Murphy USA

Standing Out

Most of Murphy USA’s locations are either kiosk or approximately 1,200-square-foot c-stores located near Walmart supercenters. It seeks to differentiate itself in the minds of consumers and investors. Murphy USA’s model allows it to sell a variety of single-serve items. 

“We want the consumer to know we are complimentary to Walmart as a low-price destination for products like fuel, tobacco and core c-store items,” Clyde says. “We have developed standard kiosks and 1,200-square-foot stores that can be built and operated for less while still allowing us to sell more product than many of our peers with larger stores.”

The Murphy USA model has worked well because of the volume the company is able to generate and flow through a frugal footprint. The company is a leader in the fuel volume it dispenses per pump. Additionally, Murphy USA ranked No. 2 in sales per square foot behind Apple in a recent eMarketer report.  

The company is unlike many of its competitors because today’s giant c-stores are often big into food service and operate mainly large footprint stores. Murphy USA sticks to its core mission and strives to do what it does better than anyone else. “We can achieve anything when we put our focus on it,” Clyde says. “We prioritize and focus on our goals, and our plan is to grow and keep improving.” 

As a public company, Murphy USA seeks to stand out in the minds of investors through a compare and contrast approach. The company employs a strategy based on organic growth where many others look for consolidation. Additionally, its small format in front of super centers contrasts to the big box c-store model. 

“We try to highlight our distinctive way to compete, and we have strengths to support our strategy,” Clyde says. “We are more reliant on fuel sales and are resilient to price volatility because we have a low-cost and conservative capital structure and unique fuel supply chain strategies.” 

Seeking Returns

Recent investments have included a focus on opening new sites. In 2014, the company opened 60 new locations, up from fewer than 40 in 2013. In 2015, Murphy USA aims to open between 60 and 80 new locations. 

In addition, the company is constantly seeking to improve existing locations. At its kiosks, Murphy USA has been adding super cooler systems with top-loaded compressors that can hold more product. 

“We refresh about 100 sites a year as Walmart refreshes and reimages their stores,” Clyde says. “Our plan is to increase that effort over the next three or four years to catch up on deferred maintenance in areas like bathrooms and canopy wraps. That will improve our brand image and reduce maintenance costs. We’ve made other investments into improvements like LED lights to reduce utility costs. These kinds of investments give us a fresh look to the consumer and provide ROI because of lower operating costs.”

Investments into technology are taking place at locations and in the back office. Clyde says the company has invested in what he called the Murphy Magic Box at kiosks, which can monitor electricity usage on coolers and help with monitoring equipment to enhance preventive maintenance and reduce utility costs. In the back office, the company is in the middle of a major initiative it is calling ASaP, an acronym for advanced systems and processing. 

“We’re looking at all our systems and interfaces and making sure we can process all the information flowing through our systems efficiently,” Clyde says. “That will give us better data and analytical capabilities and provide us with better insight into the business. It will also enable us to better scale our cost structure with growth. We are now determining what systems to invest in, and we’ve also improved internal alignment to our strategy, redefined our core principles as a company, improved performance measurement and invested in our staff.”

Pushing Forward

Murphy USA is certainly on a growth track for the foreseeable future. Although not a central part of its strategy, the company will also continue to invest in building a handful of Murphy Express larger format locations when opportunities arise. “Ramping up to support new building growth and our refresh program is a major objective for this year,” Clyde says.

In 2015, about 80 percent of its new location growth will be focused on the 1,200-square-foot stores, and that is likely to be Murphy USA’s main method of growth in the future. The company will make its decisions based on market characteristics and local regulations, return economics and the size of available parcels as it determines whether to open kiosks, 1,200-square-foot stores or the larger Murphy Express locations.

Clyde says the company has ramped up its asset management capabilities and has created strong partnerships with contractors and vendors to help facilitate growth. Given its highly distributed network with a greater rural concentration than its peers, Murphy USA partners with McLane for supply chain distribution versus having its own central distribution and commissary operations which require greater concentration. 

The company also has significant promotions going on with suppliers, which are helping to drive increased sales in declining categories like carbonated beverages. The company is quick to act on programs with suppliers. The company says its suppliers regularly comment that they make decisions faster than anyone in the industry, which translates into opportunities for their vendors. 

The company is well aware of all of the trends impacting some of its core items. Fuel demand is flat and cigarette sales are declining in the industry, but the company has found ways it can make up the margin by offering other products that appeal to consumers in the c-store sector. 

 “Sustaining our growth trajectory, innovating around the headwinds of major c-store categories and beating cost inflation are Murphy USA’s key challenges,” Clyde says. “With our distinctive strategy and highly engaged team, we are confident of our prospects and outlook for the future.”