Murphy USA Q1 FY26 earnings call MUSA

Murphy USA's fuel supply business, formerly PS&W, demonstrated strong performance in Q1 FY26, contributing $0.096 per gallon to total fuel contribution. This was significantly boosted by nearly $80 million ($0.069 per gallon) from inventory gains due to the rapid upward movement in unleaded prices during March. Management disaggregates this into controllable activities (generating $0.024 per retail gallon), inventory exposure (volatile, dependent on price changes), and wholesale/terminal functions (modest, ratable contribution of $1M-$2M per month). The company emphasized its ability to manage volatility and adapt its playbook to market conditions.

Despite a rapidly rising price environment, retail fuel margins averaged a healthy $0.254 per gallon in Q1 FY26, reaching over $0.27 per gallon in March. This strength is attributed to fuel retailers remaining risk-averse and quickly passing through higher replacement costs, indicating that marginal retailers are less resilient to margin pressure. This market rationality, combined with Murphy USA's everyday low price model, allows the business to deliver strong results even in dynamic conditions.

The company observed a significant increase in value-seeking consumer behavior, evidenced by a record 600,000 new sign-ups for Murphy Drive Rewards in March, the highest monthly total since 2022. This indicates that new and lapsed customers are choosing Murphy USA for its low prices during periods of higher fuel costs. While overall Q1 fuel volumes were down less than 1% due to weather and the early stage of price increases, April volumes were flat year-over-year, suggesting a gradual build in customer attraction as prices remain elevated.

Merchandise results were strong, particularly in the nicotine category, where contribution dollars were up 8.8% on an average per store month basis, with non-combustible products up 22%. This was driven by favorable promotional activity and manufacturers investing in trial for new products. Non-nicotine sales and margin also held up well, increasing 2% and 4.4% respectively, indicating the core Murphy USA customer is maintaining in-store spend on non-discretionary items.

Murphy USA achieved only minor growth in per store operating expenses in Q1 FY26, demonstrating effective cost control. This was a result of intentional activities, including evolving maintenance functionality to a proactive, business-minded approach (e.g., batching tickets, prioritizing repairs) and implementing an upgraded store labor model to optimize staffing based on customer demand. Progress in shrink reduction and monthly employee training also contributed to these efficiencies.

The QuickChek stores in the Northeast region continue to face traffic challenges, largely due to intense QSR competition. In response, management is focusing on simplifying the food offer, rationalizing assortment, and improving margins. A key initiative is evolving the QuickChek culture towards a "sales-first mentality," similar to the successful approach at Murphy USA stores, supported by recent leadership changes. Early stages of this transformation are underway, aiming to drive results across all center-of-store categories.

The company maintains a balanced capital allocation strategy, prioritizing growth CapEx for building 45 to 55 new-to-industry sites in FY26. This is balanced with ratable share repurchases, with $71 million executed in Q1 FY26 at an average price of $420 per share. The company also paid down $26 million of debt on its revolver and grew its cash balance to $119 million. Deleveraging is a lower priority given the already low leverage ratio of 1.9x.