Murphy USA's Q1 2025 Earnings Call: Unpacking Contradictions in Non-Nicotine Growth, Retail Margins, and Store Performance

Non-nicotine category growth and margin impact, new store performance and expectations, fuel volume trends, retail margins and competitive behavior, initiatives to drive merchandise contribution are the key contradictions discussed in Murphy USA's latest 2025Q1 earnings call.



Retail Margin Trends:
- Murphy USA's retail margins were $0.02 per gallon higher in Q1 versus the prior year, with $0.045 increase specifically in the Northeast region.
- This was driven by a flatter price environment for gasoline, which prevented margin compression during a normal cycle of rising Q1 prices, and a more stable competitive dynamic in the Northeast.

Inside the Store Performance:
- Despite temporal challenges, candy sales were up 15% year-on-year, while same-store sales increased over 7% for reduced risk products in the noncombustible nicotine category, with a 15% margin increase.
- Growth was attributed to strategic investments in digital capabilities and promotional effectiveness, as well as structural advantages through targeted pricing and promotional strategies.

Store Expansion and Financial Health:
- Murphy USA added 8 new stores in Q1, maintaining robust construction activity with 18 new stores and 20 raise and rebuilds currently underway.
- The company's financial health was showcased by a $151 million share repurchase and increased credit facility from $350 million to $750 million, supporting long-term strategic execution and maintaining a debt-to-EBITDA ratio of 2.0.

Consumer Behavior and Loyalty Program:
- Murphy Drive Rewards and QuickCheck Rewards loyalty program memberships grew 11% and 30% respectively in Q1, with middle to high-income customers now representing nearly half of the membership base.
- This growth was driven by increased recognition of value-seeking behavior across income cohorts due to economic pressures, leading to more customers trading down to Murphy USA for nondiscretionary needs.