ARKO - Earnings call 4 2023

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Greetings. Welcome to the Arko Corp. Fourth quarter and Fiscal Year 2023 Earnings Conference Call. [Operator Instructions] Please note this conference is being recorded.I will now turn the conference over to Jordan Mann, Senior Vice President of Corporate Strategy, Capital Markets and Investor Relations. Thank you.

begin. may You

Jordan Mann

Executive morning fiscal Good On to fourth Financial and Arko's call Vice Giammatteo, Thank and President XXXX and earnings and Chief Chief President, Chairman, year Arie webcast. and conference quarter Rob are Executive you. Officer. Kotler, welcome Officer; call today's and

call presentation on at Our as SEC, the filed Report for unless are on year website Form today, earnings Arko available press our management period earnings results Annual ended stated, the www.arkocorp.com.During with the and XX-K to release, in will December XXXX, otherwise our XX, XXXX. compare same

Before fourth quarter we XXXX that unaudited. is begin, please note financial all information

the forward-looking Any management of for our or earnings XXXX current end December Annual adjusted such Report for operating during during differ quarter of reconciliations detailed not presentation to make Litigation various made this and Descriptions our of in result of our the forward use, with quarter XX-K Securities non-GAAP statements are update and our information results our results our results a those basis fourth respect we forward-looking new posted this or with in call, a income share views call this as basis. earnings non-GAAP as reported measures as today. adjusted measures statements within on cause statements call and this Form ended review or of made in fourth release, GAAP release on future management Act XX, revise may will fiscal otherwise.On to section at year and and our materially Arko actual website. call, accordance both to on statements the call, of events, will these XXXX cautionary a the made XXXX, Private operating financial EBITDA, factors statements the meaning earnings reflect from looking forward-looking Reform whether could During Please that forward-looking our XXXX. that on GAAP,

our fuel profit segments and share I less Arie. call is will by with fuel business turn individual calculated measures along charges to management to like intercompany the which now Additionally, GPMP.And exclude of over would as fuel costs, revenue, contribution,

Arie Kotler

Thank you morning, everyone, and Good you, joining us. Jordan. for thank

into a would results, getting opening Before our I to like off financial start with remarks. few

be like end, would additive Financial to experience as would brought significant To First, that financial and as the helped the company ] welcome to relevant Rob to and we transformation like to Rob's excellent the directly will Arko which growth team extremely enhanced contribution year, January. his drive Executive the former saw to convenience thank believe company in that and Don as performance. for Don you this serve joining Chief to Bassell, enabled will the earlier our have to CFO, roles in since has years seen to business. Giammatteo performance strengthen I'm company, to continue our to I Officer. that I the sure in we experience company personally the achieve value team also Vice has President financial welcomed We and his Retail already Rob have over and help build [ and the

net incredible million reflecting As proud Retail acquisitions, stores of Fueling and we've company, a our period. I'm their a XXX adding on ensure the closed acquisition footprint successfully segments. Wholesale have XXX work we as significantly have and million on integrate transition $XXX our in Fleet approximately geographic results in public past first XXXX cumulative with that XX smooth reported, approximately this almost in these Don across to and years assets. new $XXX will alone, through April delivered to until we X adjusted EBITDA company the income remain approximately very broadened In our and X sites our Rob.Second, to over team months

cash-on-cash the in merchandise We and QX assets margin that of location December and XX earned by that of in return reflects XXXX that improved from completed Pride We the just provided rapid XXX Since related in and we have meaningful X are acquisition, and our attractive approximately price. was transition basis including the our our we positioning.I addition driven approximately successful Pride of QX Pride and loyalty now of we at retail by the paid our back to to our under items to stores synergies adjusted convenience XXXX. at EBITDA a us which confident briefly that the We store prices, believe acquisition with This increase scale were delivered fas integration have X,XXX average bought good program. assets Pride members wanted relative over able attractive Pride open. acquisition REWARDS consideration competitive over on is integration, on to year, transaction. for construction XXXX Arko's and points return included stores XX% X in of closing good that to touch

performance stores our As drive strategy of we and is the core move more to XXXX, which and into segment to pull. attention our levers our I many have of Retail our and unlock other to value refine, to focusing growth improve believe retail we resources we further at business. management our are push, organic

roadmap year results. [indiscernible] milestones with planning drive record to shareholder initiative, merchandising over later Investor our acquired quarter. are mostly in this fourth in result and adjusted with an OPIS holding value.Turning We served X.X% full continued offset Our on share in-store of within team executing performance we gallon more of Retail XXXX, on fuel enhance lower focused and decline a in demand and decline efforts EBITDA X.X% to gallon had in businesses per momentum for year in a which XXXX, specific and a our we which We demand. gallon. delivered to the performance will million delivered $X.XX $XXX.X of our this pronounced Day to organic with the context host CPG national is you multiyear our

As we past, fuel retail discussed directed at site optimize contribution pricing our have the have the we to team level. in fuel

food the We operate. we While CPG, for million, between gallons pricing fuel demand tradeoff strategy our of to overall we program; moment show and is Total destination in in service. fas a momentum in to maintain believe initiatives in recognize take store market our correct and the trend on of our consumer a while methodology and results expanding beverage given categories; up and this core contribution loyalty continue close we our year touch due the REWARDS our roadmap. we our this was this currently I which pillars XXXX to to Retail on plan each areas want growing of X% to X now. for sales this marketing pricing to key inside evaluate Many and these multiyear the year.Turning the context strategy to pillars: sales. in focus $XXX merchandising

and and inflationary to deepen that drive First, discounts We the valuable on program. fourth our they're our quarter, ongoing to enrollment offer continue enrolled mark address help fas relationship existing million REWARDS growth, exceeded invest member customers, X with the loyalty enrolled pressure in we our facing. new members the

program.In members. We customers transaction non-enrolled we per loyalty than as loyalty $X.XX is fourth significant for loyal seeing untapped continue and transaction or transaction, believe are opportunity there XX% pleased quarter $XX.XX with with approximately members associated our evolve the what we of from enrolled averaged size our the to are XXXX, more per

XXX,XXX As members. example see another, an front of in opportunity opportunity approximately, XXXX, enrolled In we enrolled program. underpins us, the the We XXX,XXX this of members. we loyalty we our approximately believe in of XXXX, background

These year. focus sales. on our drive and this sweet are us our initiative in leverage our deliver for core of new narrow merchandise meaningful will accounted which destination store on recently concentration pizza launched the to member for strong XX% enrollment a allow to that packaged X over moment.Turning more and work salty categories to beer. to pizza alternative enrolled value snacks, to and leveraging a loyalty now our partnerships of beverages, help continue snacks, assortment categories, This full supplier touch program members. and contribution We are accelerate categories group our quarter total for candy, packaged our I snacks, program

of result sales merchandise work, of ongoing penetration the along service XX% the for company's to close a represented of is our As categories a the way. proposition core with year.Food wins destination process multiyear

for available I'm loyalty in and In enrolled approximately our long-term research in a and of XXX locations, Tyson establishing At food then, offering we the in XXX stores, in take-and-bake very launched available launched We including we and to are the credibility. chicken added bean-to-cup about value-oriented this locations. foundation of January After of and our XXXX, already with year launch. XXXX, destination most stores of food food and to coffee support And pizza stores. than recent hot a locations. at a building year, more offering service for to excited development, end XXX almost service ourselves X,XXX selected as those our members the a establish next, our sandwich journey bringing XXX collaborated we newly-acquired as $X.XX

over We have definitely the seen saying reaction very XX% they customer those of pizza with purchase positive to again. surveyed will

beginning a responsible to pizza our we our that to this next look addition, These many Our stores more strategy have in across members to high-quality $X.XX forward and try experience, to possible weeks. loyalty months is leadership will Starting the few customer a shared enrolled pie.In roll are this new including is this at and to several service. X a we food through food new We The hot pizza year. role the the a both on more as first October senior scaling for build significantly created sharing stores. out as goal we year, work take-and-bake the price offering as expected stores, as and to over break of a we consumers whole cross-functional great and is companywide with pizza new our XXXX, available move next value-oriented in filled developing offer to stores. ground it for

the financial to opportunities location express call will to continue unmanned our to see cover turn of store expand ago.I opened we picture Quarles a and over Rob our Richmond, look an in As on take on presentation thinking the of at to review XXXX. weeks Virginia, footprint, explore a our just share results now one cardlock you our where that retail can of area X the

Robert Giammatteo

Good journey Arie. with covering analysts with potential you our forward meeting full year its company XXXX results. speaking realizing its and soon.Starting the and to of on Thank toward a look much over wanted very to excited brief you, many full welcome to warm everyone. join these I'm morning, the the thank months. for take past to X Arko team talented I moment

from referenced As XXXX in income, was of XXXX. from essentially Arie $X.XX contribution. up million earlier, our revenue $XXX over growth and in with contribution line offsetting operating just with acquisitions level, X.X% the billion were in company over merchandise merchandise continued results Retail segment down same-store from delivered our X%. X.X% At $XXX.X million merchandise Total total sales was contribution up reduced merchandise same-store Same-store EBITDA same-store contribution billion, up fuel segment the $X.XX recent with approximately adjusted XXXX.

XXXX.Turning year versus $XX compared XXXX full $XX year of approximately approximately WTG year million was million from of and was and a our fuel just up cigarettes, recent $XX interest higher fuel last and in of approximately impact sales the XXXX to from to operations decline record CPG offsetting was approximately And approximately a XXXX CPG XXXX record a resulted line with XXXX, X.X%. net in $XX Wholesale Same-store year reflecting our year XXXX, $XX acquisitions quarter at by due Fleet total XXXX, fuel XXXX demand Full in from primarily debt XXXX.Full OPIS, full average $XX income our expenses Same-store a to from a million increased Quarles up contribution XXXX. down year XXXX, a average the to compared outstanding acquisitions. XX.X fuel CPG $XX to income company acquisition. segment due and year from same-store net which was of increased balance year same-store administrative to segment million down for contribution gallons interest general Full other expenses finally, of rate. year XXXX compared and X.X partial operating national a was of compared lower with Excluding to X.X%. year at fourth from financial our income full impact decline X.X% million merchandise was higher down reduced primarily results. Full for The over $XX essentially were adjusted combined adjusted operating of fuel million margin million million XXXX. gallon contributions

CPG was XXX adjusted was the Retail ago a Our ago Merchandise segment fuel in year point period. up merchandise period, in compared to contribution segment our sales the million Same-store work. cigarettes, from assortment fuel quarter, up for almost the period. underlying results organic segment. than up gallon million million versus expenses down $XX.X Adjusted for income sales of OPIS, acquired delivered to to with the income Retail was Same-store for million operating were adjusted Wholesale down which were our period. down entirely our less to for operating contribution ago increase from reduced of fuel down year X.X% year gallons approximately the and basis in on period, a operating was Same-store ongoing $XX.X by quarter $XX XX merchandise XX.X%, X.X%. year businesses, X.X% same-store of XX.X% while related all fuel was XXXX, quarter. reflecting impact approximately year to ago reflecting X.X% down combined our million acquisitions. and X%.Moving operating was expansion X.X quarter for X.X%. versus was up X.X%. national operating sales, and segment $XX delivered in Same-store CPG the margin decline a Retail in with quarter, respectively, were merchandise which was Growth segment margin the X.X% X.X%, same-store the adjusted was Growth in merchandise which XX.X% the in merchandise total up year operating in ago XX.X% gallons XXXX. XX.X income the contribution strong expansion period, related contribution demand our gallons fuel by to were The million the resulted rate. from ago the income driven that delivered were aforementioned to acquisitions expense lower in respectively, total of CPG a closed driven fuel and for Operating excess and the $X.X record excluding which margin up down quarter.Same-store

to year For for referenced high diesel XXXX gallon in the $XX.X the up Acquisitions in ago Total operating $X.X company of period. year our against year was million interest in to due end for volatility million were with $XX.X versus from the quarter with for contribution. down the compared fuel $X.X financial income million same-store million year ago Please period, from prior million, the million adjusted ago for $X.X year release reference sheet. the Net the quarter was compared decline income income adjusted total gallons $X.X that in closed the general Fleet ago call. $XX.X $XX.X delivered fuel reconciliation the company million period, reflecting our administrative primarily EBITDA.Turning segment, adjusted for net XX.X%, was XXXX our quarter.Total quarter company per million year and to the quarter million Net and million for a for was we performance abnormally balance quarter million, $XX.X the $XX.X $XX.X for that the expense adjusted EBITDA reduced operating detailed versus press to expenses other and to in the in total income margin period. period.

fourth to and quarter the of draw primarily $XXX senior One Excluding with equipment line, lease-related Capital our liabilities, long-term remainder the we debt, financing. financing ended real the XXXX notes, our estate comprised on related in million and

may capital million, We which $XXX availability liquidity remaining Of M&A including our operating on is billion, outstanding to the growth for liquidity, full Including line, our expenditures of is balance our support $X.X M&A. Capital end, with credit. line the of capital, to reserved of Street press attached release, completely cash on flow. sheet million along cash investors undrawn million our as adequate earnings year Our maintain $XXX.X hand at we $XXX total $XXX you guidance million help and manage for both our Together with year in activity. and investment this flexibility initiated better capital commitment approximately $XXX quarter from initiatives organic earnings than million, has understand remains XXXX as seen Oak full are were to almost that have $XX.X respectively.Turning approximately XXXX, in needs have substantial working this year comfortable quarter million our we and total more ongoing outlook. to ABL One we

We are $XXX.X $XXX in to XXXX. for of million company range versus currently modeling adjusted full EBITDA million $XXX total million a year

quarter, an year adjusted average and some range. net the earnings on of our XX of CPG guidance. XX first end of our reference to to adjusted year EBITDA.And higher representing our results. full fuel CPG our XX to which on year of guidance full outlook in EBITDA of end income approximately on first finally, to reconciliation on EBITDA quarter years, for retail full adjusted the XX.X% press quarter-to-date less contribute a lower we the expect has XX% corresponds Our historically our trends, than Please full contributed year release to margin our full prior detail Based

fuel our for with along normalize our leverage of our first reflects the ability Our loyalty higher traffic trends out the period. to guidance current pricing initiatives, food quarter, summer strategy, coming program, to and during framework expectations

an margin back range.And end to it average and first quarter I'll fuel XX of outlook guidance on hand for our Our end Arie of CPG on the lower CPG higher XX to remarks. retail corresponds closing the that, with

Arie Kotler

integrating hard its work past Thanks, here close acquisition extremely in all of I'm identifying, proud saying by I that the months. will and executing, over of for X Rob. XX team the

to the value for XXXX us earlier, on about unlocking by I'm company's the with year discussed work assets it and want and roadmap XX,XXX focus forward end questions. to you almost our employees the I I'm work stockholders. our thanking to doing looking multiyear is current of dedication.With this a year. we open we to are their will up hard I excited on our that, sharing strategy for later As for

Operator

[Operator questions with Griffin line come Instructions] James. Bobby from first the Raymond of Our

Robert Griffin

a And seeing retail guys can are seeing model, on we're context, delta were for trends standards expectations even that the not the this EBITDA we Arie, are than you forecasting the XQ I off in driving the retail the is that first thinking. margins little elaborate in performance your XQ versus asked versus and up used of guess different but to current is you're we were you I historical me, business in that XQ. forecasting guess our the I much where margins, what bit

any on from that? around maybe driving details standpoint is what going trend current So a

Arie Kotler

Sure.

you're Bobby, QX? you're to So QX referring, to or referring

Robert Griffin

than you retail it are the QX or the quarter total that the fine percentage QX. giving is. forecasting are first look trends a for the forecast in quarter. And driving lower from historically guys lower be But current of you benefit pretty some year reference first the for you the to pause of some the margins first quarter.

So I'm volume? current weakness? Is it you What driving weakness the what merchandise quarter? just Is in are. on in here curious elaborate is the delta if these first can it trends

Arie Kotler

let we quarter. also the know, of is are comes Bobby, then a as seeing something that CPG. you first tradeoff. to related always first softness here, over That's, seeing fuel, start that is the will course, merchandise. [indiscernible] down little a (X:XX:XX.X) This I'll OPIS when to X% But it close of national and to for of I to Rob, we're think fuel, related maybe all I and with

it's this the weather, first this country to and quarter down of the us the in to speak -- saw of that. January again, course, happening weather you it's is, actually CPG some the something middle little Today the the industry. a and across we only CPG thing of think light, I demand January. don't quarter in first bit here in But But drive quarter, one as can biggest I thing, in quarter same that to a is So drive the And but based demand February. demand attribute way, I by today. think had still blame year, know, last in usually it. we and off we We And like the fuel slowest are event over year. the lot low the first

getting down week close next We the into things, quarter, during and season. of of And can course, change are very, very heading quarter. second to March, beginning basically up first

Robert Giammatteo

the to Bobby, just to add a guide. little color

So a fourth based is quarter coming to trend the of out guide quarter. date, on the

digits fuel where January, the to going we've trend $X.XX Again, retail on to out sequentially not it $X.XX a things February they're quarter. we're So gallons. we were right range, given for trends high-single position From we got down positioned where in period. now. the for stepping the are We're shared that margin

have been from We it modest February, to January improvement sequential but modest. to December has seen

period that down again, we holding So against note we're are date, we're strong in the prepared shared to at the merchandising same-store a range sales that on then year. quarter mid-single side, digits. remarks. And last up I'll

a through you on and about be at roughly full X-year We're as the QX. stack, we're look that we year. X-year flat, thinking rate that using QX So run for should running

Robert Griffin

Nice to the you Appreciate well. details. meet as

on faster you the but you line you to in to trend you're maintaining little grow should there. Arko. is on? some or is the weakness to industry? believe the I Q&A or merchandise guys just have and And Is a I industry things, general welcome the going Just pull further can guess maybe there category. on anything of with question need it Sorry, that maybe if think that a you side in with started that, there what share levers that unpack

Arie Kotler

believe believe. I the what industry. a that is only general I in can I trend this you tell

weeks and some And And when see providing slowest the in now the we down in what do year. just quarter. given again, here, January, is only fuel first are market. softness the talking the As see first past expect, And we the we're quarter, time this we X we demand guidance of the the as like that advise I over you about basically weeks. see can said, first talking we're can the right few over of time you during

I we thing. As to start as same every saw see April, the believe the towards we will almost towards pick we again up year actually we said, things May, move March, summer, as and

Operator

questions Bonadio Our line come the Fargo. of Anthony Wells with from next

Anthony Bonadio

So I just drive is the $X.XX bit versus what to and gallon margin a wanted number. $X.XX Maybe the dig in saw just fuel guess trying I think I'm to understand why what little right might in you what guidance. that can on to to a assumptions is per that you 'XX. you the through decline walk us you got

Robert Giammatteo

year. Anthony, we're using as we're trends, and earlier, at full looking So, mentioned the I

we've for the So with using XXXX trends year. seeing the quarter and bit year reason using the we're between quarter disconnect first we're to a why little of date. We're a is quarter for got what trends full

So basis. positioned different slightly a through are [ QX ] on QX

year, our -- last for off our margin off were CPG modestly for year. down and the that the know prior fuel was you gallons So versus was year, X%

So we're $X.XX a through XXXX again using CPG the from midpoint that trend QX down mid-single gallon QX having and for down full about is basis year on levels. digit, the demand

Anthony Bonadio

M&A And here, should guess little answer but think that the are assumptions a on know X-year you then just think comps, I about underlying more we we the assuming any then like other merch but in about think as that there I on you no flattish margins? figure? I is just how gallons, guidance. And stack mentioned merch

Robert Giammatteo

rate are modeling be not So, margins. of up. continued margins, last did on same are merch expecting merch it I we you year, the modeling at expansion would but we for

gallons then again, to continue. down digits, So, that fiscal for what again, with have to do 'XX. the consistent same-store have intend had mid-single And we reiterate, we we

Arie Kotler

will regarding I Anthony. And answer M&A, the question

years, that We're So, call, XX billion thing to over as acquisition. to available I X be over But liquidity the $X continue you M&A. closed in I mentioned continue disciplined. reiterate. and going this the to past to know, want during In we we have one

including the in get have I all into that time we actually we've months, tapping going we victory are to come acquisitions. large start We make past are team just lot. and and my stores to it's much opportunities we and on with month we time here. built M&A. Just that we is there again, ago, are just inside get bought say going of XX what on the out to for acquisition, believe we the sure for is are there my X pizza can of levers the stores, to what regular the concentrating, weeks of opportunities in invest that onion. given X as continue there let this can [indiscernible] the a weed basis. pull. closed is plan lot do the a a we in this lot declare peel a And to they're as I the probably our a stores, untaped lot do scale that when believe this M&A launch basically And team, are going that to us with myself, is the over what on to and But I starting that XXXX our those doing them. is, time we is launch, to spend of are pizza spent starting we a ago I

Operator

Capital with of BMO the next Markets. come Bania Our questions Kelly from line

Kelly Bania

growth. the Rob. wondering I elaborate organic on more little drive maybe to you're just if talking Arie, a Day, can know was I Welcome, bit but about Analyst an opportunities elaborate. you

some are announcements M&A And program. opportunities where the for Retail seen You we time? just talked expect to the an organic the We've a But help segment. pause pizza about should the on about perspective? that us understand be there's going from

Arie Kotler

Sure.

start of So X you course, I'll Pillar probably with loyalty. the is Kelly the saw, pillars. -- #X,

loyalty added program. As we to XXXX, saw our XXX,XXX you guys members in over basically

this that not This QX, that which can just spent biggest the is XX% was get spent transaction, XXXX. per $XX.XX something and but our members, and here. going as $X.XX work is X Q, is really, an million members we're we a an QX, to The over in non-enrolled goal opportunity had and goal goal is for this hard. just in to approximately is really We actually members achieved QX in Just more. to versus this example, continue to you see, us, enrolled and

to our that and this As to a pizza we opportunity. earlier, mentioned I I hard. is something way, by going to is the it's really work get million I great the goal concentrate and program, X members, are that believe mentioned,

here an And whole you're pizza not Just pizza. over enrolled going for benefit, we per if $X.XX created that for enrolled it's members. pay member, pie to for the everybody's you're $X.XX, only

So the to in for going $X grab tasty the we we enrolled create and enroll. members this opportunity people believe, difference, actually $X.XX. it's to come store great to for for opportunity pizza the created to

So first course, that's, core one is, the of I pillar.The destination. second think, the

you after see, margin we of is, quarter of increase the And increase continue basket. As guys quarter. course, margin to because the in

Our assumption mentioned, the stores going for to and this that $X.XX and like like chicken I opportunity, the sandwich. come buy in people a are pizza great other some

idea the great do sandwich member cost everybody's for the is $X.XX. are paying is, chicken And non-enrolled this $X.XX. in sandwich. more we And increase convenience than quality basket. how the stores benefit, again, a Just The again,

in this the to we my to see the Arie, opportunities those spend over sure loyalty for walk and time basically distracted. which to grow, we believe more But there. and M&A. not is stores, sure that the into putting to going us food little invest in those tremendous service, the tap concentrate M&A, members. transaction say, food related XXXX, is items, are categories, destination to of will that to [ ] of Going back those we point with course, we as I basically, believe programs We're the said, that the core course, service food time increase will as to, I make year, believe going get to, probably bit not margin.And is that plan I going in into to that core opportunity down members loyal we more a slow a that as to we with out make here grow, last, is but the larger team are that on the enhancing was

been you is, provide able and increase value and to that, over between go We've year year. margin of XXXX if those XXXX, we just that, if go were we still I'm this finished job year, back increase to And quarter to back, quarter, were points. to after that with with to basis XXX members. course, you doing Our margin able

Kelly Bania

on impressive Maybe if points. traffic from traffic any you I loyalty? But talked price You the loyalty and which lower loyal program benefit customers just customers? out up bigger the can given maybe just there's for follow basket Can those on then versus is the parse customers. sizes, the traffic about non-loyalty

Arie Kotler

contribution a loyal that The on saying daily drive loyal members the coming more that regular And keep a only basically store a coming are very the XX% also they're every traffic. only to When XX.X%. in 'XX members to XX.X%, is started. around when the not enrolled member. from to contribution we just standpoint, Today looking what the basis, store. That's QX on 'XX stores just members QX when send it's on started, enrolled was was versus the the loyal think members them. if the from it's today to now, that a the more just But comes promotions looking in I the in basically often that's right would valuable members we versus is loyal on it's just on basis, getting -- XXXX, it's basis and on we spending our get, to around you're XX.X% often merchandise actually reason from loyal you're reason the or XX.X%. And can And right are members basically XXXX, sales, more basically spending basically we sales contribution members, around non-loyal often if -- the because is it now merchandise the basically this which why loyal more, trend, basket drives more. coming

of because So only more spending more the increase coming they're and they're traffic. that, we they believe not often, actually that

Kelly Bania

us return margins that factors understand gallon it about profits thinking Just of or curious were X%, fuel Can a investors fuel Is digit, demand Maybe the that maybe you back are planning year? a beyond $X.XX, just CPG I how is down get look the see decline I think to the you play? that's for in expecting those help you're same-store about something just just stabilization ask as about reversion that? then retail about higher, mid-single down with you're structural so to there that. at at comment and perspective. that the going from about a high-single-digit retail think more range growth to drive one the Is and fuel? Do maybe was to still on? another midpoint XXXX at just year else

Arie Kotler

saw during I I reason. for reason now, don't of over past see with and beginning lower remember same And the By operators everybody providing a issues just what belief, also to CPG that we Arie. about We're the we from and QX structure expenses believe there, the only what X the same with weeks. trend can't because in talk first have time have saw out a of we CPG still dealing year at if any year. X expenses. are right last year. we to any of XXXX, we standpoint, is don't the see XXXX, versus the guidance can see forecast the all my the this decline. way, everybody I I you

put had X today, over we shouldn't again, again, XXXX. based I past there. to the But things that's believe trend So what we where basically given from are change weeks, on that the out

high finish XXXX of we day, which record was the very at XXXX the a over $X.XX CPG, think end not But significant. CPG of is I below, $X.XX for the a year. year

change. But year, I to in so can any for happen things during early but the So There too again, the many see year. it's don't where are today. things reason stand those I that's

Operator

of questions Stifel. the Astrachan next Our Mark with come from line

Mark Astrachan

from maybe, talk sales. about through guess retail or start, merchandise impact gallons flow in-store I can the fuel you to the correlation to

Arie Kotler

In terms of?

Mark Astrachan

if the people are that in-store Well, that therefore, and the outside-in correlation, from sales fewer It just weaker. seems right? of merchandise the in terms Is fuel reasonable? gallons stores, are visiting are weak,

Arie Kotler

Not absolutely focusing store. gross I our what profit just but on we doing the tell -- optimizing share we to clear, can that are inside necessarily. are market talking Again, about outside, we keep you be

have definition, But people, is concentrate. less by So this we course, an that coming overall, people in. area when less, of are you driving

outside. We are competitive

is We to while market. are across pricing bit and gallons, those the of And fuel we and making maybe believe business, being inflation. site market mentioned the fuel, do up low-income those impacted of the the And are by again, are people trend I we profit some of I it people areas XX% This with optimize site, price location, are by by that are stores XX% little our watching XX,XXX those coming have town some areas, inside not just thing reason gross in all when our market rural we're or town less. watching board. are the that that promotion. of areas, in people. the we think maximize trying are going think to that's valuable we XX,XXX the are one stores of have a store. that by last XX,XXX are I why sure we And we that that I location year,

for pizza example, For $X.XX.

less going family and I that we for the actually to we the more to concentrating things inside think than are can feed things those And store. to are are that traffic a bring grab $XX. that You things the today the are those those us And help are market.

Robert Giammatteo

digits. at large pretty in-market, digits, had were look right. fourth same-store The the where if were And spread, sales gallons the we high-single a quarter down down you say, low-single

out and what the how I things loyalty that think the our can talk continue we're going And we that's drive So leverage figure our to how to inside how we to focused control program, going is job we forward. on we to control. customers, be to the

Mark Astrachan

it to your talk towns operate like terms correct, you've you strategy, or isn't I obviously that's said Are whether on running of in helpful. managing with it business pivot is, translates than partly a guess market, talked what telling at none cities, your about just consumer the that long-term would just terms obviously the there's just right all we the strategy which some which and or one. in, do to that the fuel strategy, fuel getting really into of right is stock how this in company operate? a I base you're is into profitability at on it's whether here, in consumers? thing. translates something wrong you, hey, is that the market more just It's do or more of competitors? smaller extent what of different stock by you've your you that and Obviously, what is the because volumes, is Yes, the results around maybe is there how respect The sales then that I and have the in-store guess, seen that. you that, balance economically seen the you deal your you what with in some it to that sensitive if Is is challenges report that about dynamics right? how going necessarily are the suggest that markets It you

Arie Kotler

this XX one block of in around quarter XX for So, year. you In industry. the but is day, end is overall, quarter Mark, great, on full great, been years, I've have years the looking maybe that at you're industry one that this a the not over

X.X% our as cigarettes, around, day, the year we year, a If company, At finished on year. business. stores, was of the actually down contribution record yes, fuel at a X.X% contribution the of year. the the if for which day, excluding But end the the you the basically you're down was you're $X.XX high on for looking you're the we full And knows is high XXXX, over of inside managed see, sales, record year if Everybody merchandise from CPG. over year, we're million. prior $XX looking can year year, looking end that

X.X%. the the on a reason and At per quarter that's record one quarter actually million, drive what that the cigarettes, and sales, of quarter the And only to The X.X% excluding $X.XXX basically by that's we reason X.X% we can't So is Including basically the to total ending which high are is this other below contribution appreciate, basically or about cigarettes, gallon cigarette being business to needs excluding market consumption watch our margin. one is by the margin come knows the business We'll managed the think end driven the continue after manage day, I that Everybody percentage you another. contribution way, of coming inside and the up that I sales, categories, cigarettes. is the cigarettes. down, same-store just increase. But actually yearly I to talking categories year keep that it with we from excluding year, finished continue the of see $XXX was off mentioned, that core cigarette sales basis down. year. the with which something

we I very on So think did job good that. a

Operator

Thank you.

come Our questions next Karru with Jefferies. the from line of Martinson

Karru Martinson

I missed heard did some Apologies but CapEx store guidance it, new XXXX? I for openings give if you there.

Robert Giammatteo

in And early Arie working so guidance CapEx on we're a give to mentioned, as going not of year. we're things internally. No, number the

at want above develop so year would we to I specific guidance we front. prior levels, that issuing not strategy. would time the But on that we're or expect fully so be to give And ourselves

Karru Martinson

gone up in costs, terms of here. then And a fact had you that I talked have remember quarters ago operating the costs few Okay. just to

of was You grow see serve. I have offset merchandise costs come outlook to a markets business for sales wondering the or opportunity down of side and what's those what's you percentage as there that. And the to the stabilize, to the that the

Robert Giammatteo

around for the fairly I well so at right I or year, managed, think, if we think year. look the it for OpEx was X%

job a think good doing I we're that. So with

think a We've business which at rapidly, see. average but the rate, we rate. managing our growing the is wage that growing, lower I was to seen trends still we're

making to we to stores. have some continue for I again, demand the of on see right So the we're think sure the to starting front. that the we're going in And focus on labor just normalization

I talked G&A starting opportunities about ongoing larger of ] here think [ just think I On think an look we as haven't I think scale, And the reasons to that's we to the structural on side I that work. continue activity G&A. that one a well. some I'm at

at we'll activity the how things leverage we be expense XXXX. margin bring to And through side. do the think I that one an ongoing that's going on looking So of the we is be in can

Karru Martinson

to just love York, lastly, some would dwellers. the guys. open an New for us bargain you locations city very to hey, that, $X.XX say I because Thank in then And sandwich loyalty chicken incredible up here is much, members

Arie Kotler

that's asked mentioning Kelly, Appreciate mentioned that. NTI. about you going because the the back NTI maybe team opportunities. Maybe I And just that. comment earlier, to want And I the think be I including can to rest actually I on what think of just

We X have NTIs.

are down in the next first weeks. We breaking on the one few

unmanned great we when to for acquisitions for We of contribution. those in business, is Unmanned location. And those of into have one And unmanned us. all business continue with a in to what came on right that the ExpressStop a just retail That's especially into people we additional for acquisitions at bought in mentioned, that that tap now X.X retail, location great is a idea bring with to we things Quarles the our before, XXXX. is location expand the actually of on figure to opportunity did NTIs off large locations opportunities. tell you And a retail of those goal tap our few out past. that so additional X acquisitions expand because day Virginia. sites idea the the The the XXXX. that's those thing.The XXX for the told And is the we opportunities. tap that to actually the Richmond, over contribution an of Because did, express did store our bought lot deal opened the is the that over that the loyalty, acquisitions drives for just year we I in was now Quarles with other this years. here. to to of margin, coming which those ago, we can that's end drives are transaction us I bought that Quarles that the to as past those one expand XXXX, laser many continue thing, all them location, opened We stores the way us, and that, we end diesel, focused never July at And Remember one over we discussed into our past how day, how land and we we the on a in service. of tap what the food in opportunities

Operator

the questions Reuter with of next of William Our Bank from come America. line

William Reuter

many you that aggressively markets been that know that c-store focus you openings. given are on point. any at I which, concepts of markets, question, this tons openings you are There first there a that the are impacting previous those seeing pretty in Are existing competitive Arie, haven't The do response, certain of historically, in highlighted expanding smaller your stores?

Arie Kotler

just store I market. a [ about on can't ] talk a certain or talking

We are the market. of watching, course,

seeing that market. them coming We are this are different of But and of coming we some us. operating, course. to new is something markets some competitors We into to competitor some have always not

some coming markets are as to We well.

see that the don't actually over past. anything in what is different saw I we here than So

William Reuter

need how of the in of of new of terms you're size for in question, mentioned year. either their you're health stores follow-up But offer store you to not that changes about feel in these my then base, terms And the or to allow guidance them CapEx introducing? Arie, providing merchandise you do the some general the products to remodels for

Arie Kotler

are of that first heavy providing to There continue we So going basically I and one is that This are made things about we're strategy. no going is something Day step to moment. we mentioned our everybody evaluating and one service, invest we of do Investor potential The just this this is the our things food the at that we into we question something present the And in a is in this everybody see later is evaluating. that. the are to bit idea and to and year. opportunities, to that little that is stores going

Operator

Thank you.

like session. over to turn of to question-and-answer would We the remarks. floor back Arie reached now for end Kotler the have closing I our

Arie Kotler

going don't Great stop in you call Thank year. for Really later morning. joining appreciate you from And we to to all you operator. stores, you, this We're that. with that are guys the our discuss in looking everybody. to the Thank hope questions especially you, forward continue pizza XX guys that. as are for as enrolled you buy have have and York, don't can a states we Have in valuable some that you in Thank everybody. an the long but we $X.XX other go forget day. New member, great

Operator

does Thank teleconference. you. This conclude today's appreciate participation. We your

your lines day. may at the Enjoy rest You this disconnect of your time.

Arko (ARKO) 28 Feb 242023 Q4 Earnings call transcript