Corner Store … 'Corner by Corner'

CST CEO outlines new-store plans, foodservice direction, more

Published in CSP Daily News

By
Angel Abcede, Senior Editor/Content Development Coordinator

CST Brands Corner Store

SAN ANTONIO -- Touching on its growth strategies for new builds, foodservice and fuel pricing, officials with the new CST Brands discussed the company's third-quarter earnings Monday during a conference call with investors and analysts.

Describing the year-over-year earnings growth as "strong," Kim Bowers, chairman and CEO of CST Brands, said the company is making "great strides" as a separate, publicly traded company spun off from Valero Energy Corp., also based in San Antonio, earlier this year.

She named areas of culture and brand development as key areas of improvement, along with the rebuilding of its administrative and information technology (IT) infrastructure that had to be reestablished when it separated from its oil company parent.

On the new-store front, CST opened 15 in the first nine months of the year, with the third quarter of 2013 being particularly busy with eight grand openings in the United States and two in Canada.

Bowers said the new stores are performing well inside, noting how part of their strategy is to sacrifice fuel margins to build volume and traffic. While at the company's established "legacy" stores, the strategy will be to optimize margins, often at the sacrifice of volume. Other officials noted that the strategy at legacy stores did not appear to affect inside sales.

"At our new stores, we look at balance, pushing volume from time to time to generate traffic," Bowers said. "For our legacy stores, we have to strike a balance between margin and volume. We need both. At those stores, we're more focused on that optimal balance. It's a corner-by corner-analysis."

Officials noted that costs of a new-build were in the range of $3 million for the building and $1.5 million for land, with the most activity to occur in Texas because of its projected population growth.

With regards to its foodservice strategy, Hal Adams, senior vice president and CMO for CST, said there is "energy … around developing lunch and later-in-the-day snacking" offers. Another opportunity is developing a fuller breakfast offer. New staff specializing in foodservice is already injecting fresh ideas into the mix to enhance menus and hone the strategy, he said.

Addressing private label in foodservice, Adams said the company is interested in its "Fresh Choices" brand going forward, and executives are encouraged by the private-label strategy in general.

"It builds value to the Corner Store brand and loyalty with customers," he said.

For the three-month period ending Sept. 30, 2013, the company reported net income of $41 million. It reported net income of $24 million for the comparable period in 2012 (see related story on CSPnet.com and in CSP Daily News for a report on CST Brands' financial performance).

CST Brands is a convenience store retailer with 1,900 locations in the United States and Canada and $13 billion in revenues. It is one of the largest independent retailers of motor fuels and convenience merchandise in North America, operating throughout the southwestern United States and eastern Canada offering an array of convenience merchandise, beverages, snacks and fresh food. In the United States, CST Corner Stores sell Valero fuels and signature products such as Fresh Choices baked and packaged goods, U Force energy and sport drinks, Cibolo Mountain coffee, FC Soda and Flavors2Go fountain drinks. In Canada, CST is the exclusive provider of Ultramar fuel and its Depanneur du Coin and Corner Stores sell signature Transit Cafe coffee and pastries.

By Angel Abcede, Senior Editor/Content Development Coordinator
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