Q1 2025 Arko Corp Earnings Call
Good afternoon, ladies and gentlemen, and welcome to the Arco Corp, first quarter 2035 earnings Conference call.
At this time all lines are in a listen only mode.
Following the presentation, we will conduct a question and answer session.
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This call is made recorded on Thursday may eight 2035.
Jordan men: I would now like to turn the conference over to Jordan men.
Jordan men: <unk>, Vice President corporate strategy and capital markets Investor Relations. Please go ahead.
Speaker Change: Thank you good afternoon, and welcome to <unk> first quarter 2025 earnings conference call and webcast.
Speaker Change: On today's call are recover chairman, President and Chief Executive Officer, and Rob <unk> Executive Vice President and Chief Financial Officer.
Speaker Change: During our call today, unless otherwise stated, management will compare results to the same period in 2024. Before we begin, please note that all first quarter 2025 financial information is unordered.
Speaker Change: During this call, management may make forward-looking statements within the meaning of the private security's litigation reform act of 1995.
Speaker Change: Please review the forward-looking and cautionary statement section at the end of our first quarter 2025 earnings release for various factors that could cause actual results to differ materially from forward-looking statements made during our call today.
Speaker Change: Any forward-looking statements made during this call reflect our current views with respect to future events and Arko is under no obligation to update or revise forward-looking statements made on this call, whether as a result of new information, future events, or otherwise, except as required by law.
Speaker Change: On this call, management will share operating results on both a gap basis and on a non-GAAP basis.
Speaker Change: Descriptions of those non-GAAP financial measures that we use, such as the Justity Bada and the Consiliations of these measures to our results are as reported in accordance with GAP.
Speaker Change: or detailed in our earnings release or in our quarterly report on form KENQ for the quarter-ended March 31st, 2025.
Arie: Additionally, management will share profit measures for our individual business segments along with fuel contribution, which is calculated as fuel revenue, press fuel costs, and exclude inter-company charges by our subsidiary GPMP. And now I would like to turn the call over to Arie.
Arie: Thank you, Jordan, and thank you all for joining. This quarter, the company and our industry face Edwin's from lower traffic and consumer spending to reveal weather.
Arie: Even though we manage the business effectively and deliver results above the midpoint of our guidance, I have higher expectation for the business.
Arie: We continue to demonstrate that even in a tough environment, we are executing with discipline and remaining focused on what we can control.
Arie: This quarter, persistently inflation and eye-consumer deaths put increased financial pressure on lower and middle income households, especially the communities where many of our stores are located.
Arie: Holder, the currently unpredictable tariff environment as created uncertainty around spending as customers try to manage their expenses.
Arie: However, we believe we are well positioned to deliver on the value that our customer is seeking to our promotional and merchandising efforts.
Arie: Like many in our industry, we're seeing consumers stretch their dollars further, increasingly shifting their purchases towards value-oriented options and exhibiting more price sensitivity.
Arie: This quarter also brought a unique set of excellent challenges that compounded these micro-economic pressures, a combination of persistent cold weather and widespread winter storms across several key geographies, reduced customer mobility, and a constrained store visits.
Arie: In addition to pressure on gallons and merchandise sales trends, the unfavorable weather drove an incremental $1.7 million in operating cost to snow and ice removal.
Arie: While inclement weather is expected in the first quarter, the range and intensity of adverse event is here, especially in February , for a notably greater than typical seasonal
Arie: Looking behind the external factors, our team is committed to the company transformation strategy including the ongoing
Arie: The expansion of I-Mars in categories like other tobacco products and food service.
Arie: and targeted promotional initiative both in the stores and at the pump, which we have designed to deepen customer engagement.
Arie: These actions are helping us navigate the current environment and we believe they position the business for long-term growth.
Arie: Our strategies are driven by experience leadership and executed daily by a committed operation team that prioritizes a customer experience.
Arie: This strategies are optimizing a retail footprint by dealerizing stores that don't fit within our Go Forward operating model.
Arie: Driving value and relevance to our consumers through innovative promotional activity.
Arie: One example is a fueling American future campaign which provides discounts on fuel up to $2 all per gallon for up to $20.
Arie: Another example is our investment in the tobacco bath bar to support shifting consumer demand to OTP products, which we are supporting with elevated value promotion.
OTP and cigarettes together represent approximately 39% of cells.
Arie: Implementing a new consumer-centric remodel centers around a delicious menu of art and called grab and go for it and defend their virtues.
Arie: We will be introducing a new brand for this strategy called Fast Graves. Our first store will be in a Fast Mart in Richmond, Virginia, advancing our story model program with our first pile of stores starting construction this week.
Arie: filling the pipeline for the new-to-industry stores in our existing markets and increasing customer trips and spend through our fast-reward loyalty program by offering the best deals to our best customers.
Arie: Now, let me provide a level update for each of these course strategies.
Arie: On our transformation plan, we continue to execute our strategy to convert company-operated stores into dealer-size, where we believe the long-term economics are more favorable for the stores under our dealer segments.
Arie: Here today, as of the end of April , we converted 77 stores to our wholesale network, and we have more than 130 stores under contract for conversion, with a meaningful number still on our list to convert.
Arie: As we previously disclosed, at full scale, we continue to expect this initiative to deliver a cumulative annualized operating income benefits in excess of $20 million.
Arie: Arie Value, Fuelling America Future Contain, Keektop & Stores on March 12th.
Arie: This campaign is centered around providing enrolls or ethic customers with both value promotions inside the store and significant discounts at the pump.
Arie: In partnership with many of our supply partners, we are offering our loyalty members up to $2 per gallon, up to 20 gallons when they purchase the left products and stores.
Arie: While the campaign just started, we have seen an increase in our average enrollment per day by 35% and an increase in gallons for previously enrolled lab members.
Arie: Taking advantage of this great offer from approximately 6.8 gallons to 9.8 gallons per transaction with an average basket increase of approximately $2.38 or 16%.
Arie: Turning to our cigarette and OTP back by Refresh, today we have completed these projects in more than 900 stores, which is driving improvement in merchandising and assortment for total nicotine.
Arie: When combined with our expanded promotional efforts, we're capturing market share across select OTP categories, creating momentum for indoor performance as we broaden our assortment and find through in our promotional strategy to drive growth.
Arie: of the approximately 675 stores where we believe we have enough new results to draw conclusions. We are seeing that these resets are starting to improve our total nicotine performance.
Arie: We have implemented very strong monthly OTP promotion supplemented by a store manager and district manager sales contest to assist in driving OTP sales.
Arie: OTP-Mix continues to evolve to meet customer demand and we do it as a lever to drive basket growth amid challenging micro backdrop.
Arie: Turning to our remodel program, we started construction on the first of our seven pilot remodeled this week and expect to start work on the second remodel in the middle of May.
Arie: As a reminder, the pile of soar are expected to include an expanded and refined merchandise assortment.
Arie: We've been announced in-store experience and focus on foods centered on odds and fresh grabbing of foods, bakery, pizza, roller grills, and other prepared foods, including our new branded food offering, fast craze.
Arie: The intent is to take learning from this pilot source and implement the right remodels across a larger portion of our retail location to target this capital deployment.
Arie: This initiative are fundamental to our long-term retail transformation strategy and represent our commitment to organic growth and sole-level reinvestment.
Arie: In addition to our remodeled program, in the first quarter, we opened a new Duncan store in a fast-market location.
Arie: Additionally, we currently have four NCIs in development, three have started construction and one story is awaiting a final permit.
Arie: Diffenti either expected to open in the second half of the year.
Arie: T-4 stores with the pilot remodel concept I discussed moments ago.
Arie: We are pleased with the result of our fast rewards loyalty program. Our loyal customers continue to make more trips and spend more per month than our non-enrolled members.
Arie: In the first quarter of 2025, and Rolls-Fast rewards members spend approximately 47% more and visited 2.5 times more per month than non-enrolled members.
Arie: and we'll learn the OTP sales now account for 18.5% of OTP sales versus 18.1% in Q4 2020-24.
Arie: and all the members are persisting 23% more gallant inter-transaction than non-involved members.
Arie: Overall, we added approximately 27,000 involved members in Q1, reaching over 2.3 million involved members in total, which was up 11% from the end of Q1 2024.
Arie: We continue to learn and evaluate the rich customer data and adjust our tactics to ensure we provide meaningful value to our most learned customers.
Arie: As adoption grows, we believe loyalty will continue to be an increasingly powerful lever to improve same-store performance over time.
Arie: The team is executing many initiatives in our retail segment to drive results despite the current micro-economic edge winds.
Arie: Outside of retail, are also in fleet segments, have delivered stable and reliable cash flows, providing meaningful support as we navigate ongoing micro and consumer pressures.
Arie: Over the past four quarters, these segments have generated approximately $130 million in operating income.
Arie: Combining all of the positive and the negative, this quarter, we again deliver results above the midpoint of our quarterly guidance.
Arie: Much of this performance was driven by controlling the things we can control, especially on the expense side as we mitigate IRACOST related to snow removal, through discipline management and execution.
Turning to capital allocation.
We remain committed to a strategic and thoughtful approach.
Arie: Based on our stock price in the first quarter, we repurchased approximately 1.3 million shares during the quarter at an average price of $4.1 per share with almost all of those repurchases executed in March.
Additionally, we repurchased approximately 1.3 million additional shares in April .
Arie: We believe our current market valuation reflects discounts for a scale convenience stores retailer with the diversified revenue across merchandise, retail fuel, and also on fleet fueling.
Arie: Our approach to capital allocation will continue to focus on long-term value creation and discipline capital deployment.
Arie: We believe in the string of our plan, the capabilities of our team, and the transformation path ahead and remain committed to executing step by step to unlock value for our shareholders.
With that, I will end it over to Rob.
Thank you, Arie. Good afternoon, everyone.
Turning to first quarter 2025 results.
Arie: Ajusted EBITDA was $30.9 million for the quarter compared to $33.2 million in a year ago period, with the decrease caused primarily by lower retail fuel and merchandise contribution.
Arie: At the segment level, our retail segment contributed approximately 40.2 million compared to 46.5 million in the year ago period.
Arie: Amestore Merchandise sales, excluding cigarettes, were down 5.2% versus the year-ago period, while total Amestore Merchandise sales were down 6.9%.
Arie: Same-store margin rate was up approximately 50 basis points versus the prior year.
Arie: Same store, a fuel contribution was down approximately $3.2 million for the quarter caused by a 6.2% decline in gallons.
Arie: Same store, a few margin of 37.9 cents per gallon was up 1 cent per gallon year over year.
Arie: Same-store operative expenses were down approximately 1.4% for the quarter.
Arie: Moving on to our whole sales segment, operating income was 18.6 million for the quarter versus 18.3 million in the year ago period.
Arie: Fuel Margin was 8.8 cents per gallon versus 9.2 cents per gallon in the year ago period.
Arie: Downs were up modestly to the year ago period, driven by our channel optimization program, which contributed close to 14 million gallons for the quarter.
Arie: Gallons from channel optimization, more than offset, a gallon decline from comparable sites, which were down 4.6% from the year ago period, reflecting similar trends experienced in our retail segment.
Arie: For our Fleet segment, operating income was 11 million for the quarter versus 9.8 million in the year ago period, with total gallons down 4.2 percent to the prior year.
Arie: Fuel margin for the quarter was 43.6 cents per gallon, up from 38 cents per gallon in the year-ago period.
Arie: Total company general and administrative expense for the quarter was 41.6 million versus 42.2 million in the year ago period.
Arie: Net interest and other financial expenses for the quarter were 13.9 million compared to 2.5 million in the year-ago period, with the increase primarily related to roughly 9 million in recorded income in the year-ago period related to settlement of deferred purchase price obligations for our TEG acquisition on favorable terms.
Arie: Net loss for the quarter was $12.7 million compared to a net loss of $0.6 million for the year ago period.
Arie: Please reference our press release for a detailed reconciliation from Total Company Net Income to Adjusted EBITDA.
Arie: Turning to the balance sheet, excluding least related financing liabilities, we ended the first quarter with 880 million in long-term death.
Arie: We maintain substantial liquidity of approximately 847 million, including 265 million in cash on hand to quarter-end, along with remaining availability on our lines of credit.
Total capital expenditures for the quarter were 27.4 million.
Arie: Turning to forward guidance, for our second quarter, we expect total company Adjusted EBITDA to be in the range of 70 to 80 million.
It's guidance is based on the following key segment assumptions.
Arie: First for our retail segment. We are estimating our Q2 2025 average retail store account to be approximately 1300 sites.
Arie: We expect merchandise sales per average store to be flat to upload single digits, reflecting the higher productivity of retained stores versus a year ago period, partially offset by same-store merchandise sales performance, which is positioned down low to mid-single digits.
Arie: We expect gallons per average store to be up low single digits, reflecting the higher productivity of retained stores for a year ago period, partially offset by same store gallon performance, which is positioned down, mid-single digits.
Arie: and finally, we are modeling total retail fuel margin in a range of 42.5 to 44.5 cents per gallon.
Arie: Moving to our wholesale segment, we expect mid-to-high single-digit operating income growth given by our ongoing channel optimization work.
Arie: and for our fleet segment, we expect operating income to be up modestly as we begin to cycle prior your fuel margin sense per gallon in the mid-40 range.
Arie: I'll wrap up with our full year total company adjusted eva.guidance, which we are maintaining in a range of 233 to 253 million.
Arie: This outlook is based on an average retail fuel margin of $0.40 per gallon on the lower end and $0.42 per gallon on the higher end of our guidance range.
Arie: With that, I'll hand it back to Arie for closing remarks.
Arie: Thanks Rob, to our team members, customers and investors, we appreciate your continuous support.
Arie: As we add into our historically strongest season of the year, the 100 day of summer, they're energized by the opportunities ahead.
Arie: We know the journey requires discipline and transparency, and that's exactly how we plan to lead.
Arie: While the environment remains dynamic, we remain focused on execution and our optimistic about the path forward.
Arie: Through consistent, deliberate action, we are committed to creating a long-term value for our customers and shareholders.
We will now open it up to the question.
Arie: Thank you. Ladies and gentlemen, we will now conduct a question and answer session.
Arie: If you have a question, please press star, follow the number one on your touchstone phone. You will hear a three-tone prompt acknowledging your request.
Arie: If you would like to cancel your request, please press start too.
Please ensure you lift the handset before pressing any keys.
Bobby Griffin: Their first question comes from the line of Bobby Griffin from Raymond James. Their line is now open.
Everybody, good afternoon. Thanks for taking the questions.
Speaker Change: I guess I'll interrupt first, maybe just touch a little bit on how the business has performed of ladies once we got by some of the winter weather. I think the weather issues that impacted the convenience store space are pretty well known by a few different companies that have talked about it, so what have you seen kind of maybe more in April ?
Speaker Change: and May, and have you seen anything get better as we've, you know, approached normal weather conditions again?
Speaker Change: Sure, good afternoon, Bobby. I will start maybe with the recap for first quarter, and then maybe talk a little bit about what we see moving forward.
So, you know, as we started the year.
Speaker Change: You know, here, you know, we reported right now that, you know, the sales were down 6.9% for the quarter and 5.2% X cigarettes.
Speaker Change: When we started the quarter, the January result were actually 5.8 on total sales, but 3.8% negative on sales excluding cigarettes. That's what's January .
Speaker Change: When you go into March, excluding cigarettes in March, were minus 3.9%, so you're talking 3.8% negative in January , minus 3.9 in March.
Speaker Change: and then all of the sudden, February hit with FCVO weather.
Decells, excluding cigarettes in February , were minus 9.3%.
and that's really, you know, the story of the quarter.
Speaker Change: So, you know, the weather, you know, we believe that the weather was probably two to three percent [inaudible]
Speaker Change: you know, just because of that. You know, as we move behind March, going into April , we see a slightly improvement in size cells.
Speaker Change: and of course, you know, we see elevated fuel margin that, you know, of course, offset, you know, some of those, some of those sales decline that we see over here.
Speaker Change: So overall, I'm very optimistic in Q2 and as I said we see slightly improvements in April .
Speaker Change: Thank you. That's helpful. And then maybe switching gears into the Deolarization Network, the work you guys have been doing. Just...
Speaker Change: Honestly, two questions. One, is the saving starting to flow through the P&L as we look at the results
Speaker Change: and then Rob, that $20 million number that you're referencing on an annualized basis, what does that assume for the total number of stores? Is that the savings from the number of stores you've already done or that are under contract or ultimately the entire program which I don't think we know the full number of stores you guys have identified yet?
Rob: Yeah, that's right, Bobby. So the 20 million is going to be at scale when we're done, and as you know, we've not shared that total, but as Arie mentioned in this prepared remarks, we do have a meaningful number that is still continued in addition to the sites that we have under contract today. So that is certainly a total program amount.
Rob: If you think about this quarter, the channel optimization delivered about $2.4 million, the sites that were transitioned over, so on an annualized basis, that's about $10 million at the run rate, so we're pretty much roughly halfway through the program, but again, I wouldn't attribute that necessarily to store accounts, but more in terms of the financials that we talked about, but this quarter was 2.4 million, the last quarter was 2 million on a quarterly basis, so you can see the accretion starting there.
Rob: and obviously the wholesale channel, the base business, as I mentioned before, the gallons were down mid-single digits, so we're hoping to kind of get that base a little bit closer to that flat number and have the channel optimization be accretive on top of it, but it's still seeing growth out of that channel even with some of the headwinds in gallons.
Speaker Change: Yep, that's helpful. And then I guess lastly, Arie, you touched a little bit on the remodel initiative, you know, kind of making a little progress there. When does that potentially get accelerated? Is that more 2026 where we can see that actually rolled out across a large portion of your fleet, and what is the CAP-X that...
Rob: that will require on a per store basis just where we can think about that on a multi-year kind of impact to the model.
Rob: Sure, you know, our plan really right now when you know, we respect for those the seven pilot stores. Our plan is really to finish the seven pilot stores.
As I mentioned, we started this week, the first tour.
Stardust Construction, we are at the second store starting mid-May.
and we hope...
Rob: You know, to basically to continue to see progress over here probably towards the third quarter of 2025 and again subject to results. Thank you very much, Paul.
Rob: You know, we probably going to start to, you know, to increase the pace, you know, in the regional level or subject to results. You know, for your benefit, you know, today. [inaudible]
Rob: You know, the investment, you know, in a remodeled store is anywhere between, I would call it $700,000 to a million, a million won. That's probably the, you know, that's probably the cost per location.
Rob: But again, it's all about how we feel about those pilots. If we need to tweak anything, we respect to those pilots, but the idea is really to take the initial learning and then basically apply them.
Rob: across a full region, and then we're going to continue to go. So I think, if you're a question, I think the assumption is that, as far as the end of 2025, we'll have better results. And, you know, we will probably see...
Rob: this upticking, assuming we enjoy it from the results and happy with the results, Robert we're going to see an upticking 2026.
Thank you. I appreciate it. That's the look gone forward.
Thank you very much, Bobby.
Speaker Change: Your next question comes from the line of Anthony Bonadio from Wells Fargo, your line is now open.
Anthony Bonadio: Yeah, hey guys, thanks for taking our questions. I want to start with fuel margins.
Anthony Bonadio: It seems like you guys are seeing quite a bit of strength into Q2, just giving your guidance and some of your comments and response to Bobby's question. I guess one is that reflective of what you guys are seeing out there today. And then two, can you just talk about what's driving those fuel margins as we think about price dynamics, brake events, that kind of thing?
Sure. Good afternoon, Anthony.
Anthony Bonadio: Well, with driving the fuel margin, I think that the number one, of course, is the volatility in the market. You know, you saw what happened in the last, broadly, four or five weeks.
Anthony Bonadio: Price is a fuel drop, and they drop all the way to, at some point I think it was like $57 or $55, which of course reflect, so volatility is the first thing that reflect those things.
and the second thing beside volatility that increased fuel margin.
Speaker Change: My belief, this is Arie's belief, I believe that the pressure that everybody's seeing inside the store.
Speaker Change: You know, they're going to have to pay for their expenses, you know, people are going to need to run their businesses and this is what we're doing over here and everybody's trying to be of course competitive as much as we could.
Speaker Change: and given that 63% of this industry is Mom and Pop, and we are also...
Speaker Change: You know, selling fuel to many of them. We have almost 2,000 locations, including the visualization that we are doing right now.
Speaker Change: I believe that some of it is just shifting basically because, I mean, when you have a soft towel.
Speaker Change: Inside the store is given the microeconomic pressure and the weather, et cetera, et cetera. I believe that people...
Speaker Change: Needs to figure out the way how to make changes in order for them basically to be profitable and changing the price at the pump It's probably the fastest and the easiest way to do so and we saw something very similar to it if you remember during Covid. [inaudible]
Speaker Change: It was very, very similar. So, you know, that's really my belief. I think those two components are the one, the driving, basically fuel margin. [inaudible]
Anthony Bonadio: Thanks, that's all right Anthony. Just for reference we've seen 46 cents per gallon in April and maybe one has kind of been sticky, so please with that so far.
Speaker Change: I got it. Super helpful. And then just on the repo, you guys bought back quite a bit of stock in the quarter. You're still sitting on a lot of cash. I think you've got another 20 million under the authorization, but can you just talk about how you're thinking about the cadence of buybacks at this point, and just maybe more broadly how you're thinking about capital allocation.
Thank you for joining us.
Thank you guys.
Thank you.
Speaker Change: Your next question comes from the line of Ben Wood from Bimo. Your line is not open.
Ben Wood: Hey guys, this is Ben on behalf of Kelly and BMO. Thank you for taking our questions.
Speaker Change: I wanted to do two follow-ups on Bobby's line of questioning, just the first on the deolarization. It seems like the language you guys are using is pre-consistent to 4Q, but can you talk about the pace?
Speaker Change: of dualizations in one queue and how that tracks relative to internal plans. What's kind of the visibility on the pace that these could happen? And is there anything in the current environment that might make it harder to progress through kind of the outline targeted numbers?
Thank you. Thank you.
Sure. Thank you for being over your bend.
Speaker Change: And the reason that we close 77 versus 100 that we're on our plan, it's really all subject to licensing and permits the sum of those dealers. As a matter of fact, we have 130 stores under contract right now.
Speaker Change: and it's just a matter of those dealers getting licenses and permits. You know, it's very, very important for us. Given that, you know, we are, you know, moving some of those stores from our company and the operating stores to dealers.
Speaker Change: and in order for that to happen, they must have legal licenses, for example, that usually would take a little bit longer to get legal licenses.
from Defend Minister Pallati.
Speaker Change: and of course some of those guys are interested to close even earlier, but for us it's very, very important that the minute they take over, they will have all of their licenses and permits in place, so they will not live basically any sales on the table.
Speaker Change: So it's really just a matter of Pyramids and just a matter of licenses that...
Speaker Change: You know, I believe because of the winter and because of the bad weather in February , some of those military politics are probably closed or something like that, but everything is moving along in accordance to plan and as I mentioned, you know, behind the 77th location that we close up until May 1st.
Speaker Change: We have another 130 locations under contract already and they're going to continue to close as soon as they receive permits and licenses.
Ben Wood: Ben, in terms of, like, you know, possible, I mean, I think you saw on Q4, we did a hundred sites, right? So, you know, to Arie's point, there's counter parties we're dealing with, there's licenses, there's states that are involved with it, that number's going to ebb and flow. But, you know, if you're saying, hey, what's possible, we've done a hundred in Q4. So, you know, again, ranging up to that level, I think is reasonable. . . . . . .
Ben Wood: No, that's very helpful. And then just going back to the remodel initiative conversation we were having.
Is there...
Ben Wood: between now and when you start to get feedback on those and think about rolling them out more aggressively. What's what's the pipeline of maybe some smaller initiatives that you guys can take on and spread throughout the the. Yeah.
Storbeis.
Ben Wood: And it's the idea once we get a remodel that we like that we'll stick with the remodels, or is there an opportunity to pull bits and pieces of that pilot program?
Ben Wood: and spread them to the base a little bit faster. Just trying to get the sense of, you know, kind of your pipeline of different organic growth initiatives you guys have.
Ben Wood: Sure, no, no, that's a great question. So, you know, the seven pile of stores should have everything from soup to not. That I think what we're trying to basically explain over here. For example. [inaudible]
Ben Wood: Every one of those stores needs to have an improved backbar so I'll give an example the backbar is just an example of the things that we are not waiting. [inaudible]
Ben Wood: We are basically getting very heavily into the OTP category.
Ben Wood: We believe that in this environment, you know, when the consumer have a lot of pressures when consumption of cigarettes are down, we believe that OTP is one of growing categories and as you remember we mentioned that we invested in 900 stores in the back bar.
Ben Wood: So this is just, you know, one lever that we already, you know, start to move forward. The second thing, of course, is fueling America, a campaign that we started.
Ben Wood: and that campaign, of course, involve, you know, between the beverage, you know, the beverage promotion that we're putting out there.
Ben Wood: At the same time, you know, we continue to add food service features. For example, grab and go at and call in stores that we basically know that we're going to need to.
Ben Wood: Invest in that when the ministry finished the remodel. So there are small things that we're doing, there are big things that we're doing, but as I said, the largest one was really the back bar that was very important for us to finish as we're moving into a hundred-day of summer.
Great. Thank you guys.
Thank you, Ben.
Speaker Change: Your next question comes from the line of Daniel Goglielmo from Capital One. Your line is not open.
Hi, everyone. Thank you for taking my questions.
Daniel Guglielmo: As a part of the transformation plan, Y'all mentioned targeted capital allocation toward strategic retail stores. What are some of the characteristics of retail stores that are in that strategic bucket? Is there anything from a quantitative or a qualitative standpoint?
Can you explain a little bit more your question?
yeah I was yeah all right I'll take that one
Speaker Change: Sorry, so we look at sites that are in what we consider as strategic markets, so markets where obviously they're favorable demographics, favorable competitive and favorable physical plant that's existing. Daniel, so again, for markets that are heavily competitive where our physical plant may not be as competitive currently and where there's, you know, subpar demographics, that's the way we look at this.
Speaker Change: We had a strategic engagement with a consulting leader beginning of last year. We looked at this market by market, where physically we think markets are growing, where our physical plan with location and existing physical plan has a right to win, where we think it makes sense to invest. That's how we've broken this down and why we determine which stores we would be investing in, and which would behave more appropriately in our wholesale channel.
Speaker Change: now that it's been another quarter, can you talk about how that benefit realization has played out versus your expectations?
Speaker Change: Yeah, I think the, you know, again, as we talked about before, there are going to be some puts and takes with the timing of deilization, right, based on counterparties and some state regulations, but in terms of the expectations, the stores that we pushed, the wholesale channel are performing in line with our expectations.
Speaker Change: As I mentioned in my prepared remarks, there's about 14 million incremental gallons, so a significant amount of volume that's starting to come over to this channel, performing in line generally with our expectations. And, you know, what we're hoping to see again is that that baseline prior to your business, the comparable accounts getting closer to zero versus the negative mid single digits. So, but we're pleased with which channel optimization has been doing so far. I mean, that's one of the reasons Daniel, before you covered us, why, you know, we significantly expanded the count that we were looking at for that channel, because we've been very pleased and we've been very pleased with which channel optimization has been doing so far. We've been very pleased with which channel
with performance today.
Speaker Change: Yes, just to be one more thing, just to add one more thing for Rob just said, which is everything
Speaker Change: Every one of those deals we did was a creative from day one.
Speaker Change: so we didn't have to change something and you know wait a period of time to see if this is going to change anything you know all of those deals were acquitted for the minute we actually convert them into dealers just to be clear.
Appreciate it. Thank you.
Thank you.
Speaker Change: Your next question comes from the line of Karru Martinson from Jeffries. Your line is not open.
Speaker Change: Good afternoon. This might be simplistic, but it's the housekeeping. When you do the deolarization,
Does that?
Speaker Change: Loyalty members stay within the program. Are they still able to access the program's benefits?
Yeah, so when we actually dealerize the store...
Speaker Change: The loyalty program do not stay with the store that we did not have the systems and the bands but you know usually those customers will travel or will move to some other location that we basically have the loyalty program. [inaudible]
The loyalty program is only beneficial in our retail stores.
Speaker Change: Okay, so it is with you, so that's just wondering if like you're growing, but you're also taking customers in theory out from locations from that perspective.
Speaker Change: In terms of your liquidity here, your bonds are in the high 70s, 11, 12 percent. How do you balance the share by-backs versus the potential for bond by-backs here?
Speaker Change: Like I mentioned earlier, everything is being analyzed by the company, by our board, and this is not something that I'm prepared to answer at the moment.
Alright then, thank you very much.
I appreciate that. Thank you.
Speaker Change: Your next question comes from the line of Hale Holden from Barclays. Your line is not open.
[inaudible]
Hale Holden: Thank you, afternoon. I just had one big picture question, which is...
Speaker Change: You know, since you gave your guidance on the fourth quarter call, the one thing that's changed is the price of crude has come down a lot and the price of retail fuel has come down a lot. So it's wondering how that flows into the guy that you gave that you just reaffirmed and you know puts and takes around that in terms of positives or negatives.
Yes, sure.
Speaker Change: Yeah, so as you mentioned, you know, we have taken a more constructive view on fuel margin for the year, the mention we're running 46 cents from April through May 1st week of May, so that is obviously something we factored in.
Speaker Change: Channel. If you look at our press release, you'll see at the GNA, excluding, you know, a crew along the legal was down a couple million dollars here on here.
Speaker Change: So again, I don't want you to be taking that specific number, but you should be expecting to be a little more aggressive on GNA as well. So, you know, a little bit back on gallons and merge sales, more constructive on CPG and more aggressive on hotbecks in GNA.
Speaker Change: So the, just as a follow-up, the inside sale in gallons, that's more like a weaker consumer view, and then the G&A is something, you know, as you get further into the dealers' association plan, maybe that gets a little bit more heavy in terms of cutting there.
Speaker Change: I think that's a fair way to look about it. Yes.
Great. Thank you so much. I appreciate it, fellows.
Welcome. Thank you.
Speaker Change: There are no further questions that this time. I will now turn the call over to Arie Kotler. Please proceed.
Arie Kotler: Thank you very much everybody for participating this afternoon. I really appreciate that. As I mentioned earlier, you know, fueling America campaign that we started in stores on Merchwell.
Arie Kotler: This is a big initiative for us, especially as we go, as we move into a hundred-day of summer and as I said with those promos and with those campaigns we hope to see more customers in our stores at the pump.
Arie Kotler: and we hope to see you guys soon. Thank you very much, have a good evening.
Speaker Change: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
Robert Giammatteo, Mark Astrachan, William Reuter, Robert Griffin, Arie Kotler,
Speaker Change: [music].