Dive Brief:

• Arko Corp’s three-pronged growth strategy centered on loyalty, foodservice and core store categories is bearing fruit, according to Chairman, President and CEO Arie Kotler in the company’s second quarter earnings report.  
• The company reported Q2 same store merchandise sales grew 0.7% compared to the same period a year ago, and increased 3.8% when factoring out cigarette sales. Company net income came in at $14.5 million — less than half what it reported during the same period a year ago, mainly due to recent acquisitions and favorable fair-value adjustments in Q2 of 2022.
• Arko has added over 200,000 people to its loyalty program since March and brought bean-to-cup coffee machines to an additional 135 stores during Q2.

Dive Insight:

Among the core destination categories, candy and salty snacks were top performers in Q2, which ended on June 30, with gains of 12.2% and 11.7%, respectively, according to the company’s earnings presentation. 

As part of Arko’s focus on its core destination categories, the company is also pulling back from tobacco sales, and Kotler said it measures its success on growth outside of cigarettes.

This long-term focus has been working. Over the past three years, core destination categories have increased from 38.4% to 44.6% of total merchandise sales, while cigarettes have decreased from 38.2% to 29.6%, said Kotler. 

Turning to loyalty, the company reported a net gain of 205,234 marketable members since the fasRewards program’s relaunch on March 28, leading to a current total of over 1.48 million members. 

In the second quarter, the company reported that loyalty members made nearly six times as many trips and spent about $60 more per month on average than non-enrolled customers. 

“We believe that the program develops and enhances our relationship with our customers, drives more trips with our existing customers and attracts new loyal customers,” said Kotler 

In foodservice, Arko has seen a 10.4% increase in sales at its franchised restaurants and a 13.4% gain in same-store grab-and-go sales.

Arko has boosted the total number of stores with bean-to-cup coffee machines to over 700, with another 230 expected to come online by the end of 2023.

While it did not announce any new acquisitions, Kotler noted that the company has $2 billion in funding available, which it can use for new acquisitions, fresh store builds and remodels. But while all of those are in consideration, he said the company is built for acquisitions.

“There is no reason for us to stop anytime soon,” said Kotler.

Arko Corp operates over 1,500 convenience stores in 30 states under a number of brands, including Scotchman and Pride.