Arko Reaffirms EBITDA Guidance and Announces $235 Million Acquisition
The company reported second-quarter net income of $9.4 million, down from $20.1 million in the prior year period.
Arko (ARKO), the convenience store and wholesale fuel operator, reported second-quarter net income of $9.4 million. The result was a decrease from the $20.1 million reported in the prior year period, primarily due to a $20.8 million non-cash gain from a sale-leaseback transaction in the previous year.
Adjusted EBITDA for the quarter was $72.0 million, compared to $76.9 million in the prior year period. A $3.3 million increase in credit card fees, driven by higher fuel prices, and other retail same-store operating expenses offset benefits gained from dealerization.
Retail performance showed mixed trends in volume and margins. Same-store merchandise sales decreased 1.7%, excluding cigarettes which fell 0.9%, though this represented an improvement over the 4.2% decrease seen in the prior year period. Merchandise margins increased 110 basis points to 34.7% from 33.6%.
Fuel margins also rose, with retail same-store fuel margins increasing to 48.7 cents per gallon from 45.7 cents per gallon. Same-store fuel contribution increased approximately 0.5%. However, fleet fueling fuel contribution decreased by $0.7 million as indexed prices declined faster than inventory costs.
Operating costs shifted as the company continued its dealerization strategy. Retail site operating expenses decreased 9.4% compared to the second quarter of 2024, though same-store operating expenses rose 5.6%, or $8.3 million, due to higher rent, personnel, insurance, and credit card fees. Arko converted 21 retail stores to dealer locations during the quarter, bringing the total conversions since the 2024 program inception to 47.
Wholesale operating income increased by $1.6 million compared to the prior year period. Growth was driven by the conversion of retail sites to dealer locations, which offset reduced income at comparable wholesale sites.
Arko reaffirmed its full-year 2024 Adjusted EBITDA guidance of $245 million to $265 million. The company increased its outlook for average annual retail fuel margins to a range of 45.5 to 47.5 cents per gallon.
The company announced an agreement to acquire U.S. Petroleum Partners, LLC for $205 million in cash plus inventory and $30 million in escrowed stock. The acquisition is expected to add approximately $30 million of annualized Adjusted EBITDA and increase annual fuel volumes by roughly 280 million gallons.
During the second quarter, Arko repurchased approximately $37.9 million principal amount of 5.125% senior notes.