Murphy USA (MUSA) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported over $1 billion in EBITDA for 2024, indicating sustainable earnings potential [7] - Retail margins improved by 50 basis points to$ 0.281 per gallon despite challenging market conditions [11] - Operating expenses per store month increased by 5.2% in 2024, driven by new larger stores [24][25] Business Line Data and Key Metrics Changes - Merchandise contribution dollars reached $834 million in 2024, up 3.8% from 2023, with a notable increase in the fourth quarter [22] - QuickCheck Markets faced pressure from food inflation and competition, impacting their performance [9][23] - The Murphy branded network saw per store merchandise sales grow by 3.5% and margin dollars by 5.9% for the full year [11] Market Data and Key Metrics Changes - The company sold approximately 4 billion gallons of fuel in 2014, growing to nearly 5 billion gallons by 2024, representing a 21% increase [20] - Average fuel volumes per store month in 2024 were 240.6 thousand gallons, at the low end of guidance [16] - The company expects to sell just over 5 billion gallons of fuel in 2025, a 4.5% increase from 2024 [19] Company Strategy and Development Direction - The company plans to accelerate its new store program, targeting up to 50 new stores in 2025 [15] - A balanced capital allocation strategy focusing on store growth and share repurchase has been emphasized [31][32] - The company aims to enhance store performance through initiatives like fuel dispenser health improvements [98] Management's Comments on Operating Environment and Future Outlook - Management acknowledged 2024 as a disappointing year due to various challenges, including rising prices and severe weather [8][9] - The company remains optimistic about long-term demand stability and margin growth potential [12] - Management expects continued pressure on QuickCheck Markets but anticipates strong performance in core merchandise categories [23][24] Other Important Information - Total capital spending in 2024 was over$ 500 million, with a similar level expected for 2025 [29][30] - The company repurchased approximately 938 thousand shares in 2024, reflecting a commitment to shareholder value [31][32] Q&A Session Summary Question: What drove the non-nicotine category to flip positive in the quarter? - Strong performance in Murphy stores with double-digit growth in several categories attributed to digital transformation initiatives [44] Question: Can you walk us through the implied non-nicotine gross margins decline despite better sales? - The gap between sales growth and margin growth is primarily due to how lotto and lottery are reported [48] Question: What are your thoughts on the buyback versus balance sheet leverage? - The company maintains a 50/50 balanced capital allocation approach and can leverage up as earnings power grows [56] Question: Can you discuss the CapEx guidance for 2025? - CapEx for 2025 is expected to be around $500 million, with a shift from raise and rebuilds to new store openings [62] Question: What discussions are you having with vendors regarding promotional support in 2025? - The company values high volumes per store, which positions it well for discussions with vendors [68] Question: What are your expectations for the performance of new stores? - New stores have shown high performance metrics, and the company is focused on making up for missed expectations in future years [86]