Susser's Obamacare Budget

ACA to add up to $4 million annually to convenience store retailer's costs

Published in CSP Daily News

By  Angel Abcede, Senior Editor/Content Development Coordinator

CORPUS CHRISTI, Texas --As business across the country assess the additional costs that will hit with the eventual enforcement of the Affordable Care Act (ACA), or Obamacare, Susser Petroleum addressed the issue during its quarterly investor call last week, saying it is adding $3 million to $4 million annually to the company's health care costs.

The call focused on the first-quarter performance of the firm's master limited partnership (MLP), Susser Petroleum, with officials careful to announce that they would not address the recent purchase of its parent, Susser Holdings, by Dallas-based Energy Transfer Partners for $1.8 billion.

Overall, personnel expenses were 21% of merchandise sales versus 20.6% a year ago, said Sid Keswani, senior vice president of store operations for Susser Petroleum. He attributed the overall expense increases in its first quarter to several factors, "including a shift towards more foodservice, which acquires about two-to-three times the labor as a percent of sales versus traditional convenience store merchandise; lower-than-expected top line growth, due in large part to the cold wet weather; labor inefficiencies related to ramping up new Stripes stores we have opened over the last six months; extra labor and travel costs for our store managers and area managers that mentored the new teams at the [47] Sac-N-Pac stores that we purchased at the end of January; and higher health care costs."

A number of factors offset the health care costs, Keswani said, including "continuous improvement in the management of labor hours worked versus our staffing model, careful management of our wage rates and a significant increase in the ratio of part-time versus full-time for new hires this year."

Last spring, during the NACS State of the Industry (SOI) Summit in Chicago, presenters noted an industry trend toward hiring more part-time employees as a response to the ACA. Glenn Plumby,SOI presenter and vice president of operations for Speedway LLC, Enon, Ohio, said the number of employees per store reported in the NACS data is up 19.5%. And between 2009-2013, the number of employees per store went from 11 to 15. Plumby attributes some of the activity to companies getting ready for the ACA.

"Our part-time workers are up 32.2%," Plumby said. "In 2013, part time actually doubled what it was in 2010. We're reacting to ACA, [by adding] four more employees to the store. That costs money."

Plumby also pointed to the pressure of an increasing minimum wage. He showed a map of the 20 states that have enacted minimum wage increases and an additional 17 considering it.

"When minimum wage goes up, it's not good for our industry," Plumby said.

But growing companies are forced to deal with these rising costs, with Susser officials saying their plan is to open 26 to 35 new stores every year, which means added labor. Sam Susser, founder, chairman, CEO and president of the company said that the company is having to add more than 1,000 net new jobs to support its current level of growth.

"And that's very challenging," Susser said on the earnings call, especially in light of the chain's successful "Laredo Taco Co." restaurant concept. "So we feel that the people-development side and getting the foodservice culture and the customer-service culture right, that pace of growth is also a bit of a challenge. And I think we, in terms of organic growth, we would need to be thinking about stepping that up incrementally as opposed to a giant-step change."

His opinions were dependent, he said, on the "continued recovery strength of the economy and population growth in the markets that we serve. And it's very strong right now, and we're feeling better about the outlook as more and more of these industrial plants are breaking ground and getting permitted. … The outlook is very bright over the next three, four or five years, and I think we can keep creeping up new-store growth."

Click here to view CSP magazine's April cover story on the ACA and its impact on the c-store industry.

By Angel Abcede, Senior Editor/Content Development Coordinator
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