Murphy's Solid Cost Advantage Allows It to Reap the Benefits of Industrywide Uptick in Fuel Margins
Despite operating in the fragmented fuel retailing industry where competition is omnipresent and barriers to entry minimal, Murphy USA continues to thrive. The firm boasts a low operating cost structure and enjoys a strong real estate position, with most of its 1,700 stores located in high-traffic areas near Walmart supercenters. While the firm’s proximity to a retail stalwart mostly precludes it from offering higher-margin in-store grocery and prepared food like other convenience store peers, we don’t view this as a hindrance to Murphy’s competitive standing. Instead, we think Walmart’s presence mainly neutralizes the in-store appeal for all nearby convenience stores, benefiting the lowest-cost operators. Murphy fits this mold as the retailer’s operating expertise and small-box format help keep store-level operating costs lower than its peers.
United States