Dive Brief:
- Arko Corp., parent of convenience retailer GPM Investments, is converting “a meaningful number” of its 1,500-plus company-owned c-stores to dealer locations, Chairman, President and CEO Arie Kotler said during Arko’s 2024 first-quarter earnings call on Tuesday.
- Converting these stores to dealer sites will let Arko “significantly reduce site operating expenses and corporate general and administrative expenses,” Kotler said. He did not specify how many locations will undergo this shift.
- This strategy is part of Arko’s “multi-year transformation plan,” Kotler said. The move will also include allocating capital towards sub-segments of its retail stores and launching a new pilot program that aims to improve Arko’s customer experience and value proposition.
Dive Insight:
Over the past several months, Arko has been working with an undisclosed consulting firm on its transformation plan, which has helped the company learn that it’s stronger in some markets than in others.
As a result, Arko has already begun converting many of its company-operated c-stores in weaker markets to its wholesale segment — an approach that Kotler said is “aggressive” but that will “deliver more profitability.” He noted that Arko has implemented this approach in the past with underperforming stores, although it’s unclear when that was.
“At the end of the day, we’re just going to make more money running them as wholesale locations versus retail locations,” Kotler said.
Arko’s site operating expenses increased by nearly 13% in its latest quarter compared to the same time last year, primarily due to the expenses related to acquisitions it closed in 2023, according to its earnings report. That increase was partially offset by underperforming retail stores being closed or converted to dealer locations during the quarter, the report noted.
Kotler reiterated that even after these conversions take place, Arko will still control these c-stores, but will collect rent from the dealers. Arko may also create a consignment arrangement where it splits fuel profits, he noted.
“Just to be clear, we are not selling the business,” he said.
Richmond, Virginia-based Arko has more than 1,540 c-stores in 33 states under a variety of brands in its GPM Investments arm, including E-Z Mart, Breadbox, ExpressShop and Pride
