Yesway targets organic growth, ‘very disciplined’ on acquisitions
Yesway plans to shop for acquisitions but will be “very disciplined” and “selective,” Chief Executive Officer Thomas Trkla told analysts Tuesday during a call discussing first-quarter financial results.
The c-store chain, founded in 2015, now operates 449 stores across nine states in the Midwest and Southwest. The total includes 29 Iowa and Kansas stores it expects to sell by the end of the year. Since inception it completed 27 acquisitions, including the $850 million purchase of Allsup’s in 2019. “We’re certainly looking at acquisitions, from small to large, because obviously, that could move our dial much more quickly in the next couple of years from a growth standpoint,” Trkla said. “We’ve done a very good job over the years of not investing in stores and shedding stores that we don’t want.”
But he added “that’s not our model,” and said the company plans “first and foremost” to accelerate new store construction. The new stores see 15% to 30% returns and have stronger food service operations than the acquired stores. The company built 92 stores over the past five years and “kind of stopped buying.”
“We will focus on opportunities where we can create value, build density, strengthen our brand presence and apply our operating model effectively,” Trkla said.
Yesway expects to open six to eight new stores in 2026, including the one that it opened in the first quarter. The company intends to open 26 new stores in 2027. Much of the growth is targeted for Arizona, though it also plans growth in New Mexico, Oklahoma and Texas.
“We’re very excited about Arizona. It’s got traditionally higher fuel margins, even higher than our New Mexico and West Texas fuel margins, which are also very high to begin with,” Trkla said. “Arizona will probably be our highest growth state of those four states in the foreseeable future.”
Yesway also is bullish about diesel. It offers high-speed diesel dispensers at new stores and has added them at its legacy stores wherever possible. The company has installed high-speed diesel islands behind stores or to the side and looks for adjacent land to add diesel lanes in some cases. It also has added diesel to the forecourt for lighter trucks. As of the first quarter, diesel represented 38% of its fuel volume.
“I think the industry as a whole operates in the 20s as far as a percentage [penetration],” said Chief Financial Officer Ericka Ayles. “Despite inflationary pressures or the volatility on the street price of diesel continuing to go up, we’ve actually been growing those diesel gallons at a clip that we have experienced in prior years.”
Same-store fuel volume increased 0.2% in Q1 versus last year, and total fuel gallons sold rose 8% year over year. Total fuel margin for the quarter increased 48.5% year over
year to 49.4cts/gal.
The company beat the U.S. retail fuel industry, which averaged a 4.4% year-over-year decline in same-store fuel volume in the first quarter, according to OPIS DemandPro.
“In our fuel business, Yesway is executing well in the current environment and maximizing fuel gross profit,” said Ayles. “To provide more context, the geopolitical developments in the Middle East have increased fuel price volatility across the industry, benefiting retailer profitability. As a rule of thumb, retail prices generally increase as wholesale costs rise, protecting retailer cents-per-gallon margins.”
Same-store inside merchandise sales increased 4.5% versus last year and total inside merchandise sales rose 9.5% from a year ago. The total inside margin was 36.1%, up from 34.2% a year earlier.
Same-store sales and fuel volume have trended up through the end of May, the company said.
Net income increased to $30.2 million from a net loss of $5.6 million in the prior year, and adjusted Ebitda rose 112.9% year over year to $59.2 million, the company said.
—Reporting by Donna Harris, dharris@opisnet.com