Grocery runs fuel Parkland’s gas station growth push
If any business should have had its plans derailed by the pandemic, Parkland Corp., Canada’s largest gas station operator, would have been among the top candidates.
Gasoline demand plunged because of lockdowns — but a curious switch in consumer habits helped blunt the worst of the downturn’s damage and kept the company’s growth ambitions intact.
Despite a 24 per cent drop in fuel and petroleum product volumes, Parkland’s Canada division posted 12.1 per cent growth in same-store sales at its convenience stores last quarter. The gain was driven by an initial jump in sales of tobacco and alcohol that later gave way to increased purchases of household essentials, including groceries and take-home food items.
Chief Executive Bob Espey said the higher demand for groceries and essentials has spilled over into the current quarter. The pandemic may have permanently altered some consumers’ shopping habits in favour of smaller locations, he said.
“In our formats, it’s easy to access. You can see into the site from the outside and you can see the number of people, and if somebody needs to run in quickly and grab something, they feel much safer doing that than potentially going into a larger-format retail site,” Espey said in an interview.
While the company posted a 72 per cent drop in net earnings last quarter, the grocery gain and costs cuts kept Parkland’s cash flow robust enough to fund its capital spending, dividend payments and acquisitions. The company ended the quarter with $1 billion in cash on its balance sheet, up from $244 million at the end of last year. Parkland also said it will make permanent about $50 million to $70 million of the annualized cost cuts it took because of the crisis.
That performance during the worst of the downturn will allow the company to revive growth plans that it had shelved during the early weeks of the pandemic — including numerous $1 million to $5 million projects, such as adding new gas stations or sites for commercial customers, Espey said.
And while the company plans to focus on its strategy of building out its network through a series of smaller acquisitions, it also won’t shy away from a bigger deal if an opportunity presents itself, he said.