Susser Sums Up

On first investor call since IPO, retailer addresses growth, rebranding progress

Published in CSP Daily News

CORPUS CHRISTI, Texas -- On his company's first quarterly earnings call with investment analysts, Sam Susser outlined Susser Holdings Corp.'s third-quarter results while echoing some of the growth objectives outlines in the company's initial public offering (IPO) filings with the U.S. Securities & Exchange Commission (SEC).

Having gone public in October to the tune of $113 million, CEO Susser said the new capital will make achieving those goals possible. The proceeds from the IPO will help us continue to grow the company while maintaining a strong [image-nocss] balance sheet, he said, and it will give us the flexibility and wherewithal to look for additional acquisition opportunities in the future. [See story at left for a complete quarterly report from the company.]

The growth is already under way, with four new convenience stores having been opened in the third quarter, and one store having been closed.

[That brings] our retail count to 323 [sites], Susser said. During October, here in the fourth quarter, we opened three stores and expect to open approximately five to seven additional stores in the quarter and close three to six stores. We have 18 to 22 new retail stores planned for 2007, and substantially all of these new stores are expected to have a Laredo Taco Co. restaurant.

Susser's proprietary Mexican food restaurants have proven to provide the Corpus Christi, Texas-based chain a strong advantage, according to Susser. We believe Laredo Taco Co. will be one of the major drivers of sales growth going forward. We already make more gross profit from the 142 Laredo Co. restaurants than we do from cigarette sales on all of our 323 stores, he said. Laredo Taco Co. also drives increased customer traffic and drives sales of other items, such as fountain drinks, juices and snacks. That's tremendous operating leverage, and that's why we're putting a Laredo Taco Co. in nearly every new store we open.

Thus, next year the company plans to open eight to 10 more kitchens in existing stores, as well as include the restaurants in most new stores.

Meanwhile, Susser is continuing its gasoline and store rebranding efforts, with the goal of getting all its stores switched to the Valero and Stripes flags early in 2007.

We began changing out the gasoline branding signs over the fueling canopies at our stores in September, and we expect to be done by the end of the first quarter of next year, Susser said. We're also making good progress on rebranding the retail stores from the Circle K brand to our own Stripes brand. Between the signage conversions and new-store openings, we now have 125 stores flying the Stripes brand, and we expect to substantially complete the change-out by the end of this year.

And with so much growth in the plans, Susser made it clear that the main thrust right now is toward new construction, but some acquisitions may be in the offing.

We are hopeful that we will be able to continue to find acquisitions selectively in the years to come. We plan to be very thoughtful about that and selective, he said. There are major oil companies in our region that are looking at divesting certain [properties], and we are building relationships to have M&A opportunities, but our primary focus is definitely on the organic growth side.

One other effort that will help fund that growth is a new drive toward the sale-leaseback of some properties. We invested $18.6 million of capital in the business this quarter and $39.5 million through the third quarter, primarily on new store growth, which will continue through the fourth quarter, said Mary Sullivan, the company's CFO. We do plan to complete $16 million to $18 million in sale-leasebacks before year end to finance a portion of this year's store growth.

Keywords: 
M&A