Murphy USA Inc. (NYSE:MUSA) Q1 2024 Earnings Call Transcript

And additionally, we had refiners pricing really aggressively at the rack to clear their winter grade gasoline. As you know, most of our barrels are proprietary, they’re not rack. And so those factors contributed to the lower product supply results than you might have expected. But we do continue to believe our supply model provides an advantage that differentiates us. And in fact, as we look into this quarter, that spot to rack has normalized across the system. RINs are accurately priced in. And as Andrew already mentioned, retail is performing well for the quarter as well. So hopefully that kind of explains why the results may differ from what you would have modeled.

Benjamin Bienvenu: That’s great. That’s super helpful. Maybe shifting a little bit to inside the sort of the tobacco trends that you’ve continued to deliver, what causes that dynamic to change? Recognizing there’s some company specific issues, there’s strategic pricing and your pricing differentials relative to your competitors and prices continue to rise, which I think probably highlights the value proposition you bring to the market. Is it simply a getting to the end of initiatives and law of large numbers that causes the growth and market share gains to slow or something else because the performance has been noteworthy there?

Andrew Clyde: Yeah. Look Ben I think it’s like any other commodity category where you’ve got everyday low-price retailers and you’ve got those that price higher because as you know being somewhere stuck in the middle is the worst place to price commodity as a retailer. It’s just similar to that vicious cycle as you see more retailers taking price with the price increases on the margin. There’s just one more customer that chooses low price over convenience. And given our unique positioning, the word-of-mouth, the additional value provided through the Murphy Drive Rewards loyalty program and the value that we’re creating across the supply chain, I do feel like it’s something that’s sustainable and there will be ups and downs with the comps. But I think we have an advantage here and we remain very focused on the category and do it in a responsible way, but also giving that value to the customer.

Operator: Your next question comes from the line of Bonnie Herzog with Goldman Sachs. Please go ahead.

Bonnie Herzog: All right. Thank you. Hi, everyone. I wanted to follow-up on Anthony’s question, but maybe ask a different way considering a key question we’re hearing from investors is on your total fuel contribution in the quarter, which was quite a bit below your for modeling purposes only target of the $0.30 to $0.34 per gallon. So, I guess I wanted to understand if that range maybe is, I don’t know, no longer seems achievable and if it’s more likely you’ll be below and therefore, you know, will you see your adjusted EBITDA below the $1 billion to $1.2 billion range? Or Andrew, you know, are there other levers that we should just really be thinking about for you to have, so to pull essentially to drive EBITDA growth? Thank you.

Andrew Clyde: Yes. Bonnie, as I stated before, PS&W plus RINs was the biggest driver in the year-over-year variance and PS&W plus RINs is aligned with our plan. And so, there’s nothing that changes our view of our plan for the year and the range. Q1 was a little bit lighter on the retail side than the prior year and Mindy talked about the factors there that contributed to that. We didn’t have the fall off mid-February. Guess what, we’re starting to see it now and I can’t remember exactly what happened on May 1st a year ago, but we’re going to have rising prices and falling prices and when they happen not if they happen is something that we don’t have a crystal ball in project. So, I think the Q1 number is fully aligned with our plan and we’ve articulated why it varies from a year ago and we don’t provide quarterly guidance and so that’s probably the best way to sum it up.

Bonnie Herzog: I completely appreciate that. And if you can imagine on our side too to try and predict this, it’s incredibly challenging. So, it’s helpful honestly to hear that Q1 came in sort of as expected. So, we’ll see how the rest of the year plays out just in terms of volatility. But maybe my second question to switch gears is just on your merch contribution. I guess you had modest merch contribution growth in the quarter of 2.4%. But thinking about this in the context of the midpoint of your guidance, could you do guide that, I think for the year at that 8%. So, it does imply pretty significant acceleration the rest of the year. So just if you could provide a little bit more color on the drivers of this and maybe you’re confident that that is still achievable that would be helpful. Thanks again.

Andrew Clyde: You’re welcome. As I said look the two-year comps of sales and margin growth on non-tobacco of 12% 17.5% really reflect the strength of 23 over 22 and continuing and holding that. So, part of the 8% is just the math, right? We’re not going to have the same 23 over 22 comp to go up against. But we don’t run our business based on the comps, we run a business based on the initiatives and so as articulated for Anthony, there’s promotional activities, there’s resets, there’s new offers that we’re rolling out, there’s ISX remodels, there’s our digital transformation pricing, personalization and other offers as well. Some of the things are even further back end loaded like QuickChek, loyalty relaunch etc. But there’s a whole suite of initiatives that we’ve invested in that are going to have significant returns on the invested SG&A and capital that we’re putting into those.

Operator: Your next question comes from the line of Bobby Griffin with Raymond James. Please go ahead.

Bobby Griffin: Good morning, everybody. Thanks for taking the questions. I guess first question for me is on inside the store business and I know there’s a lot of moving parts for the quarter. Can you talk about in some of the regions if you saw anything materially different that didn’t weren’t impacted by the weather that you called out. Just trying to really kind of gather on what is going on the center store and how big the deal was the weather versus, you know, maybe the consumer just being actually a little weaker today than it was six months ago across just areas of this country?

Andrew Clyde: Bobby, it’s a great question. We look at that really, really hard and we try to correlate things to the weather. In fact, our demand forecasting tool that does our production planning and labor scheduling that we’ve rolled out a quick check absolutely factors in the wetting the weather. Look, when we have a foot of snow on the ground in New Jersey for a few days, you can expect sales to be down 30% plus. I mean it’s just absolutely horrible for our business and everyone else’s business. If you look at the daily sales report for the last four or five days, we’ve had great weather, sales were up 6% year-over-year, week over week, right, strong fuel volumes etc. So, it’s been difficult for us to identify anything that is statistically significant beyond the weather factor.