On May 8, 2024, CrossAmerica Partners LP (CAPL, Financial), a prominent player in the wholesale distribution of motor fuel and real estate leasing for retail fuel distribution, disclosed its financial outcomes for the first quarter ended March 31, 2024. The detailed insights are available in their latest 8-K filing. This period highlighted a significant net loss of $17.5 million, a stark contrast to the $1.0 million loss reported in the first quarter of 2023. This downturn was primarily due to a $15.9 million loss on lease terminations with Applegreen. Despite these challenges, the company showed some resilience in its retail segment, with a gross profit increase.
Company Overview
CrossAmerica Partners LP operates through two main segments: Wholesale and Retail. The Wholesale segment, which is a significant revenue contributor, involves the distribution of motor fuel to various entities, including lessee dealers and independent dealers. The Retail segment deals with the sale of convenience merchandise and motor fuel at both company-operated and commission agent-operated retail sites.
Financial Performance Analysis
The first quarter of 2024 was challenging for CrossAmerica, marked by increased fuel prices and reduced demand impacting both fuel and merchandise sales. The Adjusted EBITDA saw a decrease to $23.6 million from $31.7 million in the previous year, and Distributable Cash Flow dropped to $11.7 million from $19.1 million. This financial strain was reflected in the increased leverage ratio, which rose from 4.21 times at the end of 2023 to 4.49 times as of March 31, 2024.
Segment Performance
The Wholesale segment experienced a 14% decrease in gross profit, primarily due to lower motor fuel margins and a decline in volume, which was partly due to the conversion of wholesale locations to retail operations. In contrast, the Retail segment reported a 7% increase in gross profit, driven by an 18% increase in merchandise gross profit compared to the first quarter of 2023. This was despite a slight decrease in motor fuel gross profit.
Strategic Developments
During the quarter, CrossAmerica began converting Applegreen lessee dealer locations to company-operated retail sites, completing this transition early in the second quarter of 2024. This strategic move is expected to be accretive to the company's financial results, as noted by Charles Nifong, President and CEO of CrossAmerica. He commented on the quarter’s challenges and strategic adjustments, stating:
“The first quarter was a difficult operating environment, with generally increasing fuel prices that resulted in lower margins along with industry wide lower overall demand for both fuel and merchandise. Our financial results for the quarter compared to the prior year reflect these challenges,” said Charles Nifong, President and CEO of CrossAmerica.
Future Outlook and Investor Relations
Despite the current challenges, CrossAmerica's management remains optimistic about the fundamental strength of their business model and their strategic positioning. The company continues to adapt its operations and financial strategies to navigate the ongoing market volatility effectively. CrossAmerica has scheduled a conference call on May 9, 2024, to discuss the detailed quarterly results and provide further insights into their strategic initiatives and outlook.
For more detailed financial information and future updates, investors and interested parties are encouraged to refer to the investor section of the CrossAmerica website.
This comprehensive overview of CrossAmerica Partners LP's first quarter 2024 performance encapsulates the challenges and strategic maneuvers within the current economic landscape, providing valuable insights for investors and stakeholders.
Explore the complete 8-K earnings release (here) from CrossAmerica Partners LP for further details.
