Speedway reported record earnings in its fourth quarter on Wednesday, even excluding new revenue after the company’s acquisition of Hess Retail last year.
The Enon-based company reported $544 million in overall earnings in 2014, up roughly 45 percent from 2013. Company officials attributed the sharp increase to income from the added Hess stores and higher merchandise margins, among other factors.
It purchased Hess Retail last year for about $2.8 billion, acquiring more than 1,200 stores on the East Coast and nearly doubling in size.
Speedway has pledged to invest about $9.1 million in its local headquarters and add 350 jobs in the next few years as a result of the acquisition. It also bought a building in the Nextedge Applied Research and Technology Park in Springfield to house its expanded footprint.
The chain reported Wednesday earnings of about $273 million for the fourth quarter, according to officials from Marathon Petroleum Corp., Speedway’s Findlay-based parent company. The stores from the Hess chain contributed earnings of about $118 million.
The company has begun to convert former Hess stores to the Speedway brand, a process company officials have said would take about three years. Speedway has converted 134 of the Hess stores into Speedway locations so far, according to information in Wednesday’s earnings report.
“Conversions of these new locations and the deployment of Speedway’s highly successful merchandise model are progressing well,” said Gary Heminger, CEO of Marathon in a statement about the earnings.
So far, customers have reacted well to the changes, said Anthony Kenney, Speedway’s president. He also credited employees at both companies for what he said has been a seamless transition. The changes include not only re-branding the Hess stores, but also implementing new technology and programs such as the company’s Speedy Rewards program.
“We’ve got some very good feedback from our customers,” Kenney said during a conference call with investors Wednesday morning.
It’s too early to determine how Speedway’s acquisition will impact the company or its competitors in the long-term, said Gregg Laskoski, senior petroleum analyst for Gasbuddy, which tracks gas prices in the U.S. and Canada. However, most analysts viewed it as a timely move, he said.
“We’re not talking about growth in their traditional markets in the Midwest,” Laskoski said. “You’re talking about their expansion into the East Coast and I think that’s why most analysts looked at it very favorably. It certainly looked to be a very smart move for Speedway.”
Speedway’s fourth quarter earnings of $273 million were a steep increase from the same time last year, when the company earned about $83 million. Speedway’s earnings were partially offset by higher operating and administrative expenses as a result of operating more locations after the acquisition, according to information from the company.
Speedway is the second-largest convenience store chain in the U.S. with more than 2,750 stores after the Hess acquisition. The company operates stores in 22 states, according to information from Marathon.
Marathon also announced its capital spending plan for this year, which includes about $452 million for its Speedway segment. Much of that spending will be used to continue to integrate former Hess stores into the Speedway brand, and continue to expand into new markets, according to company officials.
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