On February 26, 2025, ARKO Corp (ARKO, Financial), a leading convenience store operator in the United States, released its 8-K filing detailing its financial results for the fourth quarter and full year ended December 31, 2024. The company, known for its regional store brands such as Stop, Admiral, and fas mart, operates in four segments: Retail, Wholesale, Fleet Fueling, and GPM Petroleum, with a significant portion of its revenue derived from retail and wholesale fuel distribution.
Performance Overview and Challenges
ARKO Corp reported a net loss of $2.3 million for the fourth quarter, a significant decline from the net income of $1.1 million in the same period last year. For the full year, net income was $20.8 million, down from $34.6 million in 2023. The company's Adjusted EBITDA also decreased to $56.8 million for the quarter and $248.9 million for the year, compared to $61.8 million and $276.3 million, respectively, in the previous year. These results fell short of analyst estimates, which projected a quarterly earnings per share of $0.01 and annual earnings per share of $0.21.
Financial Achievements and Strategic Initiatives
Despite the challenging macroeconomic environment, ARKO Corp made strategic strides in its transformation plan. The company converted 153 retail stores to dealer sites in 2024, including approximately 100 in the fourth quarter, aiming to optimize its channel and enhance operating income. This initiative is expected to yield an annualized benefit of over $20 million in operating income at scale. Additionally, ARKO expanded its pipeline of new-to-industry (NTI) stores, with plans to open four more locations in 2025.
Income Statement and Key Metrics
Merchandise margin rates improved slightly, with a quarterly increase to 33.0% from 32.9% and an annual increase to 32.8% from 31.8%. However, merchandise contribution declined by $11.9 million for the quarter and $5.6 million for the year, primarily due to lower same-store contributions and the impact of store conversions. Retail fuel margins decreased slightly to 38.7 cents per gallon for the quarter but increased to 39.6 cents per gallon for the year.
“We navigated a challenging macroeconomic environment in 2024, while advancing the development of our multi-year transformation plan," said Arie Kotler, Chairman, President, and CEO of ARKO.
Balance Sheet and Cash Flow
As of December 31, 2024, ARKO's total liquidity stood at approximately $841 million, with $262 million in cash and cash equivalents and $579 million available under lines of credit. The company's outstanding debt was $881 million, resulting in a net debt of approximately $619 million. Capital expenditures for the year totaled $113.9 million.
Segment Performance
In the Retail segment, fuel gallons sold decreased by 7.2% for the quarter and 3.7% for the year. The Wholesale segment saw a slight increase in fuel contribution for the quarter, while the Fleet Fueling segment experienced a notable increase in fuel contribution due to higher volumes and recent acquisitions.
Analysis and Outlook
ARKO Corp's performance reflects the challenges posed by a volatile macroeconomic environment, impacting both its top and bottom lines. The company's strategic initiatives, including store conversions and expansion of NTI stores, are aimed at optimizing operations and enhancing profitability. However, the decline in net income and Adjusted EBITDA highlights the need for continued focus on operational efficiencies and strategic investments in high-growth areas.
Looking ahead, ARKO remains committed to driving sustainable growth and value creation, with plans to further optimize its store portfolio and invest in higher-growth categories. The company's ability to navigate industry-wide headwinds and execute its transformation plan will be crucial in achieving its long-term objectives.
Explore the complete 8-K earnings release (here) from ARKO Corp for further details.
