Release Date: February 26, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• ARKO Corp (NASDAQ:ARKO) managed to deliver results near the midpoint of their annual guidance despite a challenging macroeconomic environment.
• The company launched the 'Fueling America's Future' campaign, offering significant fuel discounts to drive customer loyalty and increase store traffic.
• ARKO Corp (NASDAQ:ARKO) achieved a 200 basis point improvement in gross margin for the Other Tobacco Products (OTP) category.
• The dealerization program exceeded initial targets, converting over 150 retail stores to dealer sites in 2024, with plans for further conversions in 2025.
• The company maintained substantial liquidity with approximately $841 million, including $262 million in cash on hand at the end of the quarter.

Negative Points

• Total company adjusted EBITDA decreased to $248.9 million in 2024 from $276.3 million in the previous year.
• Retail fuel volume and same-store retail fuel gallons declined, with a mid-single-digit decrease for both the quarter and the year.
• Net loss for the fourth quarter was $2.3 million compared to a net income of $1.1 million in the year-ago period.
• Same-store merchandise sales were down, with a 4.3% decline in total sales and a 2.1% decline excluding cigarettes.
• The company faces ongoing challenges from adverse weather conditions impacting customer mobility and sales.

Q & A Highlights

• Warning! GuruFocus has detected 9 Warning Sign with ARKO.

Q: Can you explain the 2025 guidance, which seems to imply a slight decrease year-over-year despite expected savings from dealerization? A: (Unidentified_4) The guidance reflects a shifting same-store base, which makes traditional same-store metrics less relevant. We are currently experiencing negative trends in gallons and merchandise sales, partly due to weather impacts in January and February. However, we expect improvements as the year progresses, with average store metrics improving over time.

Q: How will the dealerization savings accrue over the year, and will there be a significant change in savings as we enter 2026? A: (Unidentified_4) The savings will accrue as more stores are converted, with a cumulative impact becoming more significant over time. We expect to see more GNA savings as we streamline the business for the new retail footprint, with a wraparound effect into 2026.

Q: What initiatives are planned for the remaining retail stores in 2025, especially regarding remodels and promotions? A: (Unidentified_3) We are focusing on the "Fueling America's Future" campaign, which offers significant fuel discounts to drive in-store traffic. We are also enhancing our back bar in 800 stores and plan to complete 100 more soon. The focus is on OTP, tobacco, and fuel, with promotional activities to drive sales.

Q: How does the $2 off fuel promotion impact profitability, and what are the expectations for maintaining margins? A: (Unidentified_3) The promotion is designed to drive gallons and in-store traffic without affecting margins. It leverages partnerships with vendors and is expected to increase fuel sales by encouraging customers who shop in-store to also purchase fuel.

Q: Can you provide insights into the performance of the remaining retail stores after dealerization, and how are same-store sales and gallons trending? A: (Unidentified_4) The remaining stores are more productive and outperform the balance of the company, although they still show negative trends. We expect these stores to continue performing better as they are more competitive and able to drive business.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.