Murphy USA Looks Poised to Continue Reaping the Benefits of a Rising Fuel Margin Environment

Despite operating in the fragmented fuel retailing industry where competition is omnipresent and barriers to entry minimal, Murphy USA continues to thrive. The firm boasts a low operating cost structure and enjoys a strong real estate position, with most of its 1,700 stores located in high-traffic areas near Walmart supercenters. While the firm’s proximity to a retail stalwart mostly precludes it from offering higher-margin in-store grocery and prepared food like other convenience store peers, we don’t view this as a hindrance to Murphy’s competitive standing. Instead, we think Walmart’s presence mainly neutralizes the in-store appeal for all nearby convenience stores, benefitting the lowest-cost operators. Murphy fits this mold as the retailer’s operating expertise and small box format help keep store-level operating costs lower than its peers.