Thanks, SpongeBob!

Keyes talks to The Fool

Published in CSP Daily News

DALLAS -- The Motley Fool.com said that 7-Eleven Inc. has SpongeBob SquarePants to thank for its recent strong earnings. The popularity of SpongeBob Slurpees and a surge in gasoline sales have helped the chain post its best first quarter in years, the investment website said.

David GardnerMotley Fool co-founder and chief analyst for the Motley Fool Rule Breakers newsletter and host of The Motley Fool Radio Showrecently asked 7-Eleven CEO Jim Keyes about the company's current success and its goals.

Here are some highlights:

DG: For those of us who don't know about 7-Eleven's product line, Jim, tell us about the role that SpongeBob played in your recent success.

JK: SpongeBob has been very good to 7-Eleven. Of course, the Slurpee business has always been a favorite among our customers, and the kids just love SpongeBob these days. So when we were able to put out a special SpongeBob SquarePants mug with "Under the Sea Pineapple" flavor for the month of March, our customers really responded. It helped us drive the Slurpee business. But that is just the beginning. We have got more things lined up for the summer that will make it very exciting for the Slurpee business.

DG: To what extent has 7-Eleven benefited from higher gas prices?

JK: We really have not benefited very much. You see, we are a net buyer of gasoline, so by the time we buy the product, we move our inventory so quickly that we are even more vulnerable than the consumer to rising prices. Now, we have been fortunate. We have been able to pass those prices along, and our margins have been very solid.... Yes, we are an energy business, but it is just like anything else we sell: Our primary purpose in gasoline is convenience. We want lower prices. It is better for the overall economy, and it is certainly better for our customers, so we like it when the prices go down. That is when our margins expand, and that is when our customers are most happy.

DG: Can you give us a sense of the way that my local 7-Eleven might be different five years from today [from] where it is today, from your viewpoint as CEO?

JK: We think your local 7-Eleven in the future will look and feel much more like a fresh-food environment -- perhaps a Starbucks or your local deli. It will be brighter; it will be cleaner. It will be merchandised more for portable, high-quality fresh foods. Now, we are still going to have the basics of convenience. We will never lose our heritage, but we think that the consumer, going forward, is going to want much more portability and a better place to pick up...healthier alternatives for lunch or for breakfast, or even dinner.

DG: Jim, which one would 7-Eleven benefit most from its disappearance: Starbucks, Krispy Kreme, McDonald's or my local mom-and-pop convenience store?

JK: That is a tough call. We actually like the work that the Starbucks and even the McDonald's and the Krispy Kremes have done in elevating the perception of portable fast food and drink for the consumer, so they are actually good guys from our environment. We are actually pleased with McDonald's foray into deli-style sandwiches. We think that is good for us because they are helping to make the consumer more aware. The local mom-and-popif they become consolidated and are able to uplift the image of conveniencewe think that would be good for the industry. In many ways, we are kind of like the Kleenex of the convenience store industry. People know 7-Eleven, and we become generic for convenience stores, and sometimes they walk into a mom-and-pop and they think they are in a 7-Eleven, but they are really not. So, yeah, if I had to pick any of those three, I would say mom-and-pops.

To read the full interview, click here.