Dive Brief:
- Murphy USA plans to ramp up new builds and rebuilds through the end of 2024 and into the coming years, company officials said during its Q2 earnings call on Thursday.
- President and CEO Andrew Clyde also said that Murphy USA will probably not be turning to M&A for significant growth, noting that the company sees organic growth as “a better capital return.”
- Murphy’s disinterest in M&A comes as several major c-stores have turned to acquisitions this year, including Thursday’s announcement that FEMSA, parent company of Latin American c-store giant Oxxo, was buying Delek US Holdings’ retail assets.
Dive Insight:
While acquisitions can give companies a big, quick boost, Murphy plans to stay the course on its slower approach to growth.
So far in 2024, the company has opened five new Murphy stores and one QuickChek. While this is well short of the company’s goal for the year so far, Murphy USA CFO Gallagher Jeff said, “I want to emphasize we will achieve our guided range of 30 to 35 new stores this year.” He noted that the company already has 22 stores under construction, three of which are QuickCheks, and another slate of new store construction expected to begin in early September.
“The new store pipeline is in great shape, and we remain highly confident that new store growth will increase again in 2025 becoming a more sustainable and significant contributor to EBITDA,” said Jeff.
Murphy opened 28 new stores in 2023.
Moreover, he said that the company has reopened 11 raze-and-rebuilds — where the company turns miniature sites into 1,400-square-foot stores — so far this year, with another 25 already underway. Murphy now expects to complete between 40 and 47 of these projects this year, compared to the 35 to 40 the retailer originally expected for 2024.
The company is targeting more raze and rebuilds than new builds because they tend to be easier to permit and build and come with “high reinvestment returns,” Jeff said.
“Given the higher level of construction activity this year, and our ability to get a head start on the [2025] new store build class, we expect our full-year 2024 capital spending to be at the high end of our $400 [million] to $450 million guided range,” said Jeff. “But this also means we can expect many more new store openings in the first quarter of 2025.”
While Clyde did not rule M&A out entirely, he noted that an acquisition would need to be a unique portfolio for Murphy to make a deal.
“When we look at our organic growth opportunity, we just see [organic growth] as a better capital return because you're getting a new store designed the way we want it, the way our customers want it, that works for our employees,” said Clyde during the call.
El Dorado, Arkansas-based Murphy USA operates more than 1,700 c-stores in 27 states.