Dive Brief:
- Arko Corp. is nearing the completion of its dealerization strategy about two years after launching the program, President, Chairman and CEO Arie Kotler said during the company’s first-quarter earnings call on Thursday.
- Arko’s plan, in which it’s converting hundreds of company-operated c-stores to wholesale locations, calls for roughly 500 conversions in total. As of Thursday’s earnings report, Arko has completed 450 conversions, and has another 75 under letter of intent, under contract or already converted since the end of Q1, according to the company’s earnings report.
- Kotler emphasized that once the program ends, Arko — which has over 1,000 c-stores through its GPM Investments arm — will prioritize NTIs and remodels for the company-operated locations left in its network.
Dive Insight:
Arko’s dealerization strategy has been one of its top priorities over the past two years. Kotler and his team maintained that the conversions would help Arko realize a cumulative annualized operating income benefit of over $20 million. Earlier this year, those changes began to bear fruit.
“The benefits are increasingly evident: lower operating costs, reduced maintenance capex, stronger cash flow generation and the more focused retail portfolio that is positioned for growth,” Kotler said on Thursday.
With the program nearing its end, a stock analyst on the call asked what might come next for GPM, whose company-operated c-store count will likely drop below 1,000 for the first time in nearly a decade.
Kotler said the goal is to invest more in organic growth and remodels, which lean heavily on foodservice and the retailer's Fas Craves menu. He added that GPM opened two NTIs during Q1 and has plans for 25 more remodels this year.
Kotler said these investments will ramp up, as Arko has over $1 billion in liquidity to continue growing the business.
“It just helps us with better store-level economics, there’s no question,” he said of Arko’s foodservice investments. “The minute you invest in foodservice … you're bringing more traffic, you have better customer engagement.”
