C-store Earnings Reveal Strategic Shifts and Revenue Drops Amid Industry Headwinds

C-store earnings reports revealed several strategic initiatives, including Arko's "dealerization" of 300 stores, CrossAmerica Partners' sale of 60 non-core sites, and Parkland's preparation for a takeover by Sunoco. Arko's Q2 revenue marked its fifth consecutive drop, while CrossAmerica's selloff brought in $64 million. The companies are focusing on maximizing profits by divesting underperforming stores and converting sites to company-operated locations.

C-store earnings reports from the second quarter revealed several strategic initiatives aimed at maximizing profits and optimizing portfolios. Key players in the industry, including Arko, CrossAmerica Partners, and Parkland, have implemented significant changes to their store operations.

Arko's "Dealerization" Strategy

Arko, a major player in the c-store industry, has been undergoing a significant transformation through its "dealerization" strategy. The company has converted nearly 300 stores from company-owned to dealer sites since launching the program last year. Chairman, President, and CEO Arie Kotler expressed satisfaction with the progress so far but acknowledged that the program is proving to be a drag on revenue [1]. The company aims to convert 500 stores in total, with the program expected to continue into next year. While the long-term goal is to save $20 million, the company's stock has fallen nearly 30% this year, raising investor concerns about the pace of dealerizations [1].

CrossAmerica Partners' Portfolio Optimization

CrossAmerica Partners, another leading c-store retailer, has been actively optimizing its portfolio. During the second quarter, the company sold 60 stores that were not performing well or were located in non-core markets, such as Colorado and Kansas. The sale generated $64 million, netting just under $30 million. This quarter's selloff was double the number of stores CrossAmerica divested in all of fiscal 2024, indicating a more aggressive approach to right-sizing its portfolio [1]. Additionally, CrossAmerica is converting many of its stores from dealer sites to company-operated locations, aiming for more control and uniformity over its footprint. Fifteen of the 60 sites sold in Q2 were company-owned stores [1].

Parkland's Preparations for Sunoco Takeover

Canada-based Parkland, facing struggles in the U.S., is preparing for its sale to Sunoco. The company's U.S. business showed significant weakness in Q2, with adjusted EBITDA dropping $21 million, marking the third consecutive quarterly decline in the key metric. In contrast, Parkland's Canadian business grew by $22 million [1]. The company owns around 660 locations and directly runs a little less than a third of them. Sunoco President and CEO Joseph Kim has remained mum about the company's plans for Parkland's U.S. c-stores, but the future of these stores is a topic of interest for c-store competitors [1].

Yum China's Resilient Growth

Separately, Yum China Holdings, Inc. (YUMC.US) reported a near 3% increase in its stock price, driven by a reversal in the downward trend of same-store sales growth in the second quarter. The company reported a positive 1% growth in same-store sales, supported by a 2% increase in same-store transactions, which has now grown for the tenth consecutive quarter [2]. The company's total revenue for the second quarter increased by 4% year-over-year to $2.787 billion, with operating profit reaching $304 million, a 14% increase from the previous year. Yum China's digital orders reached $2.4 billion in the second quarter, accounting for over 90% of total orders [2]. The company plans to add approximately 1,600 to 1,800 new stores in 2024, prioritizing franchising to sustain growth while balancing profit margins [2].

References

[1] https://www.cstoredive.com/news/c-store-earnings-q2-takeaways/757197/
[2] https://www.ainvest.com/news/yum-china-stock-surges-3-reversal-sales-decline-2508/