Arko Corp ((ARKO)) has held its Q4 earnings call. Read on for the main highlights of the call.
The recent earnings call for ARKO Corp. presented a mixed outlook for the company. While there were significant achievements, such as advancements in the dealerization program and improvements in OTP gross margins, the company also faced challenges. These included declining same-store sales, reduced adjusted EBITDA, and a net loss for the quarter. To address these challenges, ARKO introduced the Fueling America’s Future campaign, aimed at boosting store traffic and fuel sales.
Loyalty Program Success
ARKO Corp.’s loyalty program has proven to be a success, with enrolled members spending an average of $104 per month—nearly 60% more than non-enrolled customers. These loyalty members also visited stores about three more times per month, indicating strong customer engagement and repeat business.
Dealerization Program Progress
The company made significant strides in its dealerization program by converting over 150 retail stores to dealer sites in 2024, surpassing their initial conversion goal. ARKO plans to convert approximately 100 more stores by the end of Q1 2025, demonstrating its commitment to optimizing its retail operations.
OTP Gross Margin Improvement
In Q4 2024, ARKO achieved a 200 basis points improvement in the gross margin of the OTP category. This improvement further widened the gap between higher-margin OTP products and traditional cigarettes, highlighting the company’s focus on enhancing profitability in this segment.
Fueling America’s Future Campaign
To counteract declining sales, ARKO launched the Fueling America’s Future campaign. This initiative allows customers to earn up to $2 off per gallon for up to 20 gallons with in-store purchases, aiming to increase store traffic and fuel sales.
Decline in Adjusted EBITDA
The company reported a decline in total adjusted EBITDA, which was $56.8 million for Q4 2024, down from $61.8 million in the same period in 2023. This decrease was primarily due to lower retail fuel and merchandise contributions.
Same Store Sales and Fuel Volume Decline
ARKO experienced a decline in same-store merchandise sales, which were down 2.1% for Q4 2024. Additionally, same-store fuel gallon demand decreased by 4.4%, reflecting challenges in maintaining sales momentum.
Net Loss for the Quarter
The company reported a net loss of $2.3 million for Q4 2024, compared to a net income of $1.1 million in the same period in 2023. This net loss underscores the financial challenges ARKO faced during the quarter.
First Quarter 2025 Guidance Indicating Decline
For Q1 2025, ARKO provided guidance indicating an adjusted EBITDA range of $27 million to $33 million, reflecting continued negative same-store trends and adverse weather impacts. This guidance suggests ongoing challenges in the near term.
Forward-Looking Guidance
Looking ahead to 2025, ARKO expects total company adjusted EBITDA between $233 million and $253 million, slightly down from 2024’s $248.9 million. The retail fuel margin is projected to be between $0.395 and $0.415 per gallon, with mid-teen percent operating profit growth anticipated for the wholesale segment. The dealerization program is expected to generate an annualized benefit exceeding $20 million in combined wholesale and retail segment operating income. Despite a decline in same-store retail fuel gallons, ARKO aims to enhance customer engagement and boost store traffic through strategic initiatives like the Fueling America’s Future campaign.
In summary, ARKO Corp.’s earnings call highlighted a mixed sentiment, with notable achievements in loyalty programs and dealerization efforts but also challenges in sales and profitability. The company’s forward-looking guidance reflects cautious optimism, with strategic initiatives aimed at overcoming current hurdles and driving future growth.