Tobacco is a great business for Murphy and one they continue to "major in" because it drives habitual traffic. Replacing kiosks with stores has helped to diversify Murphy away from tobacco and lower their fuel breakeven cost. Murphy’s small footprint makes them cheaper to build (they require 1 acre vs 2 for QuikTrip), cheaper to maintain, and easier to staff (1-2 people). Convenience stores average 7,000 sqft, so these are still tiny by comparison. The new store format sells twice as much high-margin, non-tobacco merchandise as kiosks.
The raze-and-rebuild program replaced kiosks with 1,200-2,800 sqft stores. The highest ROIC growth opportunities are behind Murphy but the current opportunity set still looks decent. They're building stores further from Super Centers but in areas where they are well known. More recently they’ve begun in-filling their best markets. Murphy has struggled to find good store locations since QSRs (quick-serve restaurants) are often willing to pay more. They'd cherry pick the best locations for the new builds near Super Centers or similar stores like Home Depot and Lowes.įrom 2016 through 2020 Murphy built 168 stores, 34 per year. Murphy aimed to build 30-50 new Murphy Express stores and complete 20 raze-and-rebuilds per year. Grey = Repurchases, Blue = Capex, Green = Dividends Walmart gets more traffic and Murphy earns a high return on its investment. Co-locating low-cost fuel with Super Centers offers a win-win for Walmart and Murphy. Murphy sells 3-4x more fuel than its competitors at slightly lower margins (e.g.
Costco targets a different demographic, so this isn't a big deal. Murphy aims to offer lower fuel prices than anyone except Costco. Like Walmart, Murphy offers everyday low prices and targets blue-collar, value-conscious, semi-rural customers. Super Centers attract a lot of value-conscious traffic, making them ideal locations for Murphy. Murphy has a symbiotic relationship with Walmart because they drive traffic to each other. To this day Murphy owns 77% of its real estate (90% ex-QuickChek). There was no royalty, no lease, nor a cents per gallon payment of any kind.
#WALMART GAS STATION CIGARETTE PRICES FREE#
Walmart sold Murphy land on Super Center parking lots free and clear. Murphy got the Southeast and later the Midwest.
So, they cut deals with Murphy Oil (Murphy USA's predecessor), Tesoro, and Sunoco. Walmart wanted to sell fuel and tobacco at Super Centers but it didn't want to do it itself. These have been core values since day one. Low costs and low prices are the keys to Murphy's success. EPS grew 21.5% per year, driven by 12.5% earnings growth and a 7.6% buyback CAGR. Since its 2013 spinoff, Murphy's stock is up 673%, a 28.5% CAGR. Murphy USA sells a lot of gasoline and a lot of cigarettes and buys back a lot of stock.
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