For Murphy USA, Proximity Equals Productivity - eMarketer
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For Murphy USA, Proximity Equals Productivity

Convenience store's strategy proves successful

May 15, 2014

Most people are hardly surprised when they hear Apple is the most profitable US retailer, with its stores generating average sales per square foot of $4,551 in the trailing 12 months (TTM). However, almost nobody would guess that No. 2 on that list—well ahead of Tiffany & Co., Michael Kors and lululemon—is a convenience store retailer. Murphy USA, recently spun off from Murphy Oil Corp., sees more than 1.6 million customer transactions per day at over 1,200 stores and generated average sales per square foot of $4,221 in the TTM—or nearly eight times the industry average.

Store Productivity Metrics for US Convenience Store Operators, TTM

The company utilizes a unique business model, locating nearly all of its sites adjacent to Wal-Mart Supercenters. Murphy benefits from Wal-Mart’s customer traffic and also offers a discount program in partnership with Wal-Mart, which offers cents off per gallon toward fuel. The main draw for customers is Murphy’s industry-leading low-cost gas prices, and its small-format stores offer low-priced convenience items such as single-serve soft drinks, alcoholic beverages, single-unit snack items and tobacco, all of which complement rather than compete with Wal-Mart’s product offerings. Traditionally, tobacco made up the majority of merchandise sales, but nontobacco sales have increased from just 14.8% in 2009 to 20.0% in 2013.

Stores average just 440 square feet, compared with an industry average of 2,744 square feet, with 77% of stores just 208 square feet or below. However, over the past few years, the company has rolled out a new 1,200-square-foot prototype, which allows for expanded offerings such as an in-store ATM and refrigerated units, as well as higher-margin items such as dispensed coffee and fountain drinks. More than 13.1% of stores are now either 1,200 square feet or a large-format store (between 2,000 and 3,500 square feet), up from just 7.7% three years ago.

The company opened 39 stores in 2013 and expects to add between 50 and 70 new stores this year, with plans to open an additional 200 new sites at Wal-Mart stores over the next three years. And because of the unique relationship with the world’s largest retailer, there’s still plenty of room for expansion. Murphy notes that there are still 1,204 Wal-Mart Supercenters in its core markets and another 852 outside of its core markets that don’t currently have a Murphy site.

eMarketer compiles data on 225+ retail companies for a range of metrics, including sales, store productivity, earnings, ad spending and employment. The data comes from SEC filings and earnings reports. All figures are net

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