Dive Brief:
- Arko Corp. expects its “dealerization” program to be largely completed by the end of 2027, Chairman, President and CEO Arie Kotler said during the company’s Q3 earnings call on Thursday.
- The company has already converted around 500 locations, Kotler said. That’s nearly one-third of the locations it had when the plan was first announced in spring 2024.
- Arko has 55 additional locations under a letter of intent to be converted. Kotler estimated Arko will retain around 900 stores once the program is complete.
Dive Insight:
Arko first announced its plan to convert underperforming stores to dealer sites in May 2024. At the time, the project timeline and store count targets were inexact, with Kotler noting that it would involve “a meaningful number” of locations.
Earlier this year, Kotler said the company expected to complete these conversions by the end of 2026, but the timeframe has now expanded.
“As we continued to focus and as we continued to see results, we just refined the numbers, and that's why we decided to extend our program a little bit and extend the amount of stores in some areas,” said Kotler during the call.
During the Q3 earnings call, Kotler noted that Arko is keeping top performing stores that post significantly higher merchandise sales and fuel gallons compared to locations slated for conversion.
Across Arko’s retained stores portfolio, merchandise sales growth excluding cigarettes was up almost 1% year over year and same-store merchandise margins improved by 50 basis points to 34.8%, he said.
The company also continues to remodel locations with its proprietary Fas Craves foodservice, among other updates. It expects to complete 25 remodels this year, with 11 already finished, Kotler said in the call.
Chief Financial Officer Galagher Jeff said during the call that there’s “a lot of headroom” for foodservice sales to continue growing.
Kotler noted that based on initial reports, remodels are delivering low-double-digit sales growth.
Arko is also building new locations, having completed three new builds during the first nine months of the year. Those sites are generating a nearly 20% return on investment, according to Kotler.
