Dive Brief:
- Arko Corp., parent company of GPM Investments, is piloting a new food-forward store design at seven of its locations starting in the fourth quarter, Chairman, President and CEO Arie Kotler said during the company’s second-quarter earnings call on Tuesday.
- The pilot is part of a plan to invest in improving traffic flow and profitability to sub-segments of Arko’s stores, according to the quarterly earnings report.
- Additionally, Kotler noted that plans to convert some stores to dealer sites are moving forward, with several sites already converted and about 40 expected to be complete by the end of the third quarter.
Dive Insight:
With difficult economic conditions hitting both smaller retailers and larger c-stores, Arko has eased up on acquisitions, instead focusing its spending on organic growth, improving operations and increasing enrollment in its loyalty program.
Same-store merchandise sales for the quarter declined more than 5% year over year. Merchandise margins rose 90 basis points, but quarterly revenue and merchandise revenue were both down year over year.
A big part of the company’s transformation campaign will be the redesign that GPM Investments is testing. The program is designed to improve the in-store experience and will focus on the foodservice, according to the earnings report.
“We have completed consumer research to guide development of our preferred food assortment and store layout, and have selected seven stores within one of our regions to execute the pilot,” said Kotler in the call. “After validating the result, we have a goal of a region-wide rollout before expanding across our retail footprints.”
The retailer has already made some improvements to foodservice operations, introducing a value-priced pizza earlier this year and switching to Nathan’s hot dogs for its roller grills.
“We have seen great results in the value oriented pizza offering that we launched in Q1 of this year,” Kotler said. He noted that pizza sales were up 19% in the quarter over last year, and unit sales were up by 36%.
Arko also shared updates on the progress of a plan to convert a “meaningful number” of its stores to dealer sites. The company has not disclosed an exact number, but talks are happening with multiple potential dealers.
Converted sites are expected to be more profitable for Arko if they’re just collecting money for rent and fuel supply agreements. Capital expenditures can then be focused more on the remaining stores, Kotler said.
For the 40 stores in the process of conversion, the company expects about $2 million more in profitability from them post-conversion, according to Kotler.
More details of the transformation plan are expected at Arko’s Investor Day in the fourth quarter.
The company also expects three new builds to open in the third quarter.
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.
