Convenience Stores Sales, Profits Edged Higher in 2017


4/11/2018

CHICAGO – U.S. convenience stores experienced a 15th straight year of record in-store sales and a 4th straight year of $10 billion-plus in pretax profits, according to newly released NACS State of the Industry data, the convenience and fuel retailing industry’s premier benchmarks and key performance category insights.

The industry’s numbers were announced during the NACS State of the Industry Summit, which takes place April 10-12 at the O’Hare Hyatt Regency in Chicago. More than 600 leading retail and supplier company representatives are at the industry’s top conference for benchmarking and analysis of retail trends.

Industry Snapshot 2017 % Change
Inside sales $237.0B 1.7%
Fuel sales  $364.1B 14.9%
Total sales  $601.1B 9.3%
Pretax profit $10.4B 1.6%
U.S. store count 154,958 FLAT

(Sources: NACS State of the Industry Report® of 2017 Data; 2018 NACS/Nielsen Convenience Industry Store Count)

Sales, Profits Increase Led by Fuels
Convenience stores sales overall surged 9.3% to $601.1 billion, led by a 14.9% increase in fuel sales. Convenience stores sales overall are 3.2% of the overall U.S. gross domestic product of $18.57 trillion (2016 data). Put another way, one of every 30.9 dollars spent in the country was spent at a convenience store in 2017.

The sales increase at convenience stores in 2017 was largely because of higher gas prices in 2017 (up 12.8% to $2.38) and a 1.9% increase in gallons sold. Meanwhile, fuel gross margins in 2017 increased to 22.0 cents per gallon. Paired with increased sales volume overall, fuel gross profits increased 11.7% per store.

Convenience stores sell an estimated 80% of the fuel purchased in the country and while fuel sales account for 61% of sales dollars, fuels margins are still relatively slim and fuels only account for 38% of total profit dollars at convenience stores. Overall, convenience store profits were $10.4 billion, a 1.6% increase over 2016. The last time the convenience store industry reported negative profits was 1991.

In-Store Growth Powered by Foodservice
Meanwhile, in-store sales increased 1.7% to a record $237.0 billion. The last time the U.S. convenience store industry reported a decrease in in-store sales was 2002, when sales dropped 2.4%.

Foodservice, a broad category that mostly includes prepared food (69% of both category sales and profits) but also commissary foods and hot, cold and frozen dispensed beverages, continues to be a key focus for growth in the convenience store channel.

Foodservice sales overall in 2017 accounted for 22.5% of in-store sales in and 33.9% of gross profit dollars. The category also was the biggest differentiator in terms of profits: top-quartile performers had prepared food sales that were 3.6 times greater than bottom-quartile stores; coffee sales at top performers were 5.2 times greater that than those of the bottom quartile.

While tobacco products, including cigarettes, cumulatively were 34.1% of in-store sales dollars, they accounted for only 17.1% of gross profit dollars. Cigarette sales accounted for 28.6% of in-store sales dollars, a sharp decline from 36.9% in 2011. Meanwhile, the category other tobacco products (OTP) was a bright spot, with an 11.2% increase in sales dollars and an 9.2% increase in gross profit dollars.

Convenience stores sell 23.8% of packaged beverages in the United States according to Nielsen and saw a slight 0.4% sales increase in 2017. Packaged beverages (non-alcohol) accounted for 15.8% of revenue dollars and 20.1% of gross profit dollars. Within the category, enhanced water saw the strongest sales increase (9.1%); ready-to-drink iced teas (3.5%), alternative beverages (3.5%) and bottled water (0.6%) also posted sales increases, continuing the trend of consumers seeking more healthier and/or functional beverage options at convenience stores.

Snacking categories all had sales growth, as salty snacks (up 5.6%), candy (up 2.6%) and alternative snacks (up 2.0%) all had strong growth as some consumers, especially millennials, moved toward snacking and away from traditional meals. This was the second consecutive year that alternative snacks, a category driven by protein- and energy-rich items, reached the top 10 in-store merchandise categories, signaling a growing desire by consumers for immediate/healthier snacking options.

Top In-Store Categories
Here are overall merchandise sales groups as a percentage of overall merchandise sales:

  • Tobacco (cigarettes and OTP): 34.1% of in-store sales
  • Foodservice (prepared and commissary food; hot, cold and dispensed beverages): 22.5%
  • Packaged beverages (carbonated soft drinks, energy drinks, sports drinks, water, juices and teas): 15.8%
  • Center of the store (salty, candy, packaged sweet snacks and alternative snacks): 9.9%
  • Beer: 8.5% (12.4% for stores selling beer)
  • Other: 9.2%

Operating Expenses
Despite record in-store sales, direct store operating expenses (DSOE)—encompassing wages, payroll taxes, health-care insurance, card fees, utilities, repairs/maintenance and supplies, as well as several other categories including franchise fees and property taxes—outpaced inside gross profit dollars for the second consecutive year. This trend continues to create challenges for convenience retailers as they look to grow their businesses.

Beyond sales, convenience stores are an important part of the economy. The convenience and fuel retailing industry employed 2.48 million people in 2017, wages were up 8.3% and the average wage for a store associate increased to $10.19 per hour. Turnover for store associates was 115%, down from 133% in 2016 but a huge increase from the 73% that was reported in 2010 when unemployment was much higher because of the Great Recession. The rise is primarily due to tighter labor markets resulting from being in the seventh year of economic recovery. Turnover for store managers was only 18%, down from 27% the year prior.

The industry’s 2017 metrics are based on the NACS State of the Industry survey powered by its wholly owned subsidiary CSX LLC, the industry’s largest online database of financial and operating data. Complete data and analysis will be released in June in the NACS State of the Industry Report® of 2017 Data. Metrics related to turnover were from the recently released NACS Compensation Report® of 2017 Data.

Download the infographic, “Record Year for Convenience Stores.” (PDF)