Travel Centers of America reports strong Q3 from higher fuel volumes and in-store sales (update)

“We believe our strategy is working, although freight market headwinds somewhat tempered the growth in our business,” said Andrew J. Rebholz, TA CEO.

The nation’s largest operator of full-service travel centers branded as TA and Petro Stopping Centers reported higher total and same site fuel sales volume and non-fuel revenues. 

TA added three new travel centers during the quarter, bringing to 10 the number of new outlets this year. One travel store acquisition and one development parcel of land are planned in the coming months.

“The strategy we adopted in May 2018 to refocus our efforts on our core travel center operations, to grow that business and reduce our financial leverage has been successful to date and we expect to continue to pursue this strategy,” Rebholz said. “We have a number of additional potential franchise locations in the pipeline,” 

Behind the numbers

TA paid more for diesel fuel and gasoline in the quarter but offset the increase by selling higher volumes through loyalty incentives to fleets and truckers to increase their fuel purchases.

Fuel sales volume and gross margin fuel sales volume for the 2019 third quarter increased by 21.2 million gallons, or 4.3%, compared with the year-ago quarter because of marketing initiatives and an increase of 2.5 million gallons at sites opened since the beginning of the 2018 third quarter.

A slightly lower diesel fuel gross margin per gallon was largely offset by a 5.6% increase in diesel fuel sales volume. The gross margin per gallon declined because of marketing costs. 

TA is still waiting to see whether the federal government will reinstate the biodiesel blenders’ tax credit for 2018 or 2019. That could happen before the end of the year, which would allow TA to reduce the fuel cost of goods sold by about $35.0 million for 2018 and $28.9 million for the first nine months of 2019. 

Procuring pancakes

TCA is continuing a restaurant rebranding plan with a franchise development agreement with International House of Pancakes to convert up to 94 travel center restaurants over the next five years. 

TA is obligated to convert 15 Iron Skillet and Country Pride restaurants to full-service IHOP restaurants in 2020 with others to follow through 2024. As part of the agreement, TA can borrow up to $10 million from IHOP to makeover the restaurants.

“I believe the introduction of this brand to our travel centers will earn a 20% return on our investment,” because it will bring in additional customers who will also buy more fuel, Rebholz said.