shy of our internal plan.
Gallagher: As you can imagine the number of store closures also had an impact on merchandise results, but our preliminary view of the data says the business performed admirably in January with results in close proximity to our internal plan, which is a huge testament to the spirit and tenacity of our store managers and associates, who faced so many challenges.
Gallagher: Thank you all again for your hard work and continued dedication to our customers.
Gallagher: As we conclude our prepared remarks I do think its noteworthy to point out that we have essentially hit a major milestone reducing our share count to about 20 million shares as Gallagher noted the exact number of shares repurchases a function of several factors, but the simple math highlights. The next 1 million shares represents 5% of the float.
Gallagher: Accordingly, our powerful balanced capital allocation approach is well positioned to deliver double digit EPS growth and corresponding TFR well into the future.
Gallagher: Let's now turn the call back to the operator, and we'll open it up to Q&A.
Gallagher: Thank you ladies and gentlemen, we will now begin the question and answer session I would like to remind everyone to limit yourself to one question. One follow up on me should you have a question. Please press star one on your Touchtone phone anywhere like you have the go ahead has been raised should you wish to withdraw.
Gallagher: Please press star one again, if you're using a speaker phone please lift the handset before pressing.
Bobby Griffin: Our first question comes from the line of Bobby Griffin from Raymond James. Please go ahead.
Alejandro: Good morning, this is alejandro.
Bobby Griffin: And thank you for taking our question.
Bobby Griffin: First I just wanted to touch on the non nicotine category, what drove that category gets split positives back positive in the quarter was it driven by a change in performing Murphy brand or a quick check story.
Bobby Griffin: So the Murphy stores performed very well.
Bobby Griffin: Solid double digit growth in a number of our categories packaged beverage candy.
Bobby Griffin: Beer sales salty snacks were up high single digits, So really really strong performance there and look we attribute a lot of that to the initiatives, we talked last year about the second half back loaded.
Bobby Griffin: Initiatives from digital transformation.
Bobby Griffin: And we believe those have really made a difference when we look at our same store sales.
Bobby Griffin: QC performed also well in Q4, not as well as our expectations or plan, but certainly on the food and beverage side.
Bobby Griffin: We saw some strength in Q4 as well as we ended the year.
Bobby Griffin: Yeah.
Bobby Griffin: Okay. That's helpful and then.
Bobby Griffin: Non nicotine gross margins declined year over year and <unk> <unk>.
Bobby Griffin: Better sales can you walk us through some of the puts and takes on that category and any of the cost pressures, whether that's Q as our promotional pressure et cetera, and what are you assuming from a pricing promotional cadence in 2025 outlook.
Bobby Griffin: Sure. So one of the big gaps between the sales growth rate and the margin growth rate is the impact of how we report Lotto and lottery and so thats going to be the biggest driver there between those in terms of the cadence.
Bobby Griffin: We do not expect to see anything kind of materially different certainly the.
Bobby Griffin: Tobacco firms represent a large component of our.
Bobby Griffin: Promotional.
Bobby Griffin: Spend and so a lot of variance could be a function of.
Bobby Griffin: There are initiatives and what their objectives are as well, but at this stage, we don't see a major change in our promotional cadence.
Bobby Griffin: I would say on the food and beverage side at quick check we do expect to see the <unk> price value Wars continue throughout 2025, and some of the high impact six inch subs for $3 99 breakfast bundles et cetera that have been important to.
Bobby Griffin: <unk>.
Bobby Griffin: Sustaining traffic and sales we do expect those to continue throughout 2025, I would say at some point.
Bobby Griffin: Broadly for <unk>.
Bobby Griffin: Not sure how sustainable that is but the fact that we have a highly attractive fuels business that underpins our earnings potential if something they don't have.
Accordingly, we also have the diversification of our markets.
Bobby Griffin: Thank you so much and best of luck here in 2025.
Bobby Griffin: Thank you.
Speaker Change: Our next question comes from the line of John <unk> from Jpmorgan. Please go ahead.
John: Hi, good morning, Thanks for taking my question.
Speaker Change: So my first question is on the buyback.
John: You've been pretty consistent with keeping that piece of it.
Speaker Change: Somewhere near that million shares.
Speaker Change: Per year, which is the level you've talked about.
Speaker Change: My question is on your willingness to let our balance sheet leverage flowed up to stick to that commitment and maybe more of a downside case.
Speaker Change: The business in 25, just I'm just trying to understand how you think about the buyback versus the balance sheet in an environment, where say hypothetically, we lose a couple of cents of fuel margin, which I know isn't your base case, but just trying to understand how you think of it.
Speaker Change: Sure I actually really good question.
Speaker Change: What I would say is we're committed to the 50 50 balanced capital allocation approach so any leverage that we take on.
Speaker Change: I would not.
Speaker Change: How do you think about it is we're leveraging up to buy back shares or leveraging to maintain a 50 50 capital allocation plan.
Speaker Change: We have levered up from time to time as the earnings power of the business has grown.
Speaker Change: Our leverage right now is well below two times. So that's always something that we can look to do you rightly note that fuel margin volatility as the single greatest.
Speaker Change: Factor in.
And the volatility of the earnings of the business.
Speaker Change: And that's one of the things, we clearly lay out with our board as we establish our plan our capital allocation framework for not just the coming year, but the next three to five years and what we can do to maintain that commitment. This is a business that is built to win in all cycles right. All the things we focus on are about making our business better we can win.
In any environment and so we saw ourselves honestly like we did this last year I mean margins were a penny lower than our expectations because of the fuel.
Speaker Change: Environment was a lot longer looser than our expectations. So honestly it was down a penny versus our expectation and we didn't Miss a beat so I hope that provides a little color and context behind our commitment there.
Speaker Change: It does thank you Andrew and then.
Speaker Change: My second question is on on Capex and <unk>.
Speaker Change: Perhaps I'm misinterpreting something here and please let me know if I am but on the third quarter call. You had raised the Capex guide for 'twenty four to 500 to 525.
Speaker Change: And then I think you had set a similar level.
Speaker Change: Do you expect a similar level in 2000 2025.
Speaker Change: You ended up at the low end of that range in 'twenty, four and actually lower than 25. So it looks like maybe something more than just some activity moving between the two years could you talk about the capex coming in lower both this year and next if I'm interpreting it correctly.
Speaker Change: Hey, John This is Gallagher I'll take that one quickly and we guided that range. There is a little bit of uncertainty in the opening schedules for our store. So the $505 25 was.
Speaker Change: A number assuming we could really deliver our full potential of stores in December some of that slipped into 2025.
Speaker Change: We're going to be relatively flat we hit around 500 in 2024, we're planning 502025 and the difference you see is a switch from.
Speaker Change: More raze and rebuilds in 2020 for shifting to more new store openings and organic growth in 2025.
Speaker Change: Okay. Thank you.
Speaker Change: Thanks, John.
Speaker Change: Our next question comes from the line.
Speaker Change: Okay.
Speaker Change: RBC capital markets. Please go ahead.
Speaker Change: Thanks, and good morning, everyone. Just wondering what kind of discussions are you having with.
With your vendors at this point around promotional support in 2025, if anyone is China is facing the challenged consumer.
Speaker Change: And also around just underlying inflation rates from the vendors in 2025.
Speaker Change: Yeah, that's great I mean, we won't get into any detail around commercial arrangements et cetera.
Speaker Change: The one thing that our vendors value Murphy USA and quick check for us the high volumes per store that we generate we represent for many of them very very strong stable base load volume just like our fuel businesses its really no different.
Speaker Change: Hum.
Speaker Change: And that's really important you think about the candy category and its strong performance.
Speaker Change: In Q4, I mean, the manufacturers really.
Speaker Change: The benefit from that commitment to everyday low price and driving that volume and so that commitment over time. The credibility, we have established positions us well.
Speaker Change: For those type of <unk>.
Speaker Change: Discussions.
Speaker Change: As part of our digital transformation initiative, we did have some initiatives around contract management and.
Speaker Change: And we are seeing benefits.
Speaker Change: Those as well so.
Speaker Change: Most often.
Speaker Change: The type of discussion we have with the vendor it may look different than other partners is what can we do together to drive our mutual businesses forward in a positive way and for them given some of the pressures and headwinds they've had.
Speaker Change: They really value a retailer like us who can drive volume on a sustainable basis that makes it a win win for both parties. So that's really our philosophy working with them.
Speaker Change: That's very helpful. Thank you and just around sort of underlying.
Speaker Change: Expectations for price inflation this year.
Speaker Change: It's one of those.
Speaker Change: Wildcards.
Speaker Change: Every day, you got to say I don't know about something and inflation is probably one of those my sense personally is that we're going to continue to see more elevated inflation, we certainly don't know.
Speaker Change: If all the tariff discussions really translate into more tariffs and therefore higher cost or if it's a negotiating ploy for something else and they are delayed and they never.
Come into existence.
Speaker Change: Some of the government initiatives that drove higher spending.
Speaker Change: Labor rates elevated we may see some of that.
Speaker Change: Decline one of my colleagues kind of made the comment the other day that.
Speaker Change: This business is meant to win despite the new cycle and we see a new cycle every single day and honestly, we just stay focused on what we can do control what we can control and that's really the key message our leadership gives to our team.
Speaker Change: If we see higher inflation, we're going to see pressure on our consumer we saw a lot of trade down this last year to Murphy.
Speaker Change: One thing I will tell you is that in the last quarter.
Speaker Change: And looking year over year, even our low income consumers spent the exact same amount per month.
Speaker Change: From our static panel on the loyalty side so.
Speaker Change: We're hoping we're well positioned if there is continued inflation certainly hope it goes down for the benefit of our consumers.
Speaker Change: One quick thing to add to that and in addition to Andrew as contracts the trading into Murphy.
Speaker Change: Our capabilities around the rewards programs now are very strong and so as the customer seeks more value both on the Murphy side and now with the quick Tech side, we can target what resonates with them and so in an inflationary environment, we actually know a lot more of our customers than we did a year ago and can offer them the right product at the right price, which we believe will.
Speaker Change: We need to help our business.
Speaker Change: That's a great answer thank you.
Speaker Change: Alright, Thanks Irene.
Speaker Change: Our next question comes from the line of Cory <unk> from Jefferies. Please go ahead Sir.
Cory: Great Thanks, and good morning.
Cory: Could you talk a little bit about your expectations for your performance of some of the new stores would be curious to get your thoughts around.
Cory: Maybe the planned rollout and the metrics that you are targeting for these new units.
Cory: Absolutely. So you know one things.
Cory: We look at is by build class how are the new to industry stores performing from a merch sales margin fuel gallon standpoint.
Cory: 2022 class of Mti's delivered 310000 gallons per store month last year of the 2023 class 316000.
Cory: And so if you think about sort of the steady.
Cory: Steady state the average.
Cory: A really high performing stores, which is why we're so disappointed in not hitting our expectations about getting the new stores up and we own that.
Cory: Same on the merchandise side, the 22 classes.
Cory: <unk> ramped up more significantly to over 225000.
Cory: $1 in sales per store month, just on the Murphy side in the 'twenty three is within 10% of that while it is still ramping up so.
Cory: We're really pleased with the new store performance, we've got very attractive markets that we are.
Cory: Putting those stores into in this Gallagher noted we feel very good about the pipeline and continuing to build that up I think one of the challenges for the team now is can we make up in 'twenty, six 'twenty, 7% and 28.
Cory: Some of the Miss that we had in 'twenty four.
Cory: To be able to get right in line with our 2028 EBITDA goals.
Speaker Change: Got it that's very helpful. Just my follow up would be just on SG&A is there anything with.
Speaker Change: With SG&A in particular, where you think that there's further efficiency opportunity that that's worth calling out.
Speaker Change: Yes.
Speaker Change: There is and frankly, we built some of that into our year over year plan, we need to continue to invest in technology and other business.
Speaker Change: Initiatives to make our business better but that also means that we've got to retire systems get the benefits from the efficiencies.
Speaker Change: That are in there as well and so that's fully built into the expectations and our guidance for this year.
Speaker Change: Great. Thank you very much.
Speaker Change: Thank you.
Speaker Change: Our last question comes from the line of Anthony Bonadio from Wells Fargo.
Speaker Change: Yeah.
Speaker Change: Hey, good morning, guys. Thanks for taking my questions.
Speaker Change: Just wanted to ask about contribution guidance in a little more detail.
Speaker Change: Thinking through that new 3% to 5% number can you just walk us through the build and a little bit more detail I realize the environment isn't great out there right now, but it seems like.
Speaker Change: Minimum compares should be easier you've got support from ntis at raze and rebuilds and it seems like some emerging self help.
Speaker Change: So just understanding how all of those pieces flow through would be helpful.
Speaker Change: Sure so on the.
Speaker Change: Maybe as a quick check side start to start there we do expect to see some persistent headwinds there and a little bit of a drag on that so we'd like to think that.
Speaker Change: <unk> price words resolve themself in 26 and beyond really.
Speaker Change: Pick up there and our efforts are preserving traffic and holding.
Speaker Change: Volume in those cases, we are seeing solid performance in the first couple of months, a quick check rewards with significant uptick.
Speaker Change: For members their nicotine is always going to be one of those categories.
I don't think I can go a call without highlighting the fact that we still see a significant amount of illicit product being sold in stores, especially small stores and all of our markets. So there might be a little <unk>.
Speaker Change: Conservative.
Speaker Change: View on that but we'd like to see the FDA and Justice department to a better job of cracking down and enforcing.
Speaker Change: Those illicit.
Speaker Change: Legal.
Products.
Speaker Change: We got the benefit of the raze and rebuilds from last year.
Speaker Change: The MTI number honestly when you don't hit the store months that you expected in the prior year youre not as far along in the ramp.
Speaker Change: In the current year to achieve those benefits that you wanted in some of.
Speaker Change: The merchandise number kind of reflects the delay in pushing out some of those store months in.
Speaker Change: The course of the year, it's not about hitting the number for the year, it's about hitting the four months when you wanted to hit them. So that in the next year.
Speaker Change: Point that you expected.
Speaker Change: And I would add to that Andrew we're also really intent on improving the store performance of our existing network you've heard us talk about our store productivity initiative.
And we're currently in a proof of concept now going out after what we believe to be the largest wedge of opportunity, which is steel dispenser health.
Obviously, it's a field focused business.
Speaker Change: Having our pumps and service slowing fast as important to us because it's important to our customers. So we've organized a lot of resources were in the market right now piloting 20 stores getting ready to rollout to another 80 with a proof of concept to really try to find what are the opportunities out there what are the gaps to achieve that but.
Speaker Change: The stores in the home office and what is the cost benefit to inform a broader rollout now it's too early to call out overall value capture potential, but we have identified some really interesting opportunities, especially within maintenance I'll say, which should not only reduced dispenser downtime, but also reduce cost as well.
Speaker Change: And in fact, we found one opportunity in particular that could generate over $1 million in cost savings on an annualized basis, and we absolutely believe that it's doable at our stores.
I mean, when I say in operations, we are putting a lot of resources and effort behind this initiative and we havent really thorough bodacious involved but yes, very practical plan forward and other store improvement initiatives that are SPE related but not necessarily ladder also underway because if nothing else. This initiative has really shown up.
Speaker Change: Light on areas of opportunities within the stores and is it really created a renewed sense of urgency around going after right. So a lot more to come there, but we are really working on that.
Speaker Change: Really helpful. Thanks, guys and then just maybe switching gears the gallons it looks like those fell off pretty precipitously.
Speaker Change: November December from where you guys are running out tober.
Speaker Change: So maybe just some more thoughts on what drove that and then given were coming off a year, where Aps I'm gallons were actually down slightly.
Speaker Change: And given the softness youre seeing so far in January.
Speaker Change: Just more on what gives you confidence in your ability to drive gallon growth in 'twenty five.
Speaker Change: Yes, I'll take that one as well looking at volume fourth quarter really was a tale of winter storms in holidays falling mid week also as Andrew mentioned that lack of volatility, which just did not allow us to create price separation from our competitors.
Speaker Change: In fact speaking of volatility the number of cost changes greater than five cents a gallon in the fourth quarter was less than half the number we saw in the prior year.
And instead of that October price fall off in overall volatility that we benefited from the fourth quarter of 2003, what we got was an unfavorable I'm really choppy price profile for 24.
Speaker Change: So for the quarter steel volumes are pressure, but still above industry. As we were all fighting that has multiple headwinds and a strong large and serve to offset volume softness in January as we said started off weak to really severe winter storms crossing a large portion of our network where at one point, we had 500 stores down and unlike hurricane.
Speaker Change: Where you get the benefit of pre buying in Paris spine and evacuees, leaving in return and winter storms, what you really get a shelter in place and no one knows it all.
Andrew Clark: But as Andrew said the margins were trending in January two cents above last year, I will say February a little better on margin and volume margins today above 30 cents, a gallon, but winter storms heading the northeast in fact today, resulting in a full day of school closures.
Speaker Change: Can't control the weather.
Speaker Change: But we can focus on controlling our controllable and we are executing well I will tell you that.
First quarter weakness is not unusual and would rather experiences experiences weather challenges in the first quarter than in the summer and we have a lot of year left that we're confident in our ability to deliver we're confident in the ability of our ntis to come on stream and help us and with a little market help as well.
Speaker Change: Really great position to capture volume.
Speaker Change: Alright, thanks, so much.
Speaker Change: Thank you that concludes our Q&A session I will now turn the call back to our CEO, Mr. Andrew Clyde for closing remarks.
Speaker Change: Great well. Thank you all for tuning in as we put 2024 behind US we have a lot of exciting initiatives and things to look forward to in 2025 and look forward to updating you across a year at the conferences and at our <unk> as well. Thank you for tuning in and always appreciate your support.
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Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Yeah.