Murphy USA Inc. Q2 FY2025 earnings call

• Fuel prices are range bound in a lower, less volatile environment, with same-store fuel volumes down in Q2 but July volumes rebounding. - Noncombustible nicotine categories are growing to offset cigarette margin declines, and FDA Commissioner's comments on illicit vapor and synthetic kratom crackdowns are positive. - QuickChek's average per store month food and beverage sales have been positive for three straight quarters. - Digital initiatives are creating value, with MDR seeing 31% increase in new loyalty enrollments and 11% increase in merchandise transactions, and QuickChek's revamped loyalty program having mobile orders double and in-store pickup items driving additional sales. - Store profitability is maintained through operating cost improvements in overtime, labor rates, loss prevention, and maintenance, along with home office efficiencies reducing G&A. - Retail fuel margins are resilient, up 80 basis points year-to-date with lower credit card fees, and the new store pipeline is poised to deliver 50 stores over the next 12 months.

Fuel: Second quarter same-store fuel volumes were down 3.2%, but July volumes have rebounded to 100% of prior year levels. Merchandising contribution margin: Expected to be within the guided range of $855 million to $875 million but toward the low end, with headwinds from cigarettes and lottery; excluding these headwinds, Q2 merchandising contribution at Murphy USA branded stores was up 8.9% on an average per store month basis. Store operating expenses: Expected to be at or below the low end of the guided range of $36,500 to $37,000 per store month. Corporate SG&A: Trending below the low end of the guided range of $245 million to $255 million.

• Fuel volumes: First half down 3% on average per store month, expected to be slightly below the low end of the 240,000 to 245,000 average per store month guided range for the second half. - Merchandising contribution margin: Expected to be within but toward the low end of the $855 million to $875 million guided range. - Store operating expenses: Expected to be at or below the low end of the $36,500 to $37,000 per store month guided range. - Corporate SG&A: Trending below the low end of the $245 million to $255 million guided range. - Effective tax rate: Second half expected to be within 24% to 26%, full year at or slightly below the low end of guidance. - New stores: Positioned to open around 40 in 2025, with over 45 under construction in Q3 and 15 to 20 expected in Q1 2026; capital expenditures expected to remain within $450 million to $500 million. - Share repurchase: Repurchased 471,000 shares in Q2, with year-to-date repurchases near 900,000 shares, and expected to remain active.

• Geopolitical events may impact fuel prices. - Lighter cigarette promotional activity and lower lottery jackpots may continue to pressure customer traffic. - Industry competition could affect retail margins.

Q: I just wanted to ask a question on the long term. As you think about the 2028 target that you put out, what were some of the big changes that you want to highlight? What's different? Why make the update today and how you're thinking about the building blocks of getting to that new target from where we're at currently?

A: We update the target as investors ask about it. We've broken it down similar to Slide 10. Same-store performance outside of fuel is behind, but OpEx and G&A cover most of the gap. New stores' impact isn't as big in 2028. We expect retail margins to improve and a more normal price environment. The balance sheet and capital allocation strategy help us build towards the target.