ARKO Corp.'s Strategic Crossroads: Underperformance Amid a Rising Market

ARKO Corp. has found itself in a peculiar position in 2025: delivering modestly improved profitability metrics while lagging behind a convenience retail sector experiencing robust growth. Despite a 42% year-over-year increase in net income to $20.1 million in Q2 2025, the company's adjusted EBITDA dipped to $76.9 million from $80.1 million in the same period in 2024, a decline that stands in contrast to industry-wide foodservice growth of 5.7% and rising consumer adoption of digital loyalty programs Intouch Insight 2025 Convenience Store Trends^[1]. This underperformance, even as rivals like Buc-ee's and Wawa capitalize on made-to-order (MTO) food and gamified customer engagement, raises questions about strategic alignment and the sustainability of ARKO's transformation initiatives.

Operational Gains, Structural Challenges

ARKO's Q2 results reflect progress in key areas. Merchandise margin expanded to 33.6% from 32.8%, and retail fuel margin rose to 44.9 cents per gallon, driven by operational efficiencies and pricing discipline ARKO Corp. Reports Second Quarter 2025 Results^[2]. The company's dealerization program—converting 282 retail stores to dealer sites since mid-2024—has generated $20 million in annualized operating income benefits, with plans to convert an additional 100 stores by year-end ARKO Highlights Developments in Multiyear Transformation Plan^[3]. These moves aim to reduce overhead and leverage dealer networks for faster expansion, a strategy that has historically improved margins in the sector.

However, structural challenges persist. While ARKO has opened three new-to-industry (NTI) stores and piloted a food-forward store format in June 2025, its digital engagement efforts remain underdeveloped. The company's mobile app and loyalty program, targeting 25% customer adoption, lag behind industry leaders like 7-Eleven, whose gamified app drives 150% higher coupon redemptions C-stores in 2025: Food, Tech and Media Drive a Convenience Revolution^[4]. This gap is critical: 72% of convenience store shoppers now prioritize digital loyalty programs, and 43% make purchases after viewing in-store media ads Intouch Insight 2025 Convenience Store Trends^[5]. ARKO's focus on physical store remodels—while valuable—has not yet translated into a cohesive digital ecosystem to retain customers in an increasingly tech-driven market.

Strategic Misalignment with Industry Trends

The convenience retail sector's 2025 evolution is defined by three pillars: MTO food, digital engagement, and EV charging infrastructure. ARKO's recent investments in these areas are promising but uneven. The company's value-priced pizza initiative, for instance, drove a 36% increase in unit sales, aligning with the sector's shift toward fresh, differentiated food offerings ARKO Corp. Reports Second Quarter 2025 Financial Results, Highlights Store Conversions and Operating Improvements^[6]. Yet, its EV charging pilot with ZOOZ Power—a single ZOOZTER-100 unit in South Carolina—pales in scale compared to competitors exploring widespread EV infrastructure Arko debuts environmentally friendly charging station^[7]. Meanwhile, ARKO's store remodels emphasize foodservice but have not yet integrated digital media screens, a feature now present in 47% of c-store visits C-stores in 2025: Food, Tech and Media Drive a Convenience Revolution^[8].

This misalignment is compounded by macroeconomic headwinds. ARKO's Q2 results were impacted by lower consumer traffic and adverse weather, yet its guidance exceeded expectations ARKO Corp. Reports First Quarter 2025 Earnings Call Highlights^[9]. While this suggests resilience, it also highlights the fragility of its current model. The company's reliance on store conversions and margin improvements, while effective in the short term, may not suffice to capture the 35% of shoppers who now view c-stores as viable QSR alternatives Intouch Insight 2025 Convenience Store Trends^[10].

Growth Sustainability: A Balancing Act

ARKO's long-term prospects hinge on its ability to scale its transformation initiatives without sacrificing operational discipline. The dealerization program, for example, is projected to yield $20 million in annualized savings, but its success depends on maintaining store-level service quality—a challenge given that 70% of customers judge food freshness based on store cleanliness C-stores in 2025: Food, Tech and Media Drive a Convenience Revolution^[11]. Similarly, the company's NTI store strategy, while ambitious, requires significant capital and executional precision to avoid diluting brand equity.

Investors should also monitor ARKO's digital progress. The company's mobile app and loyalty program are critical to competing with rivals leveraging retail media and gamification. Without a clear roadmap to accelerate adoption, ARKO risks ceding market share to operators who treat digital engagement as a core competency rather than an ancillary initiative.

Conclusion

ARKO Corp. is navigating a complex transformation in a rapidly evolving sector. Its recent financial results and operational improvements demonstrate a commitment to efficiency, but the company's underperformance relative to industry trends underscores a strategic gap in digital innovation and MTO food scalability. While the dealerization program and store remodels provide a foundation for growth, their long-term success will depend on ARKO's ability to integrate technology and customer-centric strategies that align with 2025's convenience retail revolution. For now, the market appears to be moving faster than ARKO's current playbook—a dynamic that could widen without decisive action.