Growing Sales at Convenience Stores: Investors, Nibble Time?

Convenience stores (C-stores) are witnessing remarkable sales growth as budget-conscious consumers increasingly view them as quick-service restaurants. Established C-store chains like Casey’s General Store (NASDAQ:CASY) and 7-Eleven (OTC:SVNDY), which also owns Speedway service stations, are currently experiencing heightened total sales and higher-margin sales as never seen before.

Given these promising developments, investors may find it beneficial to pay closer attention to the performance and growth potential of C-store businesses in the future.

Can C-Store Sales Keep Rising?   

C-stores have devised innovative strategies to capitalize on a flourishing market conducive to bolstering their sales. One approach involves enhancing their menu offerings with artisanal cuisine to attract a broader customer base and elevate sales. Concurrently, C-stores are expanding their network of outlets, coupling the addition of new high-profit items with a broader geographical presence to craft a winning formula for success.

Moreover, the success entails out-competing all the smaller mom-and-pop convenience stores, many of which are attached to service stations. These individually owned stores currently comprise over 60% of all C-stores. Due to their limited size, they lack the capability to provide loyalty programs, EV charging stations, or tobacco products at competitive prices. Furthermore, individually owned C-stores do not offer quality pizza or a deli-style selection of sandwiches. In this category, larger chains simply “eat their lunch.”

As a result, these advancements have captured the interest of investors. Investors acknowledge the capability of C-stores to outperform small competitors in sales, diversify product lines, enhance profit margins, and consistently expand into new locations.

Are C-Stores an Opportunity for Investors?

Investors may discern a significant opportunity in the notable trend of higher foot traffic at convenience stores compared to fast-food restaurants, coffee chains, and even service stations. Foot traffic, which represents the number of individuals entering and moving around a physical location, has seen a substantial increase.

Moreover, this data comes from insights by Placer.ai, a company utilizing mobile phone location data to track consumer behavior, revealing that major chains experienced a surge of over 60% in foot traffic by July 2023 compared to pre-pandemic levels in January 2019. 

Importantly, this upsurge cannot solely be attributed to increased driving activity, as traditional gas stations reported only a 20% rise in foot traffic during the same period. The surge in foot traffic can also be attributed to the convenience stores’ ability to adapt and cater to changing consumer preferences, offering a diverse range of products and services that appeal to a broader audience.

Which C-Stores Are a Buy?

By recognizing and leveraging these trends, investors can strategically position themselves to benefit from the expanding success and profitability of convenience store businesses.

Three publicly traded C-Store chains investors may want to explore using the TipRanks Stock Comparison Tool are Casey’s (NASDAQ:CASY), Murphy USA (NYSE:MUSA), and Seven & I Holdings (OTC: SVNDY), which is a Japanese company that owns 7-Eleven and Speedway. While TipRanks provides earnings forecasts and other critical data on Seven & I Holdings, there is no available U.S. analyst forecast available for the company. Importantly, CASY and MUSA stock have both been given Moderate Buy ratings.

Should Investors ‘Checkout’ Convenience Store Stocks?

After all, many investors now find themselves frequenting C-Stores more often than in the past. Previously viewed merely as spots to refuel and grab a quick drink, now these stores are increasingly being seen as potential investments.

Although publicly traded C-Stores command just a fraction of the vast market share, their continuous expansion efforts and product enhancements indicate a potential shift. These companies are actively acquiring new assets while simultaneously refining their offerings to attract a broader customer base and boost profitability. This strategic approach could pave the way for increased earnings and elevated stock prices in the foreseeable future.