Arko Corp. (NASDAQ:ARKO) Q4 2022 Earnings Call Transcript

It’s not the Arko in particular, it’s actually everybody have the same issues. And I think given our size, we probably can be a little bit more flexible. But as I said, I mean, one of the things that we see in Q4, and we demonstrate that not only that CPG was up and gross profit, basically outside the world was up, it didn’t impact the sales inside the stores. As you can see our same store sales as cigarettes inside the store were up 4.1%. And we continue to see this trend, by the way moving forward. And I think that just demonstrate that CPG will continue to rise across profit dollar outside the stores continue to rise, because of all of those reasons.

Unidentified Analyst: Got it. And then how do you balance that with the fuel volume decline in the quarter going forward? I mean, it’s sort of like a tricky stabilization act, I think.

Donald Bassell : Well it’s a great question. And as I always say, we believe that we have the right tools in place. And given that we believe we have the right tools in place. We always try to find the sweet spot between losing gallons on one end and basically getting margin. So yes, our gallons were down for the year 8.1%. But if you really looking on gross profit, gross profit dollars, you’ll see that gross profit dollars was almost 20%. So you have a, you have to find this sweet spot. And at the same time, you need to be very careful and making sure that you continue to be competitive. I think that’s one of the things that we see. And you’re probably different than some others, but very similar to the accolades to the small operators, 40% of our stores are operated in cities, have population of 20,000 people or less, and an additional 20% is between 20,000 to 50,000.

So we are in a lot of rural locations. And our belief is that gallons, we’re just not there. It’s not that we lost 8% of the gallon and someone else pick up the 8% of the gallon. That’s not the case over there. We just think that people were driving last. However we are recycling right now. Almost we are in February right now we really recycling right now, the beginning of the war last year. And if you remember the volatility of fuel prices started at the beginning of March 2022. And now when basically prices, at least they are down right now dramatically from what we saw last year, we start to see increasing gallons compared to last year because of that.

Unidentified Analyst: Got it. And then my last question was, you made a reference in the script on M&A looking at adjacencies or adjacent categories. Just wondering if you could give us an example of sort of where you were thinking that might be accretive to the quarter?

Arie Kotler: Well, our main core is, of course, company operated stores. That’s our main core. I mean, if you’re really looking on our company, we continue to grow and continue to buy company operated stores. 70% of our — if you’re really looking on our operating profits, 76% of our businesses basically come from a retail segment. And as I mentioned, I mean, as we continue to grow, now we have a wholesale opportunity, which is a great opportunity for us, we have the Cardlock opportunity, which is an unbelievable opportunity for us. I mean, you see the results, I mean, we basically deliver in five months, we deliver the EBITDA that, we basically underwrote to deliver for the full year. So a great year for us. And again, this is just then, like I said that adjacent opportunity for us to continue to deliver great cash flow, while at the same time, we’re going to continue to concentrate on our retail business and company operated stores, because this is where we see, the majority of the profits coming from.