Murphy USA Inc. anticipated for some time that Wal-Mart Stores Inc. would end its agreement to build future fuel stations, the company's CEO said Wednesday.
On Monday, Murphy USA announced that the company will no longer acquire property from Wal-Mart for future gas stations, surprising some investors and analysts. But when Murphy USA's Chief Executive Officer Andrew Clyde spoke on a conference call with investors Wednesday, he told them the company had seen the "fork in the road coming for some time" and has a plan to move forward in growing the company.
"Ultimately you as investors are going to have to decide if you're willing to accept a slightly lower, but arguably more efficient, long-term sustainable growth profile in 2018 and beyond in exchange for a hugely impactful program that can return significant amounts of free cash to investors," Clyde said
He then added, "We think it is a winning combination."
Murphy USA, a retail-fuel and convenience-store firm, separated from Murphy Oil Corp. and became its own public company in 2013.
The company entered into its most recent agreement with Wal-Mart in 2012. The deal was for Murphy USA to build more than 200 of their fuel stations at Wal-Mart Supercenters. Of Murphy USA's 1,300 stations, about 1,100 are at Wal-Mart Supercenters.
The two companies will continue to work together at established locations and Murphy USA will finish building about 60 gas stations on property acquired from Wal-Mart in the 2012 deal.
Clyde has said the decision for the change in the relationship between the two companies was made by Wal-Mart, which turned down Murphy USA's offer to build fuel stations at remaining supercenters.
"They opted not to proceed with our offer but have chosen to undertake this investment themselves," he told investors.
Murphy USA of El Dorado first announced the change in the relationship Monday after markets closed. Tuesday morning, the company's shares dropped almost 9 percent before ending the day down 3.5 percent.
Murphy USA scheduled the conference call with investors midday so the company could discuss its growth plans and the share-repurchasing program it has initiated in response to the announcement.
"I think management has clearly always had a plan B in case this happened," said Bob Williams, senior vice president and managing director of Simmons First Investment Group Inc. in Little Rock. "I think [Clyde] made a good effort at reassuring investors."
Murphy USA shares declined 1.1 percent to finish Wednesday at $54.24.
During the conference call, Clyde said the future break from Wal-mart does not result in a change of strategy for the company.
"We will continue with our five-part plan with our organic growth generated from third-party locations versus acquisitions from Wal-Mart," he said. "Our business model as a low-cost fuel provider allows us to compete with anyone in this business, whether it is in a Wal-Mart parking lot or a busy intersection down the street."
He said Murphy USA's plan for going forward without Wal-Mart "couples a more modest rate of unit growth with even more meaningful shareholder-friendly capital allocations."
"Plan B allows us to reallocate capital and flex our balance sheet ... now that we know that there's no large call on our capital such as a down payment to Wal-Mart," he said.
The company has approved a $500 million capital-allocation and share-repurchase program, and plans to continue building stations and investing internally to improve deficiencies, Clyde said.
Plans include building 60 to 80 fuel stations in both 2016 and 2017.
"We will continue to do everything that we have been doing to make this company successful this year and next year and the years after that," Clyde said.
Business on 01/28/2016