C-Store Sales Reach New Heights While Profits Suffer
At the National Association of Convenience Stores’ (NACS) State of the Industry Summit this month, NACS reported that convenience store industry sales climbed by 1.4% to reach a new high of $577.4 billion in 2007, but profits decreased by $1.4 billion largely as a result of higher credit card fees. The slow down in growth follows ten years’ of remarkable growth during which convenience industry revenue more than tripled from $174.2 billion in 1997 to $577.4 billion in 2007.
The figures are based on the NACS State of the Industry survey completed by 144 companies representing over 19,000 c-stores. In the report, NACS stressed that the biggest concern for convenience retailers remains escalating credit card fees, which dramatically increased by $1 billion, or 15.2%, to total $7.6 billion. The industry’s pretax profits dropped by approximately $1.4 billion to $3.4 billion. The industry’s credit card fees are now more than double the industry’s pretax profits.
The c-store industry sells approximately 80% of the motor fuels purchased in the U.S. and fuel sales continue to dominate industry revenues, accounting for nearly 71% of industry sales. However, because of the low gross margins, motor fuels are only 33.8% of the industry’s gross profit dollars.
NACS noted that there is growing disparity between the industry’s top performers and the bottom performers as the number of new one-store operators continues to grow. The number of one-store operators has grown 51% since 2000, from 59,876 stores to 90,683 stores, as major oil companies divest their retail assets and operators sell off stores. Major oil companies now own and operate less than 3% of convenience stores selling motor fuels.
Cigarettes still dominate in-store sales and account for more than one in every three dollars spent in c-stores. Packaged beverages (non-alcohol) are in second place, with beer, on-site food and hot beverages rounding out the top five categories which account for nearly 80% of in-store sales:
- Cigarettes (36.9% of in-store sales)
- Packaged beverages (16%)
- Beer (13.2%)
- Food prepared on-site (7.9%)
- Hot dispensed beverages (5.5%)
More than 70% of gross margin dollars were from the top five categories:
- Packaged beverages (20.1% of gross margin dollars)
- Cigarettes (18.9%)
- Food prepared on-site (12.3%)
- Hot dispensed beverages (11%)
- Beer (8.4%)
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