If you've ever passed through the Carolinas on business, or made the drive to Disney World, chances are The Pantry has provided fuel for your car and body. The company is the leading convenience store operator in the southeastern US with more than 1,650 shops in about a dozen states. (Florida accounts for more than a quarter of the company's sales.) Most of the company's stores do business under the Kangaroo Express banner. Other store names include Golden Gallon, Lil' Champ, The Pantry (naturally), and Petro Express. The stores sell beverages, candy, gasoline, magazines, and tobacco products, among other items. Fuel accounts for about three-quarters of the company's sales.
Sales at The Pantry's convenience stores rose 12% in fiscal 2011 (ends September) vs. the prior year, and net income approached $10 million, vs. a $165 million loss in the prior year. While merchandise sales declined slightly, fuel sales climbed 16% over the same period.
The Pantry added Kansas and Missouri to its retail footprint in fiscal 2011 when it acquired 47 stores from Presto Convenience Stores. The purchase was in keeping with its roll-up strategy of acquiring other businesses within its industry in order to grow in the Southeast and Midwest. Previously, The Pantry acquired 38 convenience stores in Alabama, Florida, Louisiana, and Mississippi from Herndon Oil in fiscal 2010.
The convenience store operator has been busy converting stores to the Kangaroo Express name in an effort to establish a consistent identity in the Southeast, much like its rivals 7-Eleven and Couche-Tard (Circle K) have developed consistent national brands. Currently, more than 1,580 of its locations are branded Kangaroo or Kangaroo Express.
The Pantry is struggling to increase merchandise sales, especially food service and private label products, which carry substantially higher margins than gasoline sales. To this end, the company in 2010 began test marketing freshly made to-go food items (such as sandwiches and salads) and premium coffee at some of its Raleigh, North Carolina, stores; it extended the offerings to all Kangaroo and Kangaroo Express stores by mid-2011. Indeed, while merchandise accounted for less than a quarter of the company's total sales in fiscal 2011, it contributed about 70% of its total gross profit.
Investment firm T. Rowe Price owns nearly 11% of The Pantry's shares. – less
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