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DALLAS -- Fresh food was among the categories that boosted first-quarter sales for convenience store chain 7-Eleven, Inc. here, also contributing to a fourfold increase in profit, the company said yesterday.
7-Eleven's net earnings for the first quarter, which ended March 31, 2005, were $20.9 million, or 18 cents per diluted share, compared to net earnings of $4.1 million, or 4 cents per diluted share, in the same quarter a year ago.
Total revenues for the first quarter grew 8.7 percent to $3.0 billion, driven by strong growth in merchandise and gasoline sales. Total merchandise sales increased 5.0 percent to $1.9 billion. This growth was driven primarily by a 4.6 percent increase in U.S. same-store merchandise sales, on top of a 6.1 percent increase in the first quarter of 2004. Categories that contributed to the merchandise sales increase included fresh food, hot and cold beverages, cigarettes, and services.
"7-Eleven's operations and merchandising strategy is designed around keeping pace with the changing needs of our customers on an item-by-item and store-by-store basis," said Jim Keyes, 7-Eleven's president and c.e.o., in a statement. "This winning strategy has produced 34 consecutive quarterly increases in U.S. same-store merchandise sales. We have every intention of maintaining this track record of growing revenues, improving inventory turnover, and increasing profits."
For the first quarter, merchandise gross profit grew 6.8 percent to $671.9 million. Merchandise gross profit margin increased by 59 basis points to 35.86 percent, compared to the prior-year quarter. This increase was primarily due to favorable changes in product mix.
Gasoline unit sales were 544.5 million gallons for the first quarter of 2005, or basically flat with the first quarter of 2004. Total gasoline revenues for the quarter were $1,074.3 million, compared to $923.2 million in the same quarter a year ago. The 16.4 percent increase in gasoline revenues is principally due to a 27 cent-per-gallon increase in average retail gasoline prices year over year, 7-Eleven said. The average retail price of gasoline was $1.97 in the first quarter of 2005, compared to $1.70 in the first quarter of 2004.
Gasoline gross profit was $68.3 million, a 4.3 percent decrease over the first quarter of 2004. "In the face of a difficult wholesale market with significant cost increases in the second half of the quarter, we were pleased with our cent-per-gallon margins," said Keyes. "As we begin the second quarter, we have seen a decline in wholesale costs which has contributed to higher cent-per-gallon gasoline margins in April."
In early April, 7-Eleven negotiated a two-year extension on its service agreement with McLane Company, which supplies approximately 5,300 7-Eleven stores in the United States. 7-Eleven and McLane agreed to terms that provide enhanced benefits and improved service to 7-Eleven's stores, including requirements designed to improve on-time deliveries and in-stock levels. The amendment extends the agreement through Jan. 31, 2008.
7-Eleven, Inc. and its franchisees operated 5,809 stores in the United States and Canada in the quarter, with the global 7-Eleven store count reaching 28,064 stores worldwide.
Shares of 7-Eleven on the New York Stock Exchange initially jumped on news of the quarterly results, but closed at $23.20, off 1.3 percent.