Murphy USA (MUSA) 1 Aug 242024 Q2 Earnings call transcript

Thank you for standing by. My name is Bailey, and I will be your conference operator today. At this time, I would like to welcome everyone to the Murphy USA Second Quarter 2024 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Christian Pikul, Vice President of Investor Relations.

You may begin.

Bailey. you, Thank and everybody, all joining for Good thank today. us morning, you Smith, Executive Andrew Chief West, Donnie are me Officer; Financial Accounting Clyde, and Jeff, With Galagher Chief Mindy Officer. Officer; Chief Officer; Chief Operating opening the results, the of call some an open Q&A. we financial comments will and Galagher After provide Andrew, overview to will then up from

Securities be keep Litigation in including the call, in during made this defined XXXX. of mind Please Act as portion, Reform that considered will comments the statements some Private of the forward-looking Q&A

As will such, of actual projections attained. assurances these no cause can be differ. variety occur will that given A factors events may to the exist that or that results be

other of see USA factors, please Murphy discussion publicly USA takes the no further duty Forms or risk statements. SEC X-K forward-looking recent revise any to filings. Murphy For and update latest XX-K, XX-Q,

generally conform During principles, or may do today's call, we not provide certain that accepted accounting measures performance to also GAAP.

to measures found that, on of the section have release, to turn be our can reconcile part over We our website. which of those Andrew. earnings as call reported schedules with results the a basis non-GAAP I'll provided press GAAP on With the Investors

joining us and creating Murphy value you, and everyone, believe results our business We're clearly advantaged to thanks, Thank second in very for pleased is Christian, investors. with quarter flywheel today. for USA's our We results. motion, delivering our

as how business of Let's stock a is start performing. today's by call the whole taking

economics prior persist, by dynamics of that $X.XXX historically gallon Our volume. structural to it higher difficult core the margins low year breakeven is grow than in a volatility environment, fuel is when all-in in which as is results higher business $X.XXX, delivering industry period. excellent The per evidenced the support more

were a success second margin advantage sustainable underscoring history, retail Murphy the result, dollars of highest and contribution enduring quarter in the QX USA's company fuel As model.

tobacco across strong, growth performance. performance by sales driven and exceptional categories. merchandise Same-store margin to were Turning

While quarter, expectations. nearly falling X% in up second our total high merchandise the are results of year-to-date margins were short

in and growth lighter-than-expected traffic in $XXX Given margin were discretionary adjusted guided to into year full as transactions reflected merchandise be slow resulting X%, softness total that center around start built some from plan, the will QX, our in markets range fewer $XXX internal million. in in QuickChek our store categories million

early initiatives the results the our will to Inflation overcome of real Our these impact on track, and remains are not is drivers. impactful but customers.

home, home have in we markets, away food the from especially remains a lower challenge. versus effects Northeast the and where food for see seen that at We inflation

that note beverages, We prepared where increased, also categories and at QSR are per in competing core and pivoting promotional intensity to value many which traffic-driving share has QuickChek. are QSRs back food

with This the plan, where anticipated quarter, As transactions QuickChek in a about comps similar QuickChek. a X% at represents rebound remained result, in variation down we largest our more year-over-year performance to second into the July. at sales year-over-year total merchandised of

in some where we incremental to but the are highlight down, up with the value it to With members larger Rewards sustain only commitment that active, the with Similar spots trade or members, with wins and That that and positioned rollout environment, side greater other up new incredible merch baskets. X shopping trip there frequency said, initiatives, current thereafter. trip adds very to the well QC MDR remain we back. Rewards But QC trade on are not get coming win pricing, a less and bright up. our

ecosystem. within the and broader invest tobacco reinvest category all continue and promotion price, from We strong in growth across the a capability driving nicotine to perspective, products

in strength range, come advantaged volume higher to growth not strong noncombustible double-digit we other to and intend our noncombustible as are and products, vapor, only promotional transition nicotine oral to a support to the products continue share in but position foundation margins category. leveraging continue the combustible they products in our has nicotine leadership margins. that upon which also Our growing low and grow to with sales built We customers drive in

budgets down on nondiscretionary first to vapor paycheck to household Murphy the inflationary state products in no the nondiscretionary The impacting between Make In products, which discretionary store in growing on a our resurgence Americans pressures FDA were one be products, very a mixed our immune USA store, the In customer Hopefully, but already that paycheck, has mistake, that customers living front. thing to strong. the to more remains products approved. seen actually clear. have our on to cracked customer illicit strong believe volume of results not remains center spend we are the and we has come segment. that

tobacco, remains As beverages such, making we such their what overall beer, spend to and snacks spend on that discretionary growing. at stable is consider core spend Yet are their our resilient, fuel, not strong. they and Murphy our customers, choices packaged in salty at stores. remain it's stores Thus, as categories only

and dollars dollars XX%, customer. margin the of margin people was and basket X-year a in XX.X% impact the store and were categories were and -- resilience In visit. to quarter growing the XXXX. center in attached the very the categories fuel total tobacco were the powerful traffic-driving tobacco our fuel including to nontobacco of stacks illustrating in strong Murphy's growth, footprint, Murphy up Remarkably, The store material advantaged model improvements what X.X%, the margin bringing and tobacco XX% and up respectively, and up against are second nontobacco

beer the up in don't in offer. buying and XX% by value only lottery, forego, salty to at more softness where of, compelled salty margin different not store snacks and in category respectively, our want customers choices. remains growth are that but and were strong snacks, spend product candy are results offsetting Per customers beer and level, X%, Unpacking customer making

margin center seasonal additional across the from facings at in X.X% improve margins, and per optimize SKUs note, a and sales first from merchandise category share our that cost margin store sales center productivity. initiatives improvements promising growth, momentum, space. adding the is areas our Early are velocity campaign general margin our perspective, goods footprint, and format quarter, promotional focused enhance with second in larger up accretive. was sequentially intensity X XXX results to customer additional and experience store merchandise store from are reflecting reimagined improve as Nielsen drinks. performance center improved largest categories we employee and market soft data in-store outpacing robust, the XXX beverage, selling and Of of has by of Packaged exhibiting stores, the the store on X.X%, largest General more the enhancing gaining category, we up higher driven our carbonated experience,

expenses. at operating Looking

compliance. and warranty building, and intentional wage investments 'XX within dispensers Second on we quarter basis store in finish quarter higher of to we EMV track the the a of in to of and X.X% and XXXX guided growth on are internal X.X% for was raze-and-rebuilds, drivers the year-over-year, up we manager network the replaced part largely the including made attributable OpEx first a OpEx from as part stores large our cohort primary range. XXXX larger costs elevating remains on down XXXX, plan per maintenance expirations sequentially in our remains up including assistant The

in categories very benefits leveraging are our as efficiency in create relentless from business, including we XXXX XXXX seeing Like drivers productivity of part pockets the future additional that certain ramping and store offset the EDLP confident and and address campaign, maintaining in new focus store and our parts discretionary additions of and value, weakness excellence value beyond. up transformation pricing, to stores growth the digital of in of a generating on we're the will headwinds and value

our growth and These billion flywheel. target the sustainable building material our drivers are that catalyst of the blocks the XXXX of EBITDA in are $X.X to

outperform, Our delivering remains and our customer continue shareholder assurance we goal top-tier returns. core this tobacco fuel record and to track our us further of categories can giving continue meet resilient, and

flow how and grow to shareholders. value allocating now more give to the over on business the turn to I'll Galagher? color are create call our we Galagher cash you for

Hello, store on I'm some This and opened everyone. X, including Thanks our to cover spending capital today, setup. joining provide morning, that what new about to cash color Starting thank for talk store We store. you, flow. growth. openings in for with Andrew, program, our QuickChek and free stores new the year-to-date with X our we're X doing our bringing quarter, second going

We square bringing also year-to-date. kiosk reopened into small X to raze- and-rebuilds, us XX foot X,XXX transforming stores,

X new stores XX with construction, also including stores raze-and-rebuilds robust under is underway. and activity XX QuickChek construction current Our

growth from will stores XX accelerating store of emphasize, in openings We new XXXX. to year, in to our to I construction expect new And of achieve early want our pace store September. another this we range of guided begin XX XX slate

shape, again in pipeline that last new going becoming increase great mentioned the quarter, to new confident I and highly we store As EBITDA in we investments. and will new store remain sustainable for and growth is million a store significant with rest more contributor a XXXX, forward. growth spending From going that capital $XXX in maintenance $XX the technology of second about spent and to million capital quarter, the perspective, largely

the open in-service at XX certain dates, through least targeting over mind, now from press a in in are the finish Keep stores, in line release, in projects of serving original guidance. XX XX get XX more this are for our business able push to and impact to final we are year As the timing customers range and our XXXX. may referenced up raze-and-rebuild but to we

projects versus For this with offers, and raze-and-rebuild of our it as like generally store. permit returns. improves new build perspective, reinvestment to comes do and stores We the appearance the easier high enhances are program the customer

our share free a us along effective repurchase, way for remains highly flow. So to this with cash deploy

this higher add high EBITDA. contribute this our to start year of pipeline But million expect some balance and the new to year we XXXX get means Given $XXX at store range. head on XXXX new many construction store XXXX, quarter our store to will be build to guided first end which ability the our $XXX the more in to the of a capital level full spending can the class, we also openings of XX million expect and more new activity

Turning which flow capital. use of beyond to share cash growth preferred repurchase, free remains

ongoing share repurchasers be second active shares. our remain back repurchase. We committed and to of to own in XXX,XXX shares the bought quarter continue We

authorization about of back we continue Board bought remaining million, the under execute leaving billion XXX,XXX existing XXXX. through We our to to board to $XXX shares extends authorization. repurchase billion stock, for up which $X.X against have Year-to-date, $X.X our

maintenance. growth. To good invest store in We shareholders. maintain accelerating us in share in cash store We with accelerated our This cash. how $XXX was our strong example flow advantaged model invest we store and Andrew more from and and free free invested we It QX accelerating more allotted returning to we In million stores. our of new flywheel. a our from We a of the can repurchase. dividend paid technology customers $XX our for new creates summarize, our mentioned, flow growth as and get initiatives cash closed our and enabled quarter million of allocation nearly capital balanced cash QX, to

the to we strategy, that, which long-term continue believe over turn With foreseeable future. will expect I the We for call back to Andrew. maximizes shareholder the value

Thanks, Galagher.

prices of close Whether largely steep of per July only pennies that we line performance. me will are fuel inventories, July refinery several XXXX. gallon, Geopolitical are remain high. in prior margins of retail a utilization New $X.XX present with coming year or space see a remains range-bound. bigger is to turnaround volumes at falloff not following uncertainty margin Let flat Per High fewer view preliminary season seen. so above store to are opportunity Oil into gasoline a persists. yet imports values prices York Harbor, for capture boosting about be

ultimate future whole market limited while unknown time. lack any a the place, fall-off date, dynamics out, of yet retail remains prices and we direction Will can to the in playing say always, a fuel material we There's and certain of with structural is has the higher to dynamics to significant All be there of at been the as the that third supporting inventories this set high on due impact margins hasn't are it shocks that market. volatility happened in remain quarter? certainty

in in same trends stronger we choices. have QuickChek half, In reflect first half. softness performance largely seen than discretionary the outpacing we Merchandise remains softer categories planned, traffic the with markets, dynamics the in in first seen as have nondiscretionary customer

perform in Murphy half the However, with first line core network results. continues broadly to

we pain come empathetic I'll receive to of who and we times loyal find end simple the with stress that distress, deliver them understand customers products associates In of their same smiles consumer service Murphy. incredible a and on consumers points. that and message. most their the significant subsides, because of When purchase more our from change the value behavior, stay they

witnessed severe For be in subsided, distress has categories. the other fuel, replaced of by to only persistent in high prices inflation XXXX

gained Looking at period. demonstrating of gallons, to XXXX, the during over store that stack X-year X% growth month average we've fuel volume experienced difficult the per sustainability

increases On subsided. has created not other and on the continued distress tobacco other products that hand, price have in-store

as Looking case fuel at categories trip. stacks of tobacco category or to to sustain the a and most dollars food are the of fall share. tobacco overall multiyear of often QuickChek, of they the grow ability highlights and trips. in in of and a Other between, the continue the part margin Or basket beverage destination

make and to that do to paycheck them when value, investments spin the faster so. core consumer cash way are well the times investments flywheel conditions our Indeed, make is, is distress, we we are challenges growth environment flow the have store moderate. cycles, balance these and sheet point especially keep across The free consumer, of our making and we current economic to win the as in in to the paycheck to capabilities in we positioned

and this, back Let up for questions. us to end operator the open the we'll turn call to

from of Anthony with [Operator comes Wells Instructions] first Fargo. line the Your question Bonadio

guidance. wanted start just I the So to new with insight

QX. just in seems half So up contribution you in that by back that year-over-year XX to close growth your peeling decelerates it put what back, imply to from bps the

backdrop got been So demand, you've you've choppy compares. understanding and is NTIs And all overall side right the raze-and-rebuild, talking on flip of a the pickup pretty now. in that, both self-help about. But then stuff the easier

shape help just maybe and the you just can the how about demand in puts back of thinking think the about you're forecast? consumer So half? us takes And that different in

Sure.

largely QuickChek where prepared we've softness in inflation, the the this plan view mill And merchandise where in adjusted internal the value our cetera. mentioned remarks, to contribution reflects I pricing, the year-over-year the guidance. et transactions as biggest with this seen competition, So of single QSR from rebound is continued actually driver expect persistent some we a

same for the we see of so continue pattern to And the rest this year.

what And half second have we initiatives improvements some planned is on that of base as place, of those driving initiatives that The in a therefore QuickChek, which well. at are are lower most transaction are than weighted.

NTIs. You're right around the

contributing but we're the fact, a those be the start with the tranche In on extra large up same to will much, towards of end ramping those, about very as the of raze-and-rebuilds. year and not and

X% that I So of a as quarter. transactions built driver causing we the in aggressive chain in of what just witnessed plan is the of terms velocity that's it's said, function guidance QuickChek, biggest we've versus that the in more a decline seen we've this

just think gears uncertainty, dynamics how was Got but strong some maybe it. And about QX And as of back updated range we to the half, guess just to more That's on $X.XX a thoughts really fundamentals? modeling switching helpful. margins. function then of price out about gas gallon in the that on lot year? I underlying talked guys starting of maybe $X.XX temporary versus a per that you any much thoughts

Look, I quarter different, Sure. outsized the of always biggest fuel every to we remember mean, what got just drivers margins. are and is

and saw think that run-up falloff QX. run pretty yet. the then QX. that some then off prices? in is, something see where it prices And based are falloff been in took a we seen QX, often QX to in haven't And seen in big changes on We've exceptional you a X going but but have seen it's steep first that to we've I The sharp back run-up we like in going material OPEC fall XXXX, up. XXXX, We for

There's make Anthony, inventory really we up, about inventories can crystal but all of lot a a QX. of is we had would we lives a was lot exceptional seeing wish are don't. What again, So built we nothing space. lot line easier, I ball. but our that, stronger say It -- there

we some And any see there. that in work see we what inventories dynamic call down, There's the concern. space, creates strength so would to I line competitive could continue those nothing

noted you think that period we remains margins July's if that So of margins, about in volatility, quarter's strong. this low a

the $X.XX occur. logistically range, in think that to something the of I sharp prices of $X.XX geopolitically to of end or low not U.S. $X.XX of going driver biggest are a the So or happen range a fall for end high to have is range off to in and a the infrastructure would the we see

Bonnie comes question [ next Herzog (sic) line Goldman Bonnie of ] from Hergoz with Sachs. Your the

ask I'm stepped about you maybe that whether then traffic is a pressures other Andrew, the we're year, comments the your levers you're guess, seeing to drive wanted what than promotions, to I'd In having guess in to hear the Northeast I be additional maybe more I that improved regions? environment, consumer -- I of back what cetera? of pull light certainly, can significant et the curious, or there, consumer. curious the do you and on the in up is think seeing why And seeing we're impact half

Northeast, to those And you day mean, of other if higher start mean the present inflation rate some a that I there I fact, other same factor. than some regions. with had to we of is the information exact Goldman showed economist us Sure. the just the

where as all to inflation Murphy just are little economic been high. regions be happens regions in the differently. So the hasn't faring a

home As than food date been I inflation noted, the away has home. from lower to the at food

we And members coming Rewards see our back. QC so

less trading X-inch one sub taking X for from margin making made XX-inch they sub trip, X for they're not they're are to We something items. of or from a stock our or warmer the a value down losing but guests, to are on example,

So on we're behavior that's think I seeing. behavior pretty the from subsist food a trade something down they it's And standpoint. that to need normal

we're the to every behavior faster on side, the see, they month, the more retailers. every year continued right? Murphy up seeing than Rewards Nondiscretionary the Murphy We're getting and ramping their to trading newest think year-over-year, customers growth, I lower-priced down that prior customers, cohort. accelerating items, people we've are and are Drive quarter,

So us. a consumer benefits I behavior that that's think

sometimes to And we products the and pennies more we they promotional from a many don't of because the their more raise to prices, share extra super keep the continue them players price aggressive have of in of increases get standpoint those where consumer. with with

just And time. widens our of So some the natural had over differential outsized gains that to there. think I led that's we've

I are just going if margin, categories they're I message important think But the the in are on think to And they're someone's the center basket short, X discretionary guests. that feeling on $X put just another thing is losing not trip. store choice. less we their

value the We or but guests of are making guests gaining those some keeping proposition, choices. because are

Okay. you stores Andrew? some Could thing, technology time of the thank you And for that's on with Bonnie, I this really saw add customers. one spending QuickChek quarter. resonating our hopefully,

second think And going in program an more QuickChek grow and business. sales we're We and we really our from from traction mid- QuickChek a high-single-digit reward over of rewards XX-point transactions the we're the their impact seeing our nonmembers. good that make as in to There's members. members. are behavior lot And seeing to growth of half, that a versus between on we difference realize

know of best. us trips, it, as the most expect stronger. even that from program those And the we're So we to be losing and not transactions grow expand that we the loyalty are

too, the sharing practices, you I good on that's a have of broader that a throughout lot you terms think in Okay. learnings guess. of to of touch And opportunity, As That's base, an that can store just kind implement best point. right? I

question me Okay. If topic. on one I last just may, a different for

sort on pretty M&A, allocation, announced acquisition Just your peers of capital recently. large one of a

in back raze-and-rebuilds, seeing maybe where are last Is historical new where So market? now? year guess, you've returns the versus buying just et M&A, greatest really And And levels? your curious trend I you versus how stock, you it been then lastly, and active or are multiples cetera? not growth, seeing store the right M&A

of as of the that either be I as context, terms Sure. the portfolios have in see of investment pretty And a and into most M&A varied many before, mean quality consist mix to we they of them. that performance, rise. about we've age put has transactions back talked

is, the most a we like most one of we one think is, of of retailers extremely to our does where stores tail I EBITDA the do? low-performing things store fundamental stores at look have the how commodity high compare productivity not do

XX- take just highly certain position And proposition? secondly, consistent look see And just you it, a price we low return for where on employees, out an that way entire in it When that it when markets, concentrated we organic to sitting the to the we growth then want in a many go dimensions. with meet take to way are we chain works chains don't would new opportunity, so as tanks you're recognize, capital the better designed able because that be you ground. store that in our you and your see want have at are everyday our getting XX-year-old that to value the customers then criteria many, our doesn't

or getting out contracts, to unbranded don't rebranding out spend branded have et on or the fuels capital of You getting cetera. stores of significant

our So preferred our approach strategy. is organic

that price EBITDA reason hasn't up position, improvement say shows the buy share the we that our of been our investment. continue hard in it investors had, to is only a and so pretty the shares. multiple to it's grow we've that highest return back But front With growth it's investment the in high-return

spin. the we I have if context $X to billion expect XXXX, where And we EBITDA put into be in grown by will since so

and float. almost XX% doubled of back bought over our the We will we have multiple,

highest we're stores probably it's allocation. capabilities, very our as new we really high that that And on combination. return long industry making really combination. are raze-and-rebuild improving see in capability-building balanced investments. a returns and enhanced those returns capital Is It's some to the as in and investment, investments so And of our our and stores

opportunity, play unless there to we're way M&A about something perfectly going the unique is unicorn our focused on our to so stay and to way And win.

Tarlowe And line from with your Corey the Jefferies. next of question comes

I higher I'm if I stores? willingness little promotional in talk you merchandised promotional to to carbonated seeing the how your inside intensity Great. do intensity was store think wondering highlighted potentially that about pull you to you're about need in that traffic drinks. your could boost you volumes. bit a sales the soft lever and and/or curious ability the to and about that drive some think

we're price. for Look, the activity type always you're always baseload and beverages, volume that, on going store. promotional do. that pricing And packaged a value the just activity so to to that represent some in various be many known across is part going low of providers such for see of everyday going significant store categories we center promotional We our

there's So or to of comp anything or I activity. our unique say would over that not difficult onetime terms promotional in

as that you've be you're Got thinking should and make as in making curve stores How in of been your about you to we mentioned on mean open OpEx the shape new store. and continue some wage people? you stores, then OpEx And investments and larger these just again, investments opening per these stores then I certainly the larger of the well. some it.

Yes.

raze-and-rebuilds. and larger that important amounts as some merit-type cohorts attributable will The of the we're a of raze-and-rebuilds EMV will to warranty normalize most that with normalize because do cycle number maintenance of the kind to coming stores dispenser to catch-up over related those So normal we're will new wage for new relates go we associated our the of because back increase. that to period. increasing increase our off numbers And increase those building. the The component investments will onetime we've they'll increase increase to as needed stores investments, we made larger

be the So drivers. part will those forward And store. were to the continuing the new going biggest main

to new thing enhanced wage increase stores, important the largely rates. is of merchandised which always The in those remember outstrips the performance

et to really So our you expansion of at, that be metric fuel the doing by ratio, merchandise that metric, the contribution breakeven look OpEx the that's just efficiently our why looking at the coverage itself. is It's and not pure old cetera. want key we

now I there call for Andrew to And this questions remarks. time. at are the closing turn will no back further over

joining today. everyone, Thank Great. you, for us

our challenging we long-term with I value, continuing doing times investors customers well. new capabilities only but wins And Thanks commitment in to today. serving As for those think us better for consumers. these to as many your know, all not it grow, are illustrated, for wins and we've them, Murphy's of as with for as ways time

call. This concludes today's conference

may You disconnect. now