Industry Overview

State of the Industry Report
Based on the NACS Chicago Summit ( April 11-13, 2005 )

According to information provided at the annual National Association of Convenience Store (NACS) Summit this year, the convenience store industry reported record level revenues of $394.7 billion in 2004. This 17.1 percent growth in sales was driven in large part by higher gasoline prices in 2004. Profits increased 23.5 percent reaching $4.99 billion despite an average one-cent drop in motor fuels margins and escalating credit-card fees.

The $57.7 billion increase in revenue over the $337 billion reported in 2003 was the largest one-year increase in sales dollars ever reported. This was fueled by both the 18.1 percent increase in the price of gasoline (from $1.55 in 2003 to $1.83 in 2004) and the growth of in-store sales (13.7 percent) to reach $132.1 billion. According to U.S. Department of Commerce the growth in the convenience store industry outperformed almost every other competing channel. The only competing channel that experienced higher growth in sales was warehouse clubs/superstores, which grew 13.8 percent.

A 23.5-percent increase in pretax profits marked the second straight year of strong gains following three years of declines. The gains were driven by in-store profits. While motor fuels sales in 2004 accounted for two-thirds of sales dollars in 2004, motor fuels accounted for just over one third of stores' gross margin dollars, 38.5 percent. For 2004 pretax profits per store increased to $36,100.

Motor fuels sales increased by 18.9 percent to reach $262.6 billion. The spiking motor fuels prices are continuing to drive customers toward buying lower octane levels. Sales of regular grade fuel accounted for 81.4 percent of gasoline sold at c-stores. Premium sales dropped from 8.5 percent of total fuel sales in 2003 to 7.2 percent in 2004, while mid-grade dropped from 10.9 percent in 2003 to 10.2 percent in 2004.

Large-volume motor fuels retailers continued to grow in 2004. More than 34 percent of all stores sold 125,000 gallons or more a month in 2004, up from the 24.9 percent that did in 2003.

There was a sharp drop in motor fuels gross margins, which fell nearly one cent 13.7 in 2003 to 12.71 in 2004. Taking into account the cost of credit-card fees and gas theft, gross margins on motor fuels dropped even more from an estimated 11.84 cents per gallon in 2003 to 10.46 cents per gallon in 2004. Looking at margins on a percentage basis, overall motor fuels margins dropped from 8.8 percent in 2003 to 7.2 percent in 2004 their lowest level since 1984.