Murphy USA, Inc. Stock

Thank you for standing by. My name is Freda, and I will be your conference operator today. At this time, I would like to welcome everyone to Murphy USA's Third Quarter 2026 Earnings Q&A Call. I would now like to turn the call over to Christian Pikul. Please go ahead.

Thanks, Freda. Good morning, everybody. Thanks for joining us. With me are Mindy West, Chief Executive Officer; and Donnie Smith, Chief Financial Officer.

I know you've all probably accessed our earnings release and management commentary from the website last night, so we'll go ahead and kick off the Q&A session. Please limit your question and then get back in the queue to make sure we get to everybody.

Please also keep in mind that some of the comments made during this call, including the Q&A portion, will be considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. As such, no assurances can be given that these events will occur or that the projections will be attained. A variety of factors exist that may cause actual results to differ. For further discussion of risk factors, please see the latest Murphy USA Forms 10-K, 10-Q, 8-K and other recent SEC filings. Murphy USA takes no duty to publicly update or revise any forward-looking statements. During today's call, we may also provide certain performance measures that do not conform to generally accepted accounting principles or GAAP. We have provided schedules to reconcile those non-GAAP measures with the reported results on a GAAP basis as part of our earnings press release, which can be found on the Investors section of our website.

With that, let's go ahead and open up the call. I'll turn it back over to Freda.

Your first question from the line of Jacob Aiken-Phillips with Melius Research.

So just on the unit pipeline, you have 18 stores through today and 55 under construction. Does the 45 openings this year still hold? And how many construction sites to open this year versus the first and second quarters of 2027? And then also, will 2027 be back half weighted?

Thanks for your question, Jacob. Yes, we're really pleased to have built the pipeline where we have 18 stores open year-to-date, 55, as you mentioned, under construction, and also a firm plan to start 15 to 20 between now and the end of January. So our guidance still holds. We'll be around that 45 to 50, probably obviously a little bit better than 45, we hope as we end the year. Very difficult to predict what stores are going to open December 31, for example, versus January 2 because we have so many in flight right now.

But that's why we wanted to give you comfort in the stores under construction because, obviously, whatever doesn't open in December is going to open very soon within the new year, starting our 2027 pipeline off in a good direction. So we are still firm that we are -- have built our pipeline sufficient now to be able to carry out 50 stores a year, not just for this year, but also next year and maybe even do better than that by the time we get to 2028.

I would also estimate that by 2028, our hope is to get our pipeline more ratable. So instead of opening everything kind of at the end of the year, first of the year, we're more ratable throughout the year. So too soon to tell how lumpy the pipeline is going to be in 2027. Obviously, we're going to have a slug of stores that are going to open early, but then we would also expect to have a nice complement of stores going behind that in the second, third and fourth quarters as well.

Super helpful. And then just on the White Castle partnership, any early reads or customer behavior that you're willing to disclose?

Yes, that's a great question, too, Jacob, and one actually we anticipated getting. And just to clarify for everyone, we actually refer to that program internally as MARS. So Murphy Automated Restaurant Solutions. We view this as a test-to-scale program. So currently, we have more than 100 units in the market today and are deliberately scaling the program across new markets and formats.

Our goal, though, really is threefold. It's to build evidence around customer demand, fit to our operating model and also the store level economics as we deploy this out. So at this point, it's simply too early to comment on any scalable performance potential, although we will say the initial results that we've seen so far are encouraging. But that's really all that we really want to say at this time. So hopefully, in future calls, we will have line of sight to some more detail to be able to provide you.

Your next question from the line of Bonnie Herzog with Goldman Sachs.

I just had a quick question on fuel volumes. You mentioned that you are confident in your SS fuel volume guidance of minus 1% to minus 3%. But then looking at year-to-date, your volumes are essentially flat. And I know you have a tougher comp in Q4, but it does sort of suggest you'll maybe be at the, I guess, high end of that range. So hoping, Mindy, you could talk about how we should think about that, maybe what you're seeing from a fuel volume dynamic and any consumer behavior at the pump?

Yes. I would say that our business is advantaged as we enter this more elevated price environment for longer because that is going to make customers more price sensitive. For the third quarter, I believe we have prices above $4 in 10 out of our 27 states. But I think the longer that continues, the more price fatigue there is going to be on our customer, the more budget fatigue there's going to be. So we would expect gallon growth from that. And also, we're continuing to take share.

What our third quarter results tell us is that we took share on both a total gallon basis, but also a same-store basis as we were plus 6% versus OPIS. So we were slightly positive when OPIS would tell us that we were going to do -- to be flat. So we know that higher absolute prices absolutely increase price sensitivity. But also, we still need that right environment and price-wise to be able to create that separation to drive incremental value. We saw that a little bit for 1/3 of this quarter being in a high-price environment combined with a favorable falloff, and we saw the behavior that we would expect.

So for the fourth quarter, too soon to know what that's going to look like, but I would say that we are encouraged by volumes so far in the month of October being at 100% of the prior year because that's despite some hurricane activity, which really took a large percentage of our stores down for several days. So we're optimistic about what we see, and we're also optimistic as we go into 2027 because we think this heightened volatility and these higher prices are going to continue as we enter into next year.

Yes, that kind of does make sense. And if I could ask maybe just a follow-up on sticking with fuel because on that point, looking at your fuel margins in the quarter, could you maybe just touch on a little bit more on the composition of total fuel contribution? What I mean by that is I was looking at the retail fuel margins seem to be a little bit more under pressure. So maybe talk about that. And then I know a lot of the fuel supply and RINs strength was due to uncontrollable factors, but how should we think about modeling the fuel supply segment, I guess, in Q4 and maybe next year, Mindy, based on what you just said?

Well, I'm actually glad I'm not an analyst and don't actually have to model it because I appreciate there's a lot of moving parts. There's a lot of nuances that happen out there, and every one of those absolutely can make a difference in our results. But I'll try to help you out as much as I can. So as I unpack the third quarter, the retail margin, it may have looked soft to you. But actually, what we saw in July was a run-up in price. And so that's not going to be an environment favorable to margins.

So actually, margin -- I mean, prices creeped up for almost all of the quarter, which is not a great backdrop to earning margin. So the fact that we were within $0.01 of the prior year, which had a falling price environment is telling us, that structural component that we talk about is still there, causing pressure on those marginal retailers. It really wasn't until the last half of September where we had the elevated prices combined with a falloff that we were able to create that separation and drive both margin and volume.

And then when I look at the fuel supply results, again, it was an upward sloping environment. So we had an impact on the uncontrollables as we call them, especially during the month of July. And then from a controllable standpoint, product supply was still very tight, not as tight as it was in the shock, maybe the first shock that we saw in the second quarter. So the controllables were lower in the third quarter versus the second quarter because the second quarter was dealing with that initial shock, but we still see a tight supply condition going into the fourth quarter.

We don't expect that to alleviate. I don't know what's going to happen with the pricing environment, but I want to remind people if we do see a falloff, yes, that will cause an effect in what we determine our uncontrollables, but that should also have a very positive effect on the retail side of the margin with expanded margin and then hopefully also a chance to create separation and drive volume so that total fuel contribution would be very healthy in that type of environment. But appreciate, Bonnie, that there's lots of moving parts. I don't know how to tell you to model it, but look forward to unpacking the results for the fourth quarter when we are talking in January. So hopefully, that helps a little bit, at least.

Your next question from the line of Tom Palmer with JPMorgan.

Maybe I could just follow up on Bonnie's question on fuel supply, and kind of clarify on the controllable side, how do -- because they were bucketed in controllable RIN prices. How do they impact your fuel profit? Should we think about elevated RIN prices as being a more enduring tailwind versus like, say, the $0.03 or so outlook you've talked about in the past? Or is there -- is it more about like the volatility of RINs? Just any help there.

The volatility of RINs can have an impact that is temporary, but largely RIN prices are a pass-through because the prices of the RIN that we're getting was embedded in the cost that we incurred to get that supply in the first place. So yes, if RIN prices rise really rapidly or fall really rapidly, that may not take -- that may not have an impact immediately within the cost of our supply. But over the course of a few days, that's going to normalize out.

And so we really don't concern ourselves with what the price of the RIN is because it is strictly a pass-through. And that $0.02 to $0.03 that we talk about, that is what we would expect to earn during a normalized environment where that uncontrollable piece is more or less flat. That is the $0.02 to $0.03 that we believe that we can earn from the controllable side of the business.

But I will say in a tight supply environment like we are in now, that is where our fuel advantages are to the most effect because we have all this optionality around how we acquire supply, so we can acquire it cheaper than we could if we just bought it at the rack. So we would expect our product supply and wholesale business to earn over the $0.02 and $0.03 in a tight supply environment. And then obviously, this uncontrollable piece will have an impact pertaining to the direction of the prices.

Okay. And I just wanted to clarify, I know there was some language about this, but when we're looking at the stepped-up OpEx in the fourth quarter, I know a lot of it is kind of referring to laps, but there is also maybe some deferral of certain things that are falling into 4Q. To what extent should we start thinking about any level of heightened OpEx growth next year? Or is that not the case?

Well, we're always going to have a focus on controlling our cost. So the elevated -- we were actually down this quarter. We're expecting a little bit of a catch-up in next quarter, but also we're overlapping some initiatives that we deliberately put in place last year with regard to maintenance. So as we overlap those cost savings that we already got in the fourth quarter of last year, that's part of what is driving the modest increase.

But again, for guidance purposes, we still expect to end the year even below our very low guidance that we already put out there. And then as we enter next year, our intent is going to be to sustain the advantages that we already have and create some new ones as well. But too early to guide specifically as to what that's going to look like.

Your next question from the line of Edward Kelly with Wells Fargo.

I want to follow up on fuel margins. And you mentioned retail margins better than you would have thought and a rising price environment. Could you maybe provide a little bit context around that competitively and what's allowing that to happen? And then as part of that, as you think about maybe eventually, right, the situation in Iran stabilizing, curious as to what your thoughts are on where margins could settle out versus the $0.28 you earned in '24 and '25 on the retail side and maybe how independent breakevens are informing that?

Yes. When we talk about a rising price environment not being conducive to margin, it is because you're constantly having to catch up for the price increases that you're incurring. So the market continues to have to restore. And in a choppy market, especially one that we saw during this quarter, it was very difficult to get ahead of it. And so we were always trying to restore the market versus the prior period where you had lower absolute prices, but a falloff in prices that sustain for a longer period of time.

But what we are also seeing is that, for instance, when we take share of market, which OPIS would indicate that we are, that is just putting more pressure on those marginal retailers who their only way to make up for that lost volume is to make up for it in margin. So that is continuing to support that structural margin element that we talked about that maybe will be $0.05 a year, don't know. But that certainly is seeming to hold up as our results this quarter would verify based on our retail margin being very close to what we reported last year in a completely different environment.

As we look forward, we actually expect this heightened tight supply elevated volatility to carry on into next year. Don't know when the war is going to end, but even after it does, the normalization effect is going to be really complicated because we're going to have infrastructure impacts, refinery maintenance that's been postponed, supply chain recovery, strategic reserves have to be replenished. And as long as supplies remain tight, we were going to expect continued volatility, which actually is an opportunity for the Murphy USA business because we are built for this environment. And our capabilities allow us to capitalize on that continued volatility.

So we will be able to capitalize on it on the product supply side, but that pressure that we're also putting that marginal retailer is going to allow margins to elevate for all in the business. So we'll be able to capture benefits on both sides of the fuel business and with all these stores that we have in the pipeline, they're going to open next year, they're going to open into a favorable environment also, which will increase our earnings power for 2027 and beyond.

And maybe just as a follow-up from a competition standpoint, can you just talk about some of the differences that you're seeing in some of the markets that have been a little bit more difficult from a volume perspective, whether you're seeing any easing there? Or are there any other changes that we should note in this regard?

Yes. No real changes. There continue to be areas of pressure, but pressure is just going to naturally shift across the chain over time as markets are simply all at different stages of maturity and competitive intensity. I know that Colorado and Florida have been 2 states that we've mentioned with material competitive pressure. But just like we discussed in this year's investor deck, Colorado is a great example of what happens when the market is starting to normalize. Volumes are still under pressure, and I can tell you that they still are.

But CPG is more than offsetting that gallon decline, which is driving total contribution up for the market and for players like us. So look, we're still investing in desirable markets where people want to grow. That's fine because we know over time, that competition is going to put additional pressure again on that marginal retailer supporting the structural margin. So yes, we have volume pressure in certain states. Colorado and Florida were 2 of those, but 7 out of our top 10 actually show same-store growth, which is the benefit of us having a broader footprint.

So competitive intensity continues. I wouldn't say it's any more or any less. I would just say the pockets of intensity tend to move over time and evolve, but in a very predictable way.

Your next question from the line of Bobby Griffin with Raymond James.

I guess, Mindy, first, I want to switch back to the stores. I think you guys have opened up a little over 40 over the trailing 12 months. Can you maybe talk a little bit how those have opened or performed in the first year? And then I think you guys were debating maybe a little bit different store prototypes or having a second prototype or something like that. So just any updates there on kind of that aspect of the store growth pipeline over the next couple of years?

Yes, sure. Thanks for the question, Bobby. Yes, I would say the latest class, the build class is ramping up good, maybe a little bit slower on the fuel side because you remember, we opened a lot at the end of the year. So they ramped in first to all the winter storms -- impacting our network. Then they ramped into all this price increase. So that wasn't a great environment to create separation and volume. But they're ramping despite what the environment that they face.

When we look at the build class from the year before, what we talked about in 2025 was we were seeing those build classes return 15% fully ramped up after tax. That was in the trough environment. So we would expect that to be even better when we look at them this year. But we're building really strong assets to last for 30 years. And as you know, our issue really hasn't been performance and still isn't. Our issue has been pace of store openings because the math would tell you, had we opened 50 stores per year from 2021 to 2024, our EBITDA last year actually would have exceeded $1.1 billion.

But obviously, we didn't do that. We opened 18 stores, 35, 22 and 29 stores, and that really created a tax on our business, not allowing us to show incremental EBITDA improvement in what was the worst possible fuel macro environment last year. So that's why we're excited now to have our pipeline built up because we can sustain that pace that we have talked about for the last several years. And we know that's going to be able to drive ratable EBITDA improvement for us regardless of the macro.

So last year's stores are ramping in a challenged environment, but they're coming along fine. This year's build class is going to do just fine as well. We are continuing to build great sites in great locations. But also as the second part to your question, we are definitely looking at new formats, not completely abandoning the model. The 2,800 is still going to have its place in our portfolio, but we're also looking at are there things that we can do that are maybe slightly smaller, slightly larger or just new and different from what we have done.

We've also reimagined our raze-and-rebuild programs, too, where it may not be a raze-and-rebuild that we do. We may do a heavy refresh, heavy remodel, do things like that. So just having a little more optionality in our model than what we have had before. But too soon to really talk about specifics as to what those will be.

Okay. That's helpful. Makes sense. And then maybe switching gears just over to the inside store business, in particular on nicotine, obviously, lapping the ZYN promo from last year. But, just curious, what are you hearing from that category about the promo environment going into '27? And I believe with some of the FDA changes, vapes might have been hitting the floors late in 3Q or maybe early 4Q. So just anything there on some of the changes there that were taking place?

Yes, sure. And look, it still continues to be very promotional, the whole category as consumers are still really in a test and try environment. They're not necessarily really loyal to any one thing. And we're seeing a lot of customer sets from the oral nicotine in particular, where we've seen people switching from their traditional method. We've seen people trying it in conjunction to their traditional. We're also seeing new nicotine customers that are new to us buying from us instead of someone else.

So vendors are still going to be very promotional around this category and make investments with us because we offer a high ROI on that investment. Then you also mentioned the vape and other things that may be entering. Legal vape is an incremental opportunity. We do have one brand in our stores today. We have additional products expected in 2027. So it's still limited right now, but it will become more meaningful as more products are allowed to be available.

And it's been an important category historically. So we know there is opportunity as volume moves back into the legal channel. So we definitely expect that to happen, and we will leverage our supply chain, our capabilities, the investments that we've made to be among the first to be able to offer that to our customers.

Your next question from the line of Pooran Sharma with Stephens.

Maybe wanted to -- maybe I wanted to just start out with the broader consumer. I wanted to kind of get your view on maybe the different cohorts. I know you mainly index to kind of lower income consumers. But in this higher gasoline price environment, are you seeing consumers trading down from premium and mid-grade to regular? And more broadly, are you seeing consumers trading down from higher-priced competitors to Murphy in general?

Are you meaning strictly on the fuel side or also inside the store?

Kind of -- on both, really.

Okay. Perfect. Let's do both. So your specific question as to RUL, yes, RUL actually for the quarter was up almost 2.5%, was actually up double that in the month of September. As you're right, we are seeing customers, both our customers trading down from premium and mid-grade but also customers trading in from other competitors because of our low price. Inside the store, we would also characterize our customers as resilient despite the ongoing pressure. We're calling them selective but resilient.

As we know, our customers have both discretionary and nondiscretionary spend. We've seen them continue to spend on those nondiscretionary purchases despite the rising fuel cost. But their purchases are remaining disciplined. They're not deteriorating. And to give you a proof point, we have a static panel of over 2 million of our Murphy Drive Rewards customers. Their total spend is up $50 year-over-year with us, and that's driven by the higher fuel spend, right?

But the merch spend is also remaining static, actually up slightly. So our customers are making the trade-offs, but they're doing it in other areas of their household budgets to absorb that higher fuel spend. And we continue to resonate because of our value proposition, our everyday low price position, we stand for value. So we are helping to support them even as their household budgets are remaining constrained. So maybe a little bit of pressure on the nondiscretionary purchases. But for those discretionary purchases in our store, even inside the store, those are very much tied to routine everyday things and customers are still finding room in their wallets to be able to come in our stores and purchase those.

Great. Appreciate that color. And just for my follow-up, I wanted to ask about volumes. I know a few folks have asked about it already. But just October volumes last year were about 2% lower. So I think it was a little bit easier comp. You finished 4Q last year around flattish volumes, which implies harder comps in November and December, as Bonnie had pointed out. But as you mentioned historically, a sustained decline in pricing is that type of environment where you can kind of create some separation.

And so as I'm looking to 4Q, even though you have harder comps in November and December, if RBOB holds here or kind of drops further, do you think it would be justified to think that you could see positive same-store gallon growth in November and December this year?

We could, Pooran. I think October, the fact that we're flat despite the hurricane impacting our stores is significant because last year, while it was an easy comp, we didn't have any hurricane activity at all. But from a pricing standpoint, yes, last year was an absolutely low price. But we did have a down in October. We had another down in the month of November. So when we look at this October, we had an up and then a down, and it remains to be seen what we're going to have for the rest of the year.

But if we continue to get sustained prices above $4 and if we can even rise a little bit from there, so we can get more of our network above the $4 mark and importantly, our competitors way above that $4 mark. I think that, that is going to make customers more price sensitive. And then obviously, if we could have a glide down in the second half of November that was on a sustained basis, not a choppy basis, that would certainly be an environment where even despite the difficult comp, we might could improve. But really too soon to -- in the crystal ball to be able to tell what's going to happen for the rest of the year. Is it doable? Yes, but it would take the right set of conditions to make that happen.

Your next question comes from Dan Guglielmo with Capital One Securities.

Just one for me. You mentioned in an earlier answer that you expect the normalization effect to be complicated, and the team has so much experience in the industry. So I'm just curious, what do you look for when judging if we have reentered a normalized period?

Well, the spot to rack differential is going to tell you one, but the leading indicators will be, one, does the war actually end? And does it actually end? Or is it just talk that it will end? Finding out what's happening with the infrastructure overseas will be important. Refineries that have been running in North America full out for almost 2 years. Refineries are not designed to do that. They're going to have to come down for maintenance.

Do they have problems on the way up or not? How soon does the supply chain work its way out and what really is the decrement to the overall supply chain that has to be filled? There will be some leading indicators for that, but those aren't things that are going to normalize within a week or 2. Those are things that are going to take months. And that's why we feel confident, at least at this point that even if the war actually ended today, we would still have lingering impacts well into 2027, which works to our advantage because of the optionality we have around the fuel chain.

We aren't dependent on one source of supply. We can get supply from a lot of places. So if supply happens to be tight in one area, we're not dependent on any one area. That is why we are built for this environment and our capabilities are actually worth a whole lot and our advantage is worth a whole lot. But those are the type of leading indicators that we would point to. But regardless of anything, these things are going to take months and months to work out.

Your next question from the line of Brad Thomas with KeyBanc Capital Markets.

Maybe a first one on QuickChek. Can you talk about its performance in the quarter and how you're thinking about its EBITDA going forward?

We don't break out the QuickChek EBITDA, but happy to talk about it. That business does continue to face pressure. It is a different business. Look, it is food forward, not fuel forward. It is a higher cost model to run because of that. It also has a very concentrated geographic footprint. So it doesn't have the benefit of stores everywhere where if you're experiencing competitive intensity in Colorado, we have all these other stores everywhere else that are doing just great. It is very concentrated geographically.

So we're remaining focused on improving our merchandise performance through things like sharper pricing, right assortment, executing well on our food and beverage capability. We're also working on the cost side of our business, tightly aligning the labor and our operating costs to the actual customer demand that we're seeing. We're also implementing that sales first model that we have on the Murphy USA side into the QuickChek side with the ability to upsell and better execute on promotions.

But to be quite candid, we expect all the pressures that we have been seeing and are seeing to continue to persist in the near term. And that expectation, though, is reflected in the guidance that you've already seen for the full year. So no additional increment, but that business does continue to face pressure.

I appreciate it. And then obviously, the overall business on track for a great year here. So I hate to nitpick on the non-nicotine same-store sales. But as you look at that area, clearly, some challenges for the consumer. Maybe can you speak to are you still seeing headwinds from SNAP and how big are those? And then anything interesting that you're seeing in the pipeline or that you're testing in stores that might be helpful to drive some more excitement in that area?

Yes. That's a great question. And look, our non-nicotine performance is primarily due to 2 specific categories, which we've talked about before, it's beer and it's lottery. Those are discretionary categories. Obviously, higher gas prices are not helping those at all. Lottery was the largest driver of our same-store decline, but it's also comping prior year where we had a $1.8 billion Powerball. Beer similarly is also a headwind. We did see some moderation this quarter. It doesn't mean it's positive. It just means it's not as bad as it was.

But if you exclude lottery and beer, our non-nicotine same-store margin was actually up 1% year-over-year. So that's showing you that customers are still engaging in the key categories. Packaged beverage did really well. Snacks did really well. We are gaining share across our center of store categories versus Nielsen. So that speaks to the strength of our value proposition. And also don't forget nicotine. We're continuing to drive results there and take share across that broad portfolio.

SNAP, we're really not seeing a material impact yet. But as a reminder, our exposure there is limited to less than 2% of sales. And SNAP is a currency, not a customer. So yet to be seen with do those customers just come to our stores and buy those products like a Red Bull energy drink, for example, but pay with a different method. And then with regards to initiatives, look, we're continuing just to focus on the basics, our offer being in stock, priced right, promoted effectively and leveraging our continually sophisticated MDR capabilities. So those are the things that we're doing to address that the primary culprits are lottery and beer, and that's not just a Murphy-specific headwind. That's an industry headwind, as you guys know.

We have reached the end of the Q&A session. I will now turn the call back to Mindy West for closing remarks.

All right. Thanks, everyone. We're pleased with the results we have delivered so far this year. We're also even more confident in the underlying strength of our business, but we appreciate your continued interest in Murphy USA and look forward to updating you again next quarter.

This concludes today's call. Thank you for attending. You may now disconnect.

Thank you for standing by. My name is Freda, and I will be your conference operator today. At this time, I would like to welcome everyone to the Murphy USA First (sic) [ Second ] Quarter 2026 Earnings Q&A Call. [Operator Instructions] I would now like to turn the call over to Christian Pikul. Please go ahead.

Thank you, Freda. Welcome, everybody. Thanks for joining us this morning for this Q&A session. With me are Mindy West, President and Chief Executive Officer; and Donnie Smith, Chief Financial Officer. As Freda said, we're happy to welcome more analysts to the research community covering Murphy USA. We're going to ask that you limit your initial questions to one and then get back in the queue afterwards.

Please keep in mind that some of the comments discussed in today's Q&A session may be considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Please refer to the forward-looking statements section of either the earnings release or the management commentary document for further details.

And with that, I'm happy to open up the call.

[Operator Instructions] Our first question from Irene Nattel, RBC Capital Markets.

I was just wanting some more color on the updated 2026 outlook, notably around 2 elements. The first being the fuel margin guidance and the second being sort of the, relatively speaking, the slightly sort of the low-end guidance on merch. And so I was wondering, looking for more color on content and drivers of both of those, please.

Irene, welcome to the call. Thank you for your question. When thinking about retail margins for the rest of the year, it's very difficult to predict where we're going to land because we're in the middle of a lot of heightened volatility with a crisis that continues to ebb and flow and don't know where that will end. While we can't predict the macro environment, we are seeing a higher floor for retail margins. So competitors are remaining rational. Pricing is reflective of those needs of the marginal retailer to maintain their required returns, still reflecting that virtuous cycle that we've seen.

What we haven't seen so far is a pronounced decline in price, which would gather incremental volumes for us as well as expand the retail margin. So at this point, we are not baking that into the forecast at all. So you could call our margin forecast somewhat conservative. I would agree with that. But I would also say that, that's intentional on our part because we don't know what it's going to be, and we manage our business to try to outperform our commitments. So what we are saying is reflective of what we have high confidence that we can deliver at this point.

With regard to the merch, obviously, our consumer is experiencing some budget pressures, which are putting some pressures on the nondiscretionary pieces of our merch business, although we have been very pleased with how resilient the customer has been year-to-date. But I will tell you that target when we originally set it at the beginning of the year was a bit of a stretched target anyway. It was going to be very hard to get to the high-end range of that target. And in the face of all the weather impacts that we had in the first quarter, while we had the winter storms and at one point, had half our network closed, that results in just a loss of demand there for those time periods, along with what we think are still going to be some pressures on our customers' wallets as we go through the rest of the year. That gives us confidence that, yes, we will be in the range, but towards the low end of the range.

That's really helpful. Can I ask a follow-up question?

We're just going to move on, Irene.

Your next question from the line of Pooran Sharma with Stephens Inc.

Congrats on posting the strong results. I wanted to get your sense on supply normalization. If current peace talks ultimately result in a durable resolution, how quickly do you think physical supplies could take to normalize given depleted inventories, the need to rebuild strategic reserves, disrupted shipping flows, potentially shuttered upstream and downstream assets. How long should investors expect supply tightness and volatility to persist even after the geopolitical situation improves?

Very good question, Pooran. I wish that I had the answer to that because all the things that you mentioned are great uncertainties in the market and very unlike what we saw in 2022, where COVID did produce a demand shock and then the Russia-Ukraine created a lot of volatility, but really had no impact on domestic supply at all.

When you look at the current conflict, it obviously as a supply shock is having a material impact on domestic inventories and flows essentially globally. So our belief is the return to normal is not likely at all in the near term and then yet to be seen is how much damage to infrastructure is there overseas, how long does that take to recover.

And then you mentioned if this conflict resolves, I don't know that we have any line of sight to think that it's going to resolve quickly. But -- and so that in and of itself may take a prolonged period. So I think we're looking at well into next year before this thing even begins to unwind.

Your next question from the line of Bonnie Herzog with Goldman Sachs.

I had a question on NTIs. You mentioned in the press release that you expect your NTI delivery to come in closer to the 45 new stores as opposed to, I guess, the upper end of guidance. So I was hoping to hear what changed. Is construction taking longer this year and/or did your original guidance maybe imply some M&A that now isn't happening?

And then you also mentioned that you're pulling forward construction of new stores scheduled to open in '27. So should we assume a faster ramp of NTIs next year? And Ultimately, I guess, Mindy, how does this change the pace of growth and profitability since I think you said in the past, it takes a few years to reach run rate profitability on new stores.

Thanks, Bonnie. And yes, this year, we are going to be at the lower end of our stated range, but that is without the tuck-in acquisitions that we said would take us to the high end of the range. Those may come up, we don't know. But we are only commenting now as to what we have in the pipeline and the organic pipeline currently as we continue to invest heavily in our team and in our new store pipeline. So we think we are well positioned to grow at this rate and above per year going forward.

Pulling some stores forward earlier in the year, that will certainly be helpful to get them to ramp starting sooner, but it does take, as a reminder, about 3 years for a store to get to full ramp. So it's not an indication that our activity is taking longer or we're doing less. It's just indicative of what we felt we could deliver from an organic standpoint and absent any tuck-in acquisitions, and the ramp, we think, is going to go as expected.

And as for M&A, large-scale M&A, that's certainly not something that's on the radar for us and does not need to be given the health of our organic pipeline.

Your next question from the line of Ed Kelly with Wells Fargo.

This is John Parke on for Ed. I guess can you talk about some of the puts and takes for nicotine margin dynamics in Q2 and just kind of the outlook for Q3, just given the Zyn lap here?

Yes. The Zyn lap is going to be a big one. We do believe that nicotine is going to continue to be a tailwind for us in the second half. And excitingly, we're actually seeing strength in combustibles, especially with the new value priced Cowboy Cut cigarette that did really well. It was well received by our customers. We actually had a hard time keeping that product on the shelf. And as we look forward, we think that, that's going to continue to be a source of strength. We also see some emerging other tobacco product opportunities in the second half, some new gen pouches are going to come online. We expect some flavored vape products back in the market.

But again, as you reminded us, we do have a tough third quarter comp as we lap that Zyn promotion. Our margins this quarter were reflective of growth in the pouch category of other tobacco products, but continued resurgence in that cigarette category, which, again, as a reminder, carries a lower margin than those other tobacco products. So Q3 is going to be a tough comp, but we think overall, the category is going to continue to be promotion heavy, and we'll be a major participant in that.

Your next question is from Thomas Palmer with JPMorgan.

I wanted to ask on what you're seeing with rewards. Last quarter, you discussed elevated sign-ups in the program when fuel prices moved higher. How is the conversion of those sign-ups been in terms of driving more consistent customer visits by those new members and then also converting those customers from the pump into the inside of the store.

Yes. That is a great question. As we said last quarter, our sign-ups had elevated to 600,000 a month, up from around 400,000 a month. Happy to report that during the second quarter, sign-ups were even over that 600,000 mark every month during the quarter.

Also, what we said was in the first quarter, what we were seeing was 40% of those new signees were either new or lapsed customers. That number has also ticked up in the second quarter to approaching 46% as new or lapsed customers. So we love the MDR platform. It's making it easier for us to communicate with our customers to encourage full membership, which we know translates into durable and loyal behavior. So we're taking those new members on an automated journey with a series of offers to increase their engagement, building mechanisms that are very personal to the customers as they onboard, engage and we retain them.

You mentioned driving business inside the store. Just to give you a specific example, one of the ways that we are encouraging pump-to-store conversion is we were offering spend $5 inside the store save $0.05 on gas as part of that new customer journey. What we're seeing is that has been very successful. We're also encouraged that those new members are engaging more with the program more often, and we know that they're going to be able to exhibit those loyal behaviors even sooner.

So we're thrilled with what we're seeing with the higher sign-ups. That's obviously expanding the top of the loyalty funnel, and we are enhancing our ability to create positive customer relationships that we know is going to help drive future growth. And we are continuing to refine the platform, by the way, continuing to upgrade it and make it better for our customer. So thanks for the question.

Your next question is from the line of Bobby Griffin with Raymond James.

Mindy, I appreciate all the detail on the volumes given in your script. And I think it's interesting, you're getting more and more states flipping to positive volume with really 2 kind of as the drag, big ones, Colorado and Florida. So when you look at the numbers you gave us in that prepared remarks, like where do you think you are on that competitive curve? I know that's almost impossible probably to answer, but is that drag getting better or worse sequentially from those 2 states? And is there any gleanings from other states that kind of tell you you're getting towards the bottom of that competitive drag and we might be starting to lap it?

I would hate to call the bottom because I might be surprised with new competitive intensity in other areas. I'd like that you mentioned Colorado because that does represent at least some hope while volumes are down. Our total volume is down much less than that as we are continuing to open new stores and grab share as well. And margins, just like last quarter, showed improvement, actually up over 20%, just like they were in the first quarter. So competitive entry even there does remain high, but we're seeing improvement to margins as volumes are redistributing across the new stores.

Seeing some of that in Florida, too, where volume continues to be down, but margins are actually healthier. So that may indicate kind of a turn in things. And in Texas, as we referenced, which is a large market for us, our volumes are up as that represents a more mature steady market where we've had a lot of competitive entry, but that entry has normalized and everybody now has their share and knows their place and how to play the game.

So not ready to call the thing and say it's over because I think we're still going to have competitive pressures, whether it be in Colorado, Florida or some new location. But the recipe continues to endure over time where it's painful in the beginning when those competitors come in, same as it is when we come in because everybody is competing for that share, and we're going to fight to retain our share of that, too, which results in lower margins for us as those volumes get redistributed. But over the course of time, as the competitive entry happens and volume gets reallocated, things get to a new normal with margins actually stabilizing at a higher level than they were before the competitive entry. But -- so hopefully, you're right, but I do appreciate your question, but we are seeing some green shoots at least to be able to talk about.

Your next question from the line of Jacob Aiken-Phillips with Melius Research.

Congrats on the strong results. Bonnie kind of touched on the NTI cadence, but I wanted to reconcile it with the capital spending. So like NTI is down 45 and R&R is at approximately 10, but you moved CapEx up. So I mean, can you quantify like what that additional CapEx is going to like land, construction pull forward, et cetera? And how much of it is timing versus others? And then just as a corollary, how should we think about share buybacks in that context?

Okay. So great dual questions. Yes, CapEx is trending to the high end of the range as we want to make sure that we deliver on our NTI program, and we will pull forward stores if we need to. So that's part of the estimate in case we're able to do that. We're also making some very proactive life cycle investments in our existing stores, so proactively replacing dispensers, HVAC units, safe, things like that. Rather than fixing a dispenser 4 times, we're going ahead at a dispenser that we know is nearing the end of life and going ahead and replacing those. So we are deliberately refunneling some of our CapEx to those activities.

And we're also intent on ensuring that we have future growth by investing in our land bank. So that is a clear priority for us going forward, too, which again is taking us towards the high end of the range even absent the raze-and-rebuild activities.

When we think about capital allocation and in particular, share repurchase, we are definitely going to lean into share repurchase as our capital allocation strategy has not changed. We're going to deliver capital for growth, and we have a slate of opportunities to do that, but share repurchase does remain one of our main levers, and we will continue to emphasize that as well. And the good news is the business throws off enough cash flow for us to be balanced at that over the sweep of time, and we can easily afford to continue to grow and accelerate growth with new-to-industry sites while at the same time, maintaining disciplined share repurchases.

Your next question from the line of Brad Thomas with KeyBanc Capital Markets.

Congrats on the quarter here. I had a couple of things I want to ask about the same-store fuel volumes, Mindy. So I hate to make this a multiparter, but I'm wondering if you could give us a little color on, for one, sort of how that trended through the quarter and has been tracking as we've gotten into August. How do you think about retaining these incremental customers that you're bringing in, if you are seeing incremental customers as a part of that higher volume? And then maybe what efforts might be new to retain those customers that perhaps didn't exist in the past when you sometimes saw a benefit from these spikes in gas that led to incremental customers for you?

Okay. That's a very clever way of turning one question into three. So I hope I remember all that you wanted me to cover here. But I think your first question was to talk about same-store volumes.

Look, we view what we did in the second quarter, volume performance of a positive 0.5%, as very encouraging, especially given the pricing environment because while RBOB prices finished the quarter down 2%, the quarter itself was characterized by a lot of extreme offsetting movements. So we saw a run up in April, down in May versus a flat June. And we know that absolute price level matters. We saw stores above $4, though, only 18% of the time during the quarter, which we called out on our script.

But also price direction matters just as much as the absolute price level, if not more, because as you know, in a rising environment, competitors move higher in response, that compresses spreads across the market, limits our ability to create that important separation. We saw that in April volume for same store, whereas we were essentially flattish to slightly down with that upward increase in prices. Then you know when prices fall, competitors are going to react at different speeds. That gives us the opportunity to create separation and drive incremental volume. That's exactly what we saw in May. RBOB declined 16%. Our same-store volume increased 1.6%, which was even more pronounced during the last half of May, RBOB fell actually 18%. Same-store volume ticked up over 2% versus prior year.

When we look at July, again, July itself started a bit soft with 4th of July holiday impacted by rain throughout a lot of our network. But the run-up in price that you saw during the month impacted our ability to differentiate based on price analogous to 2 out of the 3 months that we saw in the second quarter. But as we look into August, which granted we only have 5 days of results, volume is actually up 1.5% as the market has dropped some. So key point here is, I think volume is performing exactly as we would expect. And we opened today, by the way, also in the high 30s, so the margin isn't bad either. So I think May demonstrated and so far August has as well our ability to capture volume when falling wholesale allows us to differentiate on price and meaningfully drive it.

And then when we think about our capabilities versus prior year, I go back again to the MDR that we just talked about. We just have an increased ability to be able to communicate with our customer, know our customer, understand the frequency of the trips, where we may be leaking a trip or 2 with that customer and be able to drive more targeted promotions to that customer to drive that incremental behavior that we want to see. So I think we're in much better shape now that we've got these new customers here. And yes, we do have evidence that customers are trading down to a Murphy platform. We now have a greater ability to keep them and make them more sticky to us than what we have ever had in the past. So hopefully, that answered all that you wanted me to.

[Operator Instructions] Our next question is from Corey Tarlowe with Jefferies.

Great. Mindy, I have one question and then just a quick follow-up to the question that was just asked, if that's okay. First, I think you said August, I just wanted to clarify, was in the high 30s. But RBOB, I think, started to gap down pretty materially with the start of August. So I'm wondering what changed versus the second quarter?

And then also, as my broader question, during periods of prior volatility, fuel supply does tend to be a pretty meaningful earnings benefit. And it would just be helpful to kind of get your perspective on what you saw in the quarter? And then any commentary on how we might be able to think about that versus what you've seen quarter-to-date?

Thanks, Corey. Yes, your question about August, yes, you're correct, opening today with margins in the high 30s, which is actually higher than what it was when we began the month because remember, margins are a function not just of the direction of prices, but reflective of what is the competition doing and how is the market restoring and how quickly is that happening, which can vary from week-to-week or month-to-month. And also dependent on when that price increase or decrease happens, because if it happens close to a weekend, people are already positioned where they're going to be, so you really don't see any incremental new behavior until you begin the next week. So that just gives you an example of what August is doing. But I do think it's important that as we're seeing this falloff in price, we are getting that separation and our volumes are picking up just exactly as we would expect given those conditions.

And asking about fuel supply, yes, we do know that we're advantaged in this environment. Again, this is a crisis that actually has impacted supply of movements and availability. So what we're seeing is this is exactly the type of environment that underlines why we value the assets and capabilities that we have because our ability to acquire at the ship channel direct from refinery, ship it up the pipe, hold it either in our terminals or in the 100 terminals where we have access from third parties is something that gets magnified during periods like this versus a time period when you think about last year when product was ample. It was everywhere, you could buy at the rack and not be really that much disadvantaged versus us having these assets.

So I think what you saw in the second quarter identifies that because what we call the controllables piece of the business, which is our ability to acquire product through all these various mechanisms, what it would be versus buying at the rack was advantaged during this quarter versus what you saw same time last year where product was long and loose, we were returning from the controllables part of our business only about $0.025 versus the over $0.07 that we posted this quarter.

And then uncontrollables, as we went into great detail to explain during the last quarter, that's going to be a function of is the market rising or falling. But it's that controllables piece that really tells you a lot about what's going on in the fuel supply market and whether product is plentiful or scarce. And when product is scarce, again, that really underlines why we value the assets and the capabilities that we have.

Your next question from the line of Irene Nattel with RBC Capital Markets.

So listening to everything that you're saying and taking into consideration that we're likely going to be in a tight supply environment into some point next year, recognizing we don't know when. And I'm recognizing it's early. But the $0.35 all-in margin that you're conservatively guiding to in the back half of the year, I think, is higher than what many of us would have expected. Should we be thinking about a similar kind of level next year as potential as a floor? Like how should we be thinking about it?

Yes. Great question. Irene, thank you for your patience, getting back in the queue when you could have asked a multiple part question from the beginning. So thank you for getting back in line.

I think what we're seeing is we're getting good margins absent a sustained price falloff. And what we're seeing is margins are stabilizing at higher levels when they find where the bottom is, more so than what we've seen previously. So I think us saying that $0.35 is doable for the back half of the year, it's because we're seeing that we have a very stable margin structure. Restoration activity has been very rational. So while we may see margins fall more quickly from the peaks, they are stabilizing at much higher levels, so that's raising the floor.

So when we think about peak to peak, we've seen higher margins before. We saw them in 2022. We're seeing them higher than what they were in 2022. And then when we think about last year, I know a lot of people think that over time, results are going to conform to the mean, return to normal. I would remind everyone that 2025 was not normal. It was an abnormal year, just the opposite that this one is, but there was nothing normal about it. It just was abnormal in the opposite direction. But I think that the fuel margin story continues to be those marginal retailers whose costs are increasing, who are passing that on through the form of higher margin. That's why we're seeing the floor continue to rise every year, giving us at least some confidence that through the back half of this year, that $0.35 is achievable. And if you ask me, could we outperform that and where would we do it, it would probably be on the fuel margin side and maybe even the volume side if we saw a pronounced price fall off during that time.

That's very helpful. And do you think, Mindy, that it's sustainable as we look ahead to 2026, 2027? Like do you think that we really -- this is another sustainable leveling up?

That's a great question. I think we're just continuing to see that virtuous cycle that we've talked to about breakeven if equilibrium continuing to move higher. I think, yes, we will continue to see that happen. We don't see any evidence why that would not happen. Obviously, we're not ready to come out with next year's guidance. We're going to have a lot of factors that we need to work in. But I think the support we're seeing in retail margins is incrementally positive to our long-term view of the business, all else being equal. I can't predict the macro. But I can also speak to the health of our business. We're executing well, and we're seeing the margin even without that price fall off. So I think that is significant.

Your next question from the line of Daniel Guglielmo from Capital One Securities.

On the organic growth, have there been any noticeable changes in construction costs that you've seen at NTIs or raze-and-rebuilds this year?

I mean not -- on the order of magnitude, not huge. I mean, inflation continues to tick up, but that's been the case over the last several years, but that has been more than compensated for by what we just talked about, what's going on with the retail fuel margin. So the returns that we're generating versus what you would have seen us have 5 years ago, while the stores are costing more, they're actually higher returning just due to this fuel margin impact that we're talking about. So yes, they're trending higher, but certainly not at an alarming pace and certainly well within the boundaries of what we're seeing on the overall return profile with the fuel margin.

Your next question from the line of Brad Thomas with KeyBanc Capital Markets.

Mindy, I'll try and make this an easy one here after my multiparter earlier. Just hoping for an update on QuickChek, its performance and how you're thinking about their EBITDA in the second half.

Yes. Great question, Brad. Thank you. What I would say is Q2 performance is stabilizing. We're seeing food and beverage sales and margin turning positive. And we're doing some deliberate things to cause that. We're growing the sandwich category. That's critical to improving performance. We're also seeing higher margins as we are intentionally focusing on the economics of those offers. We're seeing growth in bakery, employing some new recipe engineering for our buttered roll. We had a line extension. We now offer croissants. Hot and iced coffee results are improving. We've relaunched Free Coffee Fridays. So we're seeing sales and units up while the broader market struggles.

And then we're continuing to evolve. I mentioned this in the first quarter, evolve QC into a sales-first culture similar to Murphy. And we're seeing stronger promotional response as a result of that. During the second quarter, QC had a fantastic candy contest. They executed a BOGO, and it was truly Murphy-like performance. So super proud of them for that. And our leadership structure continues to make positive changes from both a culture and store performance perspective. So we're focused on improving the basics of the business, labor shrink, improving margins, simplifying the operating model, deliberate things that we're doing. Is it back to where we want it to be? No. But I think we're turning and headed in the right direction, focused on the right things with the right leadership in place. So I'm happy with what we're seeing so far.

Your next question from the line of Corey Tarlowe with Jefferies.

Mindy, I had one more, and it was just as related to merchandise performance, specifically if you talk about Murphy's stores. I recall the performance, I believe, last quarter was a bit better than what you had seen versus the overall fleet in QuickChek. I was curious if you could highlight any trends there for us.

Are you talking nicotine, nonnicotine?

It would be -- nonnicotine would be ideal.

Yes. Nonnicotine, that -- it's reflecting strength in our core center of the store categories, but being offset by pressures in things like lottery and beer, which are not unique to Murphy USA, by the way. So we managed to hold or gain share across all our major merchandise categories. And I think that is enormously important. We were able to also grow overall merchandise contribution dollars, deliver positive margin growth, all that within a customer environment that is under pressure and that customer is remaining selective.

When you peel under the apple a little bit, we saw strength in packaged beverage anchored primarily in energy. Candy faced a tough comp, and we are creatively finding ways to boost that category, finding success in chocolate and also nonchocolate promotions, had a [indiscernible] promotion in the second quarter that was hugely successful following a really successful [indiscernible] promotion last year.

Lotto lottery remains a challenge as consumers' wallets are pinched, they're not spending as much on that typical product. They also have other ways in which they can gamble online.

Beer remains a challenge and major suppliers are saying that, too. Consumer preferences are just moving away from alcohol. That's an industry trend, not just for us. But overall, I think our results, both at MUSA Center store and QuickChek Center store are strong. And remember, nicotine is merchandised too, and we are continuing to take share and drive that category. And so I think our momentum in the second quarter demonstrated improved cigarette performance. exceptional pouch momentum and reinforces our ability to continue to grow share and hold share across the entire store, not just nicotine. So I think it demonstrates the strength of our offer and the consistency of demand from that customer for whom price matters, and we do identify with them as being low cost.

Your next question from the line of Ed Kelly with Wells Fargo.

It's John Parke on again. I guess can you talk about the unchanged down guide? I mean you clearly did better in the first half. I guess anything that suggests you wouldn't be towards like the higher end of that range here in -- for the year?

I'm sorry, you cut out, which guidance piece were you talking about when you say changed down.

The gallon guide of down 1% to down 3%, same-store gallon guide?

The retail margin. Yes. And we kind of already addressed, cents per gallon or margin? Cents per gallon, I'm sorry, or volume.

Sorry, it was just the volume.

Okay. Volume because, again, we don't know what's going to happen in the second half of the year. If we continue to have upward swings in price, again, that's not conducive to us creating separation versus our competitors. What we are not baking in at all is any prolonged decrease in prices where we would have the ability to attract both volume and margin. So again, you can call the results conservative, but -- and that's fair because if prices do fall for an extended period, we would expect our volume performance to outperform these assumptions. We would also likely think our margin performance would outperform these assumptions. But we would rather guide to the conservative side and hit it or beat it versus disappoint.

So happy with first half performance, and we will see total volumes grow as we add new stores to the network in the fourth quarter. But again, just don't want to get ahead of ourselves and bank on super high volumes or even extended volumes from what we're seeing. Let's just have something that we feel credible about and know that we can deliver. And hopefully, we're in a great position 2 calls from now to tell you about how we dramatically beat what we said that we would do here in August -- here on August 6.

We have reached the end of the Q&A session. I will now turn the call back to Mindy West for closing remarks.

Thank you, guys, for your time on the call. We do believe that our second quarter performance demonstrates the resilience of our model. Fuels highlighted the strength of our competitive advantages, while merchandise contribution dollars grew despite category pressures. So those results reinforce our confidence in the business, our ability to continue creating value for our customers and our shareholders for the long term. And our go-forward guidance may seem conservative, but that is intentional. So thank you for your interest in Murphy USA, and thanks for joining our call. Look forward to talking to you next time.

This concludes today's call. Thank you for attending. You may now disconnect.

Thank you for standing by. My name is Melissa, and I will be your conference operator today. At this time, I would like to welcome everyone to the Murphy USA First Quarter 2026 Earnings Q&A Call. [Operator Instructions] I would now like to turn the call over to Christian Pikul. Please go ahead.

Thanks, Melissa. Good morning, everybody. Thanks for joining us. With me this morning are Mindy West, President and CEO; Donnie Smith, CFO; and Ash Aulds, Director of Investor Relations and FP&A.

Before we get started, I need to remind everybody to refer to the forward-looking statement commentary we included in our prepared remarks yesterday. I also assume you have all read through our earnings release and the prepared remarks, we have read your notes.

I have a few comments before we open it up for Q&A. First, I hope that you noticed we are rebranding the PS&W plus RINs business and simply calling it fuel supply going forward. We provided a lengthy justification for that change, along with a detailed explanation of fuel supply results. So I hope that was helpful. Second, we sent a follow-up note to our sell-side analysts, but I did want to take the opportunity to clarify our comments on April volumes being flat to prior year, that metric is on an average per store month basis, not total volumes. So I wanted to point out that distinction. And lastly, as we will likely discuss, First quarter was strong, but we are focused on building shareholder value over the long term. We're pleased with the way the business performed in the first quarter, but our focus remains on making Murphy USA better in any environment, increasing the earnings power of the company in both favorable and unfavorable environments.

So with that, Melissa, please go ahead and open us up for questions.

[Operator Instructions] Your first question comes from the line of Irene Nattel with RBC Capital Markets.

Thank you for that explanation on PS&W and fuel supply. Very much appreciate it. So just obviously, you said, Christian, this very strong start to the year. Certainly, the momentum seems to be very good. What circumstances would have to occur in order for the balance of the year to take you to a place where you do not exceed the 2026 guidance, which didn't seem to be updated?

Great question. I think it would take a lot to not exceed at this point given the amount that were up in the first quarter alone. So I think that, yes, we could definitely say that the guidance that we gave is a little on the light side. But nevertheless, we did not update the guidance and we typically don't following quarter 1, and we don't want to get in the habit of doing that. There's just simply too much volatility, too many unknowns early in the year to have a really accurate forecast. Our guidance, as you may remember, was built around very low volatility, low price environment. Obviously, now we are in a different situation. But honestly, my crystal ball isn't going to be any better than yours. And this is unprecedented volatility and geopolitical risk, and it's changing every day, minute by minute. So I honestly wouldn't know what fuel margin to put into the model to give you an accurate forecast.

So at this point in the year, just not going to update. What we will do though is wake up every day react to market conditions on that day. We know we have to be nimble, change our playbook as needed and ensure that the business delivers the best outcome, whatever the environment is throughout the remainder of the year. But that's really all I can say about where we might end up year-end. Obviously, our guidance that we gave last quarter is going to end up being on the conservative side but the year is going to be what it is, and it's too soon to tell now exactly what that will be. So we're going to remain focused on execution.

That's really helpful. And then just as a follow-up and sort of it comes back to a little bit of what you said about the fuel margin. But that $0.069 per gallon from, let's call it, inventory revaluate -- inventory gains in fuel supply, how should we think about the evolution of that number as we go through the year?

Well, fuel supply results were high in the first quarter as we explained. The core business, though, generated $0.025, including the impact -- excluding the impact of those higher prices. So if prices continue to increase, then you should expect the positive inventory valuations in that part of the business. If prices decline, you're going to get the opposite impact. But at the same time, that should serve to expand retail margins at the same time, hopefully, volume as well as we can put some of that margin on the street to create separation and have chances to gain volume. But that part of the business is going to continue to be volatile month-to-month, quarter-to-quarter and largely dependent on the direction of prices, but also the magnitude and duration of those price changes.

Our next question comes from the line of Bonnie Herzog with Goldman Sachs.

All right. I did have a question on the consumer. And I guess I'm wondering, Mindy, if your outlook for the consumer has changed. I'm thinking about the context of prices at the pump tracking around $4 a gallon across the nation. So curious to hear how have purchasing patterns may be changed, especially for the lower-income consumers, if at all? And then are you seeing more consumers down trading potentially to your stores? Is this an opportunity, for instance, for you to gain share? And any kind of change of behavior at the pump would be helpful.

Yes, great question. I'll start first with the trade down because candidly, by the time customers are shopping at Murphy USA for our everyday low prices, much of that traditional trade down has already occurred. So as a result, we really see relatively little pressure, especially in the nondiscretionary categories even in the higher price environment. What we know is our everyday low price model is what brings customers in the door. And then once they become regular shoppers, we just don't see significant trade-down behavior within the store.

What we do see and we'll see are some different decisions being made inside the store in discretionary categories like salty snacks or really even lottery where there are just more venues and opportunities available to customers to participate in that. And as -- and remember what we said in the prepared remarks, the Murphy customer is maintaining their spend in our store. So results are actually stronger. Our non-nicotine sales were up 2%, with margins up over 4% at Murphy stores. So we are still seeing strength in that core customer. We're seeing margin growth across most of the inside the store categories. But I'll remind you, while that does speak to our customer is, it also has a lot to do with our team and our offer because that margin growth doesn't come automatically. Our team has to look to innovate for new promotions and vendor partnerships, and we'll keep at it and do a great job because we're seeing the results.

What is interesting to see at these higher prices is we are seeing new customers coming into our stores. We're also seeing lapsed customers returning to our stores. That's telling us 2 really key things. First, they're changing their behavior and becoming more value-seeking shoppers, which is what we would expect. Second, and this one is really important, they remember Murphy USA as a low-priced retailer and we are their store of choice when they're seeking value for low-priced goods in the store and low-priced fuel. So we know we have the right to keep this customer and they're going to return to us in periods of higher prices, and we're encouraged so far by what we're seeing already.

All right. That's helpful. If I may just ask as a follow-up, I guess, on a different topic because I do want to comment on your newly dubbed fuel supply business, and I definitely appreciate that and all the color. I think that's really helpful. And I guess I'm curious to maybe understand a little bit more about the benefits from RINs, which was really huge in Q1. And then just monitoring those prices across the board do remain quite high. So just want to make sure I understand how we should think about the magnitude of the contribution you could recognize from fuel supply in Q2?

Bonnie, we really look at it on a blended basis. You see the windfall in RINs because we report that as a separate category, but they're really just a pass-through because the RIN value is actually factored into the acquisition costs when we purchased the product. So with sustained movement in one direction over quarter, yes, they can have a slight impact over a short period of time. But over time, those impacts cancel out as rent prices move up and down, that's really just a part of the fuel supply business that's already reflected in what we paid for the product to begin with.

As we look at the quarter, if you're trying to get a land at what could product supply and wholesale be for -- I can't really speak for the quarter, but for the month of April. I know we guided you guys in the speech that we were going to be $0.35 to $0.40 a gallon. What we are comfortable saying, with the books obviously not closed on the month yet, is we're expecting retail somewhere in the low 30s that would imply product supply and wholesale would be -- I don't want to give an exact amount, but trend above the normal levels that we would expect to see just because of the volatility that we're continuing to see in the market.

Our next question comes from the line of Thomas Palmer with JPMorgan.

In some of the earlier answers, you've noted the price advantage versus competitors and how that's aided maybe some customer choices in terms of shifting towards you. I did want to ask how you think about the relative pricing advantages that you have as you watch fuel prices migrate higher? Do you think about the level of discount that attracts customers as perhaps being different? So maybe like less discounting is needed relative to the environment when fuel prices are lower and more stable?

Sure, Tom. We've said before that last year with the very low price environment that was making our value-seeking customer less price sensitive. And we were putting roughly $0.02 a gallon on the street to hold our volumes given the low prices and customer price sensitivity, but also competition. But when we said that, remember that $0.02 is not necessarily chain-wide. It's concentrated in certain areas. So where competition is very intense, we were putting more than $0.02 on. Other places where the competitive pressure was not so much, it was less than $0.02. And so I think as we return to a higher price environment, we will have to be less aggressive. But again, in certain markets, we are still going to price where we need to, to hang on to volume as we see competitive pressures.

Okay. And then just maybe an update given the likely elevated cash flow that's resulting from the strong earnings on capital allocation priorities and likely uses of this excess cash.

Yes, it's going to be a good problem to have. First call on capital is always going to be the growth CapEx. So we are committed to building our 45 to 55 sites for the year. So that's going to be the first priority. We will also look to balance that with ratable share repurchases as well. There may be also some opportunities if we need to procure some supplies in order to bolster our new-to-industry stores. We need to go out and buy tanks. We need to go out and proactively buy other things. We will certainly do that.

Deleveraging could be an option. But honestly, given our very low leverage ratio, it's not going to be a high priority but that could factor in at some point. But I think what we're going to do, the priority is going to stay the same with making sure that we are managing our growth, layer in some reasonable amount of share repurchase. And as I started by saying it's a great problem to have.

The next question comes from the line of Bobby Griffin with Raymond James.

I appreciate all the detail on the prepared remarks last night. I guess, Mindy, when you kind of think about what's developed here geopolitically and some of the changes inside the supply market, what do you look at or what should we be thinking about when we try to determine how much of this we can capitalize going further? And I guess I'm asking that more in the context of like what needs to take place or has it already taken place to move the market back from loose to tight and keep it more in a tight supply market on multiple quarters versus just a short-term benefit, if that all makes sense.

It does make sense. Bobby, great question. I would say that the market is moving closer to balance than what it was. So what I would look at is we're seeing increasing exports, total motor gasoline inventories in the U.S. have now returned to the 5-year average level. So they're not beneath it, but that has removed the overhang from last year. We're also seeing supply replenishment slowing globally, and there's a lot of market concern, especially for diesel and jet fuel, remains to be seen the amount of damaged infrastructure that might have occurred overseas and the time that that's going to need to recover. So we could see some supply pressure, the longer this goes on which would work to our benefit with our unique ways that we can procure supply.

And additionally, I think one of the investment banks just increased their Brent and WTI forecast for the end of year by $10. That would work to our benefit as well, obviously, keeping prices higher, that will continue to impact customer sensitivity. But I would expect that there is going to be some tightness in supply in certain pockets throughout at least the rest of this quarter and probably through the summer, but there are still a lot of unknowns there. But those are the things that we're looking at. How long does this conflict last? When does the strait open and how much damage to infrastructure is there? And what is the time frame needed in order to get that back up online.

Okay. That's helpful. I appreciate it. And then maybe switching gears and going inside the store. I think you called out the Murphy's non-nicotine was up 2%, so it kind of implies the drag here on the same stores being down one is in the Northeast on QuickChek. I know there's been some things you guys have been working on. So just maybe curious, you kind of unpack some of the progress there. Is the drag still just competition in QSR factors or anything else for us to kind of glean out of that?

Yes. A lot of it is just that drag in the Northeast region where we're experiencing a lot of QSR pressures. It's just a different competitive situation than what we have in our MUSA markets. We're not sitting still, though. We are taking steps to try to improve the business. We're focusing on the core items in the food offer, I think coffee, breakfast, sandwiches. We're really simplifying the menu, rationalizing the assortment, improving the margin.

One of the other things that we're doing that I really think is going to help is we are actively working to evolve the culture inside the QuickChek stores into a sales-first mentality. That's something that we successfully leverage at Murphy USA, and it's something that is not part of their DNA the same way it is in ours. And it's really an intentional change supported by the leadership changes that we've already made in that business. It's too soon to really give you proof points. We are just in the early stages of that, but we are really excited about what kind of impact that we're going to have there.

This shift in focus is going to make our promotional calendar even more effective, similar to how well we execute large promotional opportunities at our Murphy stores. And we should also see benefits that will help drive all the center of the store categories, not just food and beverage. But we also know we need to double down on efficiency. We need to improve time to serve, and we need to ensure our sales and promotional calendars are reinforced with products with the right margin structure versus making up ways to drive traffic that are not margin accretive. But I'm really excited to see how a sales culture at QuickChek can be implemented and really drive results because I think that we're going to be really happy with the results. And I know they are really excited up there to make that change.

The next question comes from the line of Edward Kelly with Wells Fargo.

Looking at gallons, your gallon performance wasn't quite as positive as I thought it would be with prices rising. I know there's some weather impact. But beyond weather, even that seems to be the case. April seems a little bit better, maybe there's some lag in the trade down. I'm just kind of curious, are you seeing the consumer trade down taking place as you would have expected this quarter? Is there anything else happening there?

Yes. What I would tell you is volume uplift from higher prices takes time, and we're really too early in that cycle. Many markets were only in the mid-$3 range as they exited March. And historically, we really see pronounced shifts once prices stay elevated and particularly elevated above $4 for a sustained period. So in April, we are seeing volumes holding up well, roughly flat year-over-year. And as the longer the prices stay high, the more customers we attract, but that shift doesn't happen all at once. It's more a gradual build. And in fact, only 1/4 of our chain is sitting at or above the $4 level now.

Importantly, though, for our Murphy Drive Rewards, we saw approximately 600,000 more loyalty sign-ups. That's the highest monthly total that we have seen since 2022. And we are viewing that as a really strong signal of those customers actively seeking value and choosing Murphy as part of their everyday routine.

Also remember, though, that price-sensitive customers are only one factor that impacts volume. You can't discount the market dynamics in different geographies and different competitive intensities. So Colorado continued to see volume pressure because we're growing there, everyone else is growing there, too. We are seeing some signs of market stabilization though, as margins are now returning to a more new normal. Markets like Florida, we're still seeing highly competitive activity. So that's pressuring both volume and margin in that region. It's not a single market, but there are many markets in Florida that are still in a highly competitive phase as everyone is trying to attract their fair share of customers. But then we can look at Texas, which we would call a more mature market. And while there's still these new store opportunities in the market, the players are already well established, and so there's not as much volume and margin pressure in a state like that.

And then when we look at the quarter, weather was also definitely a headwind. We would estimate that headwind. I think when we looked at it last year, it was roughly 2%. It's probably a bit more than that this year given the sheer number of closures that we had in the duration. But if you just say it was 2%, that was definitely a headwind that would have made our volumes for the quarter up versus down had those not occurred. And also, when we look at Opus and examine that versus our data, it would tell us that we're outperforming in all of our regions even with all those pressures. So I think the price sensitivity will come. It's just too early in the cycle as most of the -- all this price pressure really happened in March. Those customers have only had a paycheck or 2, a fill up or 2. They haven't even received their credit card statements for those purchases yet. So it's just going to take some time.

Great. I just wanted to follow up on store operating expense, really well controlled in Q1. It looks like you're running below the full year guide. Can you just talk a little bit more about the changes you made to the store labor model and the impact that's having and how we should be thinking about APSM growth moving forward the rest of the year?

Yes. We take the roughly flat increases as a very positive data point, and we think it's demonstrating our ability to implement the self-help that we did last year, controlling what we could during challenging periods, and that's giving us benefits now. What we're seeing is benefits continuing in the store labor model, making sure that we have the stores fully adequately staffed during the busy times, but not overly staffed when they're not busy. So continuing to fine-tune the labor model, continuing progress on shrink where we have made it a focus area. We've also incorporated it as a goal for the sales team. So we're paying a lot of attention to that. And also the shift in maintenance mindset. So going from a proactive -- being more proactive and taking a business mindset versus an administrative approach where we were in the past, just trying to clear the tickets. Now we're taking a step back and prioritizing tickets and batching tickets were possible.

And I use the example in an investor presentation where instead of when one light bulb goes out in the canopy, instead of calling in a tech and having the site visit cost, the cost for the special scissor lift that it takes to get you on the canopy, why don't we wait until the second light bulb goes out because it's not causing a material discrepancy in the illumination with one bulb down. But things like that may seem small, but over the -- when you spread that over 1,800 stores, those little things can quickly become big things. So we're just taking a different approach to the way we're thinking about maintenance, thinking about it more from a business standpoint versus just trying to clear the tickets.

As a reminder though, as our new stores enter the network, we do expect roughly half of our OpEx growth to reflect that with the same-store to trend at least in line, if not better, than our peers. But when we look at our '26 guidance, we are ahead of that right now. But as we feather in our new stores, we do expect to get more back in line of our guidance range in the second half as those stores come online.

The next question comes from the line of Jacob Aiken-Phillips with Melius Research.

Congrats on the strong quarter. So Mindy, just -- I know you've been in the business for a long time, but your first full quarter as the CEO and the environment has completely shifted. I'm curious if the new environment has changed your thinking about experimentation, growth investment, self-help initiatives or capital allocation or anything?

It's been an interesting turn of events, one that, quite frankly, I didn't expect during the quarter, but it doesn't change our overall strategy. We're going to continue to lean into everyday low price, that's staying the same. Continuous improvement mindset, we're only going to accelerate that going forward. Capital allocation remaining unchanged. We are pushing an innovation agenda. We want to collaborate quicker. We want to try and test these things. So that unlock was something though that I talked about even -- so it doesn't diminish in importance just because the fuel macro environment is different. We know that we still need to improve the underlying business of our same stores.

We also need to make decisions that can improve the trajectory of what we're going to be building that's new in the future. And so while it's easier to have a call when things are going like they're going now, it doesn't change the focus and the intensity of our efforts in needing to improve the business going forward because we can't always count on an environment like this sustaining.

Got it. And then so on nicotine, last year, there was a concern with the promotion that it should be viewed as a one-off, but clearly, like you're still performing super strongly in nicotine. Can you give us some color on just -- sorry?

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Yes, yes. I'll just say the question again. So on nicotine, last year, there was a concern that it was a one-off promotional activation and that it wouldn't repeat. But clearly, you're still doing very well in the nicotine category. So can you talk a bit about the promotional environment now and throughout the year and what gives you confidence that, that's actually a durable component which you're having 600,000 additional reward members helps.

Yes. The reward membership definitely does help. Look, we love the category. We put a lot of attention on it. As we mentioned in our prepared remarks, promotional activity has been favorable in the first quarter, and we're continuing to see strong performance even as we go into April. We're continuing to grow share and accelerating growth in that category. It's really growing at a very rapid pace. And importantly, customers are still trying to figure out their desired flavor and strength.

There's really no clear winners yet. Manufacturers know this. So they're investing in trial. So you'll see similar to energy drinks, you're going to see continued strong promotional activities as those brands invest to try to gain that customer. And we're going to continue to be a preferred retailer for those manufacturers to pass through savings and attract those customers, especially as they target combustible customers where our share in cigarettes is 20%. So we are ideally situated, happy to help their promotional efforts and have demonstrated the ability with them to hold on to those customers post promo as we continue to gain share.

I do want to remind everybody, everybody remembers the promotion we did back in the third quarter, and that is going to be a very tough comparison in quarter 3 when we lap that. So we're probably going to want to look at a 2-year stack as we progress through 2026, but we are going to continue to get promotional dollars. We're likely not going to have a promotion as lumpy as that particular one was, but we do see strength in the category, and we do have intentions and the ability to continue to grow share.

Great. Congrats again.

Thank you.

Our next call comes from the line of Brad Thomas with KeyBanc Capital Markets.

Mindy, I want to ask about the exciting opportunity here to be picking up some incremental customers. And I know that this will all depend on how long gas prices stay high and how high they go. But can you give us any perspective of historically the company's ability to retain incremental customers that they brought in during periods like this? And then what is the company doing differently or may do differently as the months and quarters go on here at elevated gasoline prices?

Well, I think our loyalty initiatives are key. Murphy Drive Rewards, QuickChek Rewards. What we're seeing as new member counts are up, and we would expect that. We saw the same thing when we saw prices spike in 2022. But the 600,000 new members was the highest new member month that we have on record. We're also seeing an increase in overall active members that are up 8.5% year-over-year in March, total transactions up around 12% also. So you see the dynamic of those customers. Yes, they're buying slightly less per field trip, but they're having to come in more often. And so these digital programs, these loyalty programs are more valuable to customers as they become more and more price sensitive.

And as I mentioned earlier, what we're really excited to see is those new or lapsed customers, the lapsed customers returning to our sites, new customers that we're acquiring because of the higher prices, and we become the store of choice because we are everyday low price. And I'm sorry, Brad, what was your other question? What are we doing differently because prices are high?

Exactly. I mean really just around the idea of retention. If there's anything that you are considering changing about the loyalty program and how you market to customers, et cetera, to try to retain more of these potential folks coming in your stores in this current environment?

We continue to make our digital programs more sophisticated, being able to tailor offers to customers. So we will certainly continue to leverage that. But honestly, everyday low price is everyday low price. It just means more when prices are high and budgets are constrained. And importantly, we sell a great deal of what is called nondiscretionary categories, so things like fuel and nicotine, where we are the lowest price out there. Customers know that and the offer resonates even more in this type of environment. So no, we're not necessarily doing a lot of things new, but we really don't need to.

That's great. And if I could ask just a follow-up around sort of the underlying Murphy store model. And the question that investors were all asking last year was, does it need to evolve because of industry conditions. Clearly what's setting up in 2026 is it's a great model. As you consider the opportunity to expand food or in the case of the site that's got reduced labor, will there be any incremental investments or testing because the year is shaping up to be so different here?

I wouldn't say it's because the year is shaping up to be different. I feel the same way about it this quarter as I did last quarter, that absolutely part of our innovation agenda is about evaluating new formats that can profitably serve more customers and more locations. We're also going to look to think about what is the next layer of products and services and trip missions that customers will buy from us. And then obviously, how do we maximize the productivity of the stores we have.

So I think, yes, our model needs to evolve. I think both our format needs to evolve. Also what we have in it likely needs to evolve. Whether that evolves to a full food offer in Murphy USA locations, what I would say is not necessarily and certainly not everywhere, and we're going to be very thoughtful about how we step into that. I don't want to really provide a lot of color on what we are testing and what we are looking at because it's very early days, and they need time to incubate and prove themselves out. And honestly, we're going to probably hit some singles and doubles, but we'll probably strike out on several things as well. But the focus hasn't changed just because the year is shaping up differently. We know that next year may look different, the next year may look different from that. We're here for the long run, then we need to make sure that our format and our offer is evolving, meeting the customer where they are, meeting their expectations and also giving them value in everyday low price.

The next question comes from the line of Pooran Sharma with Stephens Inc.

Congrats on the strong results. Maybe just wanted to ask if you could speak to the structural pressure on higher fuel margins, kind of the longer-term structural pressure. You kind of alluded to it in your release and on the call. And more specifically in this type of environment where you see a strong rise in wholesale fuel prices or RBOB, you would expect to see the retail side of the equation more challenged, but you've seen it hold up. What do you think is driving that? And do you think this type of dynamic where you have really high fuel prices facilitates that thesis even more?

I think that's a great question and interesting idea, and I think you're probably right. I think what we're seeing is that marginal retailer becomes that much more on the margin when prices are what they are. They feel even more pinched. We saw this start in the Ukraine invasion back in 2002 where competitors were restoring multiple times a day. They were pre restoring ahead of what they felt was going to be a price increase the next day. We're seeing that kind of, again, I think that when things get really tight, people become less comfortable riding it out and more eager to go ahead and relieve the pressure. And so I definitely think that, that is playing into it the fact that the marginal retailer becomes that much more on the margin.

We've also seen a lot of competitive entry in markets and the cost to serve doesn't go down when that happens and those retailers are going to need to make a margin on those stores as well. And so they're going to fill the pressure also when prices rise, they're going to want to keep up with that fairly quickly as well. So I think both of those dynamics are in play. But it definitely is unusual that in a period of rising prices that we would be able to post favorable product supply and wholesale results -- or excuse me, I messed up, fuel supply results. We would post positive fuel supply results, but also fairly good margin as well. And that dynamic is playing out again in the month of April, too.

Okay. Appreciate the color there and the thoughts on that. I wanted to kind of get more specific on my follow-up on the -- I guess, just what you've seen thus far through April. The $0.05, I think, $0.05 or so of PS&W margin. Is that -- does that include kind of the price spikes that we've seen up since the start of the quarter. Does that -- do you expect some normalization from those price spikes from RBOB? Just wanted to just get a better understanding of the RBOB commentary.

Well, it reflects what we think we know at this point with the books not closed. You can appreciate there's a lot of moving pieces with that fuel supply part of the business. So all that we're really comfortable commenting on now, we know that retail margins are around $0.30 a gallon or in the low 30s, and we think we're going to be in the range of $0.35 to $0.40. And that's counting all of the volatility that we the price rises that we've seen both on the -- we're accounting for that both on the retail side, when I say retail margin, but also the products supply and wholesale side. But I appreciate that this part of the business can make large swings from day-to-day. And until we close the books, we really don't know where we are precisely.

The next question comes from the line of Corey Tarlowe with Jefferies.

Mindy, I was just wondering if you could walk through the trends that you saw maybe by month in the quarter? And the reason I ask is because I believe you were lapping some pretty significant storms from the prior year. So I was wondering if you could talk about volume and merchandise trends maybe on a monthly basis, if you could, to kind of give us more color on what you saw throughout the quarter?

Yes. Started the year fairly strong. But again, completely different fuel environment so you can appreciate that that price-sensitive customer wasn't quite as price sensitive. So we definitely saw some momentum as we got into March that we didn't see January, February. And then on the fuel side, obviously, the margin exploded during the month of March was challenged when we looked at January and February. I apologize, I didn't bring month-by-month comparisons. But over the course of the quarter, when we saw the volatility return to the market, we saw customers behaving differently inside our stores. They were pressured, but they were still spending money, especially on the nondiscretionary part of the basket.

And then obviously, the fuel volume will come with time. It just hasn't had enough time to season for that customer to really return in droves. But loyalty sign-ups that we're seeing are really a key leading indicator for us that tells us that we are going to gain momentum, especially as we go into the summer if prices are still high.

Got it. And then just on the PS&W business, and again, I recognize it's only a month of data. But as you think about sort of the close to 10% that we saw in Q1 and the close to kind of 5% or thereabouts where you're seeing so far in April. Could you just talk to kind of the driver behind that change specifically, if there is anything meaningful to call out? Is it the variability within pricing? Curious what you saw.

Yes. It's the variability within the price environment, just the magnitude and the direction of the price movements were magnified in the month of March in particular. While we're continuing to see prices rise in the month of April, it hasn't been as dramatic. And so you would not expect products and wholesale results in that month to be as strong as what they were in March. And then again, I certainly can't extrapolate that out over the full quarter remains to be seen.

There are no further questions at this time. I will now turn the call back to Mindy West for closing remarks.

Thank you so much for your participation today, and really thank you for your interest in Murphy USA. I hope you guys are getting a better understanding that the first quarter results were not simply a byproduct of volatility and the price-related impacts because our team works really hard to optimize that volume-margin relationship. We're also seeing benefits in the work we've done to make merchandise and store operations more resilient.

Sitting here last quarter, we talked about what a return to volatility could mean. Did not see it happening really at all this year, much less so much so fast. Obviously, a lot can change just in a few months. That said, the reverse can also happen. So we are not relaxing because the macro is going our way. What did we emphasize in the first quarter? We emphasize improving the business. What are we focused on now? The same thing. Volatility does work in our favor, and you can see that in our results, but we can't rely on volatility. We talked about it in some of these questions. Our focus hasn't changed since last quarter. We're not relaxing because the environment has improved. We can't.

We have work to do to grow the business. We're very happy with our new store pipeline. So high-quality growth is going to continue in the years ahead. We also have work to do to continue to improve our existing business, and we're excited to get after it. I know all of us here are energized, excited to do the work to build the business and take Murphy USA to the next level, which is why we will continue to focus on what we can control. We're going to execute with precision and continue to grow our business and make it better.

So thanks, everyone, and we will talk again next quarter.

This concludes today's call. Thank you for attending. You may now disconnect.

Good afternoon, everyone, and thanks for listening in today. With me are Mindy West, President and Chief Executive Officer; and Donnie Smith, Chief Financial Officer. After some opening comments from Mindy, Donnie will review some performance highlights from the first quarter, followed by some closing comments from Mindy.

As a reminder, we will be publishing a transcript and recorded playback of these remarks this afternoon, and then we will host a live Q&A session tomorrow morning at 10:00 a.m. Central Time. Details can be found on our Investor Relations website and in today's earnings release.

Please keep in mind that some of the comments made during these remarks, including the Q&A portion tomorrow, will be considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. As such, no assurances can be given that these events will occur or that the projections will be attained. A variety of factors exist that may cause actual results to differ. For further discussion of risk factors, please see the latest Murphy USA Forms 10-K, 10-Q, 8-K and other recent SEC filings. Murphy USA takes no duty to publicly update or revise any forward-looking statements.

During today's discussion, we may also provide certain performance measures that do not conform to Generally Accepted Accounting Principles or GAAP. We have provided schedules to reconcile these non-GAAP measures with the reported results on a GAAP basis as part of our earnings press release, which can be found on the Investors section of our website.

Welcome, everyone, and thanks for listening to our first quarter 2026 fireside chat. As you have likely seen, first quarter results were strong. Increased market volatility beginning in late February contributed meaningfully to performance in March, building on an already solid start to the quarter. While geopolitical events were a catalyst for that volatility, our results reflect how Murphy USA's business model performs in a more dynamic market condition, something we have consistently highlighted as a structural strength.

I want to point out that quarterly results were not merely the passive byproduct of higher margins during periods of exceptional market volatility. All the self-help work we undertook last year during a lack of volatility is making incremental bottom line contributions in the first quarter, not just in fuels, but in driving merchandise margin and further optimizing our cost structure, both at the store level and in the home office. Importantly, first quarter results were strong despite significant and material adverse weather events across our geographies, impacting everything from fuel gallons to merchandise sales, along with extra maintenance dollars as a result of heavy snowfall.

But the most important component of first quarter results I want to ensure you understand is in the middle of the war's impact on the global supply chain for a wide range of raw materials and the chaos of rapidly changing fuel prices, the markets in which we operate have continued to remain rational. Along with higher prices, we are seeing stable and well-supported floors underneath retail margins, which distinguishes the earnings power of our everyday low price, high-volume business model. This rationality fundamentally lays the foundation for our business to deliver results in a world where we know that change is the only constant.

So let's dig into fuel results because that's a great place to start the conversation. All-in fuel margins in the first quarter averaged $0.35 per gallon comprised of $0.254 of retail margin and PS&W contribution of $0.096 per gallon. The fact that retail margins remain strong despite a rising price environment, which has historically compressed retail margins tells us 2 things. First, fuel retailers remain risk averse, quick to pass through higher replacement costs to the pump, similar to what we saw during the initial volatility during the Russia-Ukraine conflict in 2022. Second, this behavior indicates that marginal fuel retailers are less and less resilient during periods of margin pressure and are unwilling or more likely unable to withstand prolonged periods of compressed margins. Subsequently, they are more likely to pass through higher costs by restoring the fuel price in the market, which serves to insulate retail margins during periods of sharp upward movement.

Higher prices are also beneficial to PS&W margins, although much of this benefit can be temporal and moderate over longer periods of time, as I will explain. Although we have made repeated efforts to properly communicate the financials behind the product supply and wholesale business over the years, especially during periods of relatively high and low contribution margin, we acknowledge that a lack of visibility remains, rendering this function more difficult to forecast. Nevertheless, some of you guys on the sell side got pretty close this quarter, which tells us understanding of the underlying drivers continues to increase.

First, a comment around semantics. Although PS&W stands for product supply and wholesale, I want to rebrand this function and simply start calling it our fuel supply business. When discussing fuel supply internally, we disaggregate the results into 3 distinct activities.

Let's start with the controllable activities, which comprise the set of assets, expertise and capabilities we strategically deploy to provide a ratable and low-cost source of supply for roughly 50% of our retail volume. This includes securing product from the refinery, transporting it along the pipe to the terminal, blending it with ethanol and selling it at the rack to our retail business at a market-based internal transfer price. Embedded within this function are RIN sales, which are an integrated element of the fuel supply chain and are essentially a pass-through, in that the price of the RIN is typically negotiated into the product purchase. Only after the gasoline we buy and transport is blended with ethanol at the terminal, can we strip the RIN and sell it, where it is reported in other revenue as a legacy accounting policy.

What is not always obvious or apparent in our financials is the additional cost recorded when we buy product, which includes a value for RINs before we are able to sell the blended RIN in a separate transaction, typically offsetting a loss versus the internal transfer price. For that reason, we typically try to keep the timing of RIN sales closely aligned with the time in which they were generated.

While our pipeline assets and logistics capabilities can generate substantial profit during periods of physical supply disruptions, for the most part, the refined product market and infrastructure in this country remains stable and well supplied. As such, the market conditions where we can earn abnormal profits or take advantage of price arbitrage typically exist only for a brief duration. In these normalized conditions, the fuel supply business has historically generated between $0.02 and $0.03 of margin, and we expect it will continue to do so going forward. While many factors will impact the profitability of this function over any specific time period, in the first quarter of 2026, the controllable activities generated roughly $28 million of gross margin or $0.024 per retail gallon.

The second set of activities and by far, the most volatile component of reported results within fuel supply remains the exposure to changing prices combined with timing of inventory movements. This impact is ultimately dependent on both the magnitude of the change up and down and the duration of the change, does it occur over a short or a long period of time. Given the upward move in regular unleaded prices during March, this part of the fuel supply business generated roughly $100 million of margin, reflecting an average price increase of roughly $0.20 per gallon on approximately 500 million gallons purchased or a little less than half of our retail volume of 1.2 billion gallons.

On a net basis, after accounting for LIFO, this combination of pricing actions and volume movements generated nearly $80 million of margin or $0.069 of contribution margin. In short, we effectively sold our fuel inventory for a lot more than we paid for it coming into the quarter. The other 50% of our purchases in the quarter were contracted fuel purchases at the rack to directly supply our retail system. These volumes typically sell very quickly due to our position as a high-volume retailer, resulting in less variability within that component of fuel supply. While potentially material in any given quarter, importantly, there is no unique financial advantage or disadvantage in this part of the fuel supply business over time. And consequently, we expect this component to zero out as prices move up and down, often over a several year period.

The third set of activities is our wholesale and our terminal function. While we do have a wholesale arm, it is not built to be a stand-alone profit center, but rather to help us manage the logistical complexity stemming from the significant volumes we purchased for the exclusive benefit and use at our retail stores. The product we sell to third parties is largely a byproduct of our inventory management activities. The net profit or loss generated by the wholesale business is not always financially material as reported in Murphy USA results, but does serve a very important function as a discretionary lever in supporting the broader set of our fuel supply capabilities.

Murphy USA also owns and operates 7 terminals where third-party volumes are treated, blended and processed in addition to our own volumes, and we house fuel inventory at roughly 100 other third-party terminals. The terminal and wholesale business taken together generate a relatively ratable yet modest margin contribution of about $1 million to $2 million per month on average over the past several years. This quarter, the net contribution from terminals and wholesale resulted in another $0.03 of contribution margin, which taken with the controllable and uncontrollable elements collectively generated $0.096 per gallon to our first quarter total fuel contribution.

Needless to say, not every quarter will warrant such a detailed explanation. But given the relative size of the contribution this period, I wanted to take the time to fully explain as best I could the key drivers of our fuel performance.

Moving on to retail fuel performance. As I mentioned, retail margins averaged $0.254 per gallon, very healthy levels given the rapid run-up in prices over the last month of the quarter, generating just over $0.27 per gallon of retail margin in March. Importantly, while somewhat noisy, volume performance was strong as well with same-store volumes down less than 1% despite the severe weather and rising price environment. As volume pressure has abated somewhat into April, it's just as important to understand the challenges to first quarter reported volumes in addition to the set of factors that are not evident in Q1 results.

First, when prices rise rapidly, market price leaders are continuously restoring markets and moving retail prices higher, and it is tactically much more difficult to create price separation versus peers. And so historically, not an environment in which we would expect volume growth. However, during the last week of March when prices remained relatively stable in the middle of the Iran war rhetoric, we were able to invest in margins and put some price on the street in specific markets. And as a result, we did see a nice volume response, which helped boost overall March performance.

Second, almost all of the price increase in the first quarter occurred in March. So customers only had a couple of fill-ups and a couple of paychecks to begin to see the impact on their wallets. While we do expect higher prices to encourage more intentional price-seeking behavior over time, we wouldn't expect to see much, if any, of that behavior show up in our first quarter results. However, we did see heightened price sensitivity show up in our loyalty data with a record 600,000 customers signing up for Murphy Drive Rewards in the month of March, about 200,000 customers higher than the already elevated run rate of about 400,000 customers we saw sign up over the past year. For reference, when prices last spiked in 2022, we saw MDR sign-ups ramp from 250,000 to about 350,000, and we eventually saw the impact in 2022 results from those customers who began to prioritize value over convenience.

And third, as I referenced earlier, it is worth reiterating that weather was a significant headwind to first quarter volumes. In the first quarter of 2026, the business experienced over 900 temporary store closures, nearly 50% more than the 642 closures in the first quarter of 2025, a period that in hindsight, we incorrectly interpreted as an extreme weather impact. For added color, in the first quarter of 2024, we experienced only 230 temporary store closures or minimal network disruption during a period of mild weather. So against that backdrop, we were very pleased with first quarter fuel performance.

Merch results were also strong, particularly in the nicotine space where once again, we continue to accrue the promotional benefits attributable to our large presence in the category and the ongoing effort of the team to make sure we maximize our participation in the pool of promotional dollars available to retailers. This quarter, on an average per store month basis, nicotine contribution dollars were up 8.8% with growth in both cigarette margin contribution up 3% and noncombustible contribution dollars up 22%.

Total nicotine contribution dollars were up 11% year-over-year in Q1 as promotional momentum that the team generated across the category in 2025 carried over into the first quarter. We are seeing ongoing strength in sales of oral nicotine products with pouch volumes up significantly year-over-year, offsetting cigarette volume declines and setting us up for robust first half momentum in nicotine.

Despite relatively lackluster year-over-year growth in non-nicotine sales and margin, which captures more of the discretionary nature of our offer, it is important to point out that the Murphy USA customer is holding up nicely, largely maintaining their in-store spend with non-nicotine sales and margin up 2% and 4.4%, respectively, on an average per store month basis.

QuickChek stores in the Northeast region continue to face traffic challenges, offsetting the strength we are seeing across the rest of our network. In Murphy stores, we are seeing mid- to high single-digit margin growth across many of our most important categories, including packaged beverage, candy and snacks, offset by modest growth of less than 1% in lottery and general merchandise and slightly lower comps in beer, which continues to face a structural decline in demand.

Turning finally to the cost side of the equation. We experienced only minor growth in per store operating expense, which was the outcome of some very intentional activities from our store operations team. We are evolving our maintenance functionality, shifting to a proactive managing mindset versus an administrative mindset where tickets are submitted and repair crews automatically dispatched. We are taking a more holistic view of prioritizing incoming tickets and aggregating tickets by geography to limit trip charges, and this shift is having a material benefit on costs.

We are also seeing efficiencies on our largest line item, hourly wages as we rolled out an upgraded store labor model, which is allocating hours more closely aligned with customer demand at the store level, and that is delivering early benefits. We have made further progress around shrink by making it a goal for all store employees, and we've backed it up with monthly training. As we referenced in our investor deck, these are the small things we need to do really well to preserve our position as a low-cost operator, and we are making great progress in several of the largest line items within store operating expense.

As good as Q1 results were from an OpEx perspective, we do expect per store cost to increase throughout the year as we see the impact from larger new stores and begin to comp some initiatives that provided benefits in the second half of 2025.

At this point, I will turn it over to our new CFO, Donnie, for a brief financial update.

Thanks, Mindy. First, I'd like to say how grateful I am for the opportunity to serve as Chief Financial Officer of Murphy USA. I'm excited to continue working alongside Mindy and our entire leadership team as we remain focused on executing our strategy and continuing our strong track record of shareholder value creation.

Let me start off by providing some of the usual quarterly data points. Retail prices averaged $2.89 per gallon in the first quarter and $3.46 in the month of March. Total debt on the balance sheet as of March 31 was approximately $2.14 billion. This resulted in a consolidated leverage ratio we report to our banks of 1.9x.

Our effective income tax rate was 22.6%. This was slightly below the full year guided range of 23% to 25% due to higher benefits associated with federal energy tax credits, partially offset by lower excess tax benefits from share-based compensation in the period. We would still expect our full year tax rate to fall within the previously guided range.

With respect to our capital program and new store development, I'm excited to say our 2026 new store program continues to move forward. Year-to-date, we have opened 7 new-to-industry stores, 6 of them opening in the first quarter as reflected in the earnings release. We currently have 18 stores under construction, and we are steadily working new projects through the pipeline with 25 more stores expected to break ground in the next 90 days.

As a reminder, we mentioned on the fourth quarter call that the low end of the 45 to 55 new store guided range was aligned with our internal organic growth plan, while the higher end was attainable with potential bolt-on locations we may opportunistically choose to pursue.

Our cash flow from operations was robust in the first quarter at $320 million against total CapEx of about $100 million, generating strong free cash flow, providing us the extremely valuable flexibility to both invest capital to grow the business and repurchase shares to grow shareholder returns. We repurchased 169,000 shares in the quarter for $71 million, about roughly $420 per share, in addition to paying a dividend of $11.7 million or $0.63 per share. During the quarter, we also paid down approximately $26 million of debt on our revolver and grew our cash balance to $119 million from $29 million at year-end. You can expect us to maintain a balanced approach to growth and capital returns to shareholders going forward.

With that, I'll now turn it back over to Mindy.

Thanks, Donnie. Before I wrap up the call, I want to provide a few data points around April results. As we referenced in the earnings release, preliminary April volumes were flat to prior year, which remains a win given the continued volatility and upward pressure on fuel prices. April all-in margins are expected to land between $0.35 and $0.40 per gallon. However, as I mentioned previously, fuel supply results will always be highly levered to change in prices, and we all know those changes can be sudden and significant.

Our core Murphy USA customer remains strong with their spend inside our stores. Merchandise results continue to show strength in nicotine as we actively address opportunities to drive traffic and increase margins in our Northeast region. Preliminary results suggest that total merchandise contribution dollars grew high single digits versus prior year.

While year-to-date results have been strong, remember, the business performs even better in an environment of falling prices, providing significant optionality when prices ultimately fall. While price changes are ultimately out of our control, we continue to invest in new store growth and maintain our continuous improvement mindset, all of which we believe better positions Murphy USA for sustainable growth in the years ahead.

Thank you. And as a reminder, we will be hosting a question-and-answer session at 10:00 a.m. Central tomorrow.

Well, good morning, everybody. Thanks for joining us today. I'm Bobby Griffin, cover consumer hardlines retail here at Raymond James, including the convenience store sector. Today, we are pleased to have Murphy USA with us. From the company is CEO, President, Mindy West; VP of Investor Relations and FP&A, Christian Pikul; Director of Investor Relations and FP&A, Ash Aulds; and Senior Vice President of Strategy and Analytics, Eric Bartko, all sitting over there.

Today's format is going to be a presentation. Mindy is going to lead. But before we get started, I'd just like to, a, thank you for being here. You guys have been a long-time support and congratulate you on your first live presentation here as CEO.

So with that, I'll turn it over.

Thank you, Bobby. It's a pleasure to be here. Thank you, guys, for attending, and thanks for your interest in Murphy USA. We love the industry that we are in. We are actually the fourth largest convenience store operator in a huge market that is highly fragmented and serving 160 million customers on a daily basis. And we see a lot of potential for growth as well. This industry is serving a growing population in this country, and these people are mobile.

They're moving into our markets, which is good. This map may be a little bit hard to see from where you are but it shows that while the convenience store count is still hovering around 152,000 stores, there are actually fewer stores in the Midwest and the Northeast because new stores and more population are migrating to the Southeast and the Southwest. So that is a fantastic trend for us.

This industry also has high trip frequency. 43% of us live within a mile of a convenience store and about 2/3 of us visit a convenience store at least once a week. Some visit even more than that. And as we like to say, all of those trips are not for quinoa salads or pepperoni pizzas. A lot of those trips are for nondiscretionary products that we major in, that we provide for our customers, and they reward us with their loyalty for having those products. So it is an amazing industry. We have been incredibly successful in that space since our spin, and we are confident that we will continue to be successful in the future.

We built our first store in 1996, and we have grown to a network of 1,800 stores in 2025, so tremendous growth. And that's something in the past 30 years that we are really proud to have achieved. Today, I want to share with you some things that we are really excited about. We have a highly durable and repeatable growth model. We are building high-performing new stores that are earning attractive returns, and we are building more of them, and that is going to support our EBITDA growth in the future.

We are also an everyday low pricer, and that is not going to change. That is the player that we are, and we're also enhancing our offer both inside and outside the store. We're also leveraging technology to do things more efficiently and effectively and to make our stores perform better. And despite a year that created a lot of headwinds on the fuel side of the business, our fuel performance last year was actually highly resilient, and we believe that fuel is going to be a major growth catalyst for us going forward. So we believe there's a lot of reasons to be excited to invest in Murphy USA. We have a really appealing value proposition. We have an incredibly strong foundation to build on. And we're improving store performance, building new stores and share repurchase, share buybacks continue to be a focus and deliver accretive value.

I've been attending this conference for 13 years. And as Bobby said, this is the first time I'm actually presenting the company as the CEO, and I'm really excited about that. One of the most popular investor questions that I've been getting is what is going to change under my leadership. I think that's a fantastic question but I actually think a more important near-term question is what is going to stay the same. And a lot of things are going to stay the same. We remain committed to the core strategies that have allowed us to have a proven track record since our spin in 2013.

So I want to lead off with these and talk about what they mean for us. These are the same 5 pillars, by the way, that you would have seen in our spin materials in 2013. They were resonating then. They continue to resonate now. Store growth. That has always been our first strategic pillar, and we have added about 600 stores to our network since we became a public company in 2013. And since building our very first store in 1996, we have now grown into, as I said, the fourth largest convenience store retailer.

After a lull post COVID with the new store program, we are excited to tell you that we are going to be delivering new stores at a more robust pace and accelerating our growth over the next several years. And more importantly, it's not growth for growth's sake. We're building performing assets that are meeting our high return expectations and helping to expand our [Audio Gap] customers contribution and diversify our merchandise mix, which brings me to the second pillar, diversifying the merchandising mix. That is actually a strategy that I'm actually excited that we have not been able to execute because [Audio Gap]. And so that continues to be part of our foundation.

And we have -- that has been a large contributor to our success. Our in-store sales contributes about 64% and on a margin basis, just under 50%. And as we build larger stores, though, that selling space is going to more center of the store, so those higher-margin products. So over time, we will continue to diversify our merchandise mix and grow our offer to our customers, optimizing our food and beverage offer, too.

Sustaining our cost profile is a critical element to our long-term success. And there's no magic bullet here. We just have to grind it out and be better at everybody else. We have to live EDLP in order to succeed. And as we build bigger stores, I'm going to show you this in a minute, those will come with some higher store costs. But we are building a more enduring and resonating offer for our customers, which will result in higher merchandise dollars versus the additional expense dollars.

Creating advantage for market volatility. Volatility, we always say is our friend. Our friend was absent last year, which was an exceptionally low volatile year with respect to gasoline prices. However, we know that volatility can introduce itself into the market at any time, and we have a really strong and competitive business model to capitalize on it when it does. We will also leverage our proprietary supply strategy to support our EDLP strategy at the gas pump.

Lastly is investing for the long term. And when I think about that mindset, that has been one of the most impactful strategies that we have deployed in delivering shareholder value. It combines our preference for high rate of return growth and generated excellent shareholder returns since going public. So we make investments for the long term in those new stores that we expect to have a 30-plus year life and our free cash flow that those throw off, we also direct to building new stores but also investing in capabilities, investing in people, processes, technology, when those are executed with precision and scaled across the business, those can be some of the most valuable assets and valuable expenditures that we can make.

And as I said, we continue to favor share repurchases. And that's not because there's nothing else to do with our cash. It's because we know what we can do with this business. We know the value that it can create. And as a result, that belief always underwrites an investment in ourselves, and that will continue to be a focal point of our capital strategy.

All right. Let's get right to it and talk about the new stores. This is where we spend most of the capital, and we're very pleased with our new store performance. The data here that I'm showing you represents the last 3 years of stores, all 2,800 square feet that were built from 2021 to 2023. These stores are delivering higher merchandise dollars, higher fuel contribution. They do come with higher operating expenses but they also come with higher EBITDA. These store investments are meeting our return expectations. They have actually, in some cases, slightly outperformed their pro forma. And you can see the returns grow as the store ramps to maturity. And on the bottom left, from a volumetric perspective, all these stores are performing really well.

So we remain pleased with our new store performance, and we will continue to do everything we can to push those returns even higher. As we're building more of these high-performing stores, they are growing square footage at an accelerated pace. So you can see over the past 5 years, we've actually grown our square footage by over 100%, and at roughly 50 stores per year going forward, we expect square footage to grow another 900,000 [ square ] feet coming off a higher base. So that's about 34% growth in square footage as we grow the network to over 2,000 stores. And remember, as I said earlier, the square footage is going to the center of the store space. So it's diversifying our mix, it's broadening the offer to our customers and increasing our contribution.

In addition to the substantial investments we're making in the new stores, we're also investing in the customer experience, too. So we're going to be rolling out a fresh new look starting at midyear. This is what it looks like. We're going to introduce this. You can see it has a attractive new color scenes, it's very blue forward. You'll notice that the canopy matches the store. We also have a more modern look with the gray brick. On the inside of the store, we've done kind of the same thing. We've removed the wallpaper. It's now clean, white, bright space, much better signage inside the store to direct the customer where they want to go, better LED signage outside at the dispensers. We think these new stores are going to look great. We think this is really going to resonate with our customer. [Audio Gap] is really cost neutral. It's just a few thousand dollars of increase in cost we're able to roll this out. So we're really excited about this concept. We think this bright new features is going to make our brand even more appealing than it already is.

I said, nicotine is important to us. We're very good at it. We have a differentiated advantage in nicotine and it's built on a large and very loyal customer base. And it's a category, quite honestly, that we invest in. We have the best people in our company working on this category. We've invested in advanced pricing sales. We also have tremendously strong relationships with our partners. And as a result, we own a large percent of the market. And as you can see here, we have grown our share [Audio Gap] 2019. So think about that. Every 5 packs sold in our market come from our stores.

And a lot about how you get better at merchandising is really just about how do you manage executing on the basics. So as much as we would love to be the only retailer selling some unicorn product that customers want every day only we have, that's not going to happen. The fact is we honestly, in the convenience store space, we really pretty much sell the same stuff. So it's amplifying the basics that really make the difference in the business.

So how we do that is very simple. We lead with price. We're going to lead with price on the things that matter to our customers, and we're also going to price competitively for the other products throughout the store. We provide value to our customer, and we reinforce that perception with our signage and with executed promotions. We also deliver quality. While our particular customers are not the wealthiest and they have to make their dollar stretch further, they still want quality. And that's why in our mix, we skew to the well-known national brands because for our customer, that reads quality to them. You also have to provide your customer with a good shopping experience. And that can mean a lot of things. It definitely means fast and friendly customer service, clean and well-maintained stores, products that they want in stock and priced correctly. Those are all impactful to the customer. And when you do that properly, those customers want to come back. So if you execute across all those areas, we believe that we will be successful. We're already good at these things but we know that we can get better.

We're also refocusing on our food and beverage offer. And this is really about growing food contribution but it's also about driving traffic to the store and building bigger baskets. So at QC, we will be doubling down on our coffee offer to drive traffic to the store, which also will then support bakery and breakfast. We're also intent on driving complexity out of the prepared food offer. So we're going to strengthen the portfolio of what we're offering. We're going to reduce waste. And we're also going to be focused on the economics of things. So providing value and quality to the customer, but being very mindful of what margin, what price point do we need to be.

We're also going to maximize promotional opportunities. We talk about our Murphy Drive Rewards and our QuickChek Rewards. Our digital capabilities are really allowing us to meet the customers where they are. And so how can we use those to economically change customer behavior? How do we get our customers to buy more of what they already buy? How do we get them to explore and buy other things in addition to that thing that they already buy. And our loyalty programs are very important to our customers. Last year alone, we delivered over $500 million of savings to the customers through our loyalty program, largely vendor funded.

As I mentioned earlier, we are building larger, more productive stores but these larger stores do come with higher operating expenses. That does not mean that we are deviating from our everyday low-cost position at all. We are not departing from that mindset. And you can see here the new stores are driving about 2/3 of that OpEx. If you look at it from a same-store basis, the growth was only 2.2%. So that is representative of significant wins that we have made when it comes to driving down costs at the store level because really, it's all about simplifying operations, balancing efficiency and effectiveness.

We ask our store managers to do a lot of things. If you spend a couple of hours in one of our stores, it is a beehive of activity. We are asking our store managers to do an awful lot. During my 2 years as COO, I spent a lot of time in our stores, and that really shocked me how much burden and how much expectation we really put on our store. So the trick is to make sure that they're busy translates into focus on the right things. We have leveraged our digital transformation efforts to make our labor model more efficient, using demand forecasting, historical data to properly staff the stores when they are at their busiest. So store labor is roughly 2/3 of store expense, and we've done a great job in optimizing that. Our labor costs were only up a little over 2% last year.

Optimizing store hours not only allows us to drive labor costs from the business, it also means we have the right people inside the store focused on the right things. So we had a big win last year in shrink, reducing that by $4 million. We did that through a better check-in process, better inventory management, better merchandising of some high shrink items moving those closer to the register. And without the right labor model, we would have never been able to drive that efficiency.

We're also investing in store maintenance. Store maintenance by far is the largest non-people cost that we have, and we're doing a couple of different things to address that. One is life cycle management. So we've designed an inventory database to help us predict when the most costly repairs will happen. That's driven by age of equipment, warranty expiration, where is the store, what is the velocity of the store, what is the weather that, that store is typically in. So rather than paying to fix the dispenser 3 different times and having all that downtime for customers, we're going to proactively go in and replace those ahead of that. So we will reduce our maintenance expense but we will also reduce downtime and customer frustration.

We're improving our self-maintenance capability. We've taken a look at all the high-velocity tickets that are generating a lot of maintenance expense for things that we could do ourselves. So we can change out fuel hose couplings. We can change card reader batteries. Last year alone, that drove a benefit of about $2 million, and we're still identifying different opportunities to deploy that. Another subset of self-maintenance is when you call in a ticket. Our past operating procedure said, you call in a ticket anytime a single light bulb was down in a canopy. So that results in the tech coming out, a special charge for the scissor lift to get that technician to the top of the canopy. So it's a lot of expense for light bulb.

So we've rethought about that. We've recognized that light bulb out in a canopy is not making material amounts of illumination change. So what if we waited until 2 light bulbs are out. So that is the procedure says now. And those sound like little things but little customers really do have enormous impact. And as you know, we also restructured the home office last year to create a leaner and more efficient organization.

We talked a lot last year about the low price environment and the historically low volatility. I'm showing you here. Look at the minimal volatility that we had last year. We had on average of the first 3 quarters, $0.30 swing of volatility when we would normally see $0.70 to $1. We also had the lowest retail prices we've seen since COVID. Yet we still sold 28 million gallons. We continue to outperform Opus and retail margins held firm at $0.281 a gallon, which was flat to the last year. So we feel really good about what we were able to deliver in fuel.

And as we said last year, data has shown that customers become less price sensitive at low prices. And we're showing you this here. This shows the relative volume changes against absolute changes in retail gasoline. What is important in this chart is you will notice it's not a straight line. Once you reach certain thresholds, you get exponential behavior. So certainly, below prices of $2.20, customers -- we see volume pressures. Customers are less price sensitive. When prices drift over $3, you start to see that price sensitivity behavior.

Competition is also a reality that we face. There are some really strong competitors out there, and they are growing in markets in which we're growing too. In fact, we've seen 600 stores open within 3 miles of our stores since 2020. So roughly 1/3 of our network has been impacted by competitive intrusion. And a lot of that activity is happening in Texas, Florida, Colorado, North Carolina, places where we already have a strong incumbent position but we're also building new stores. You're probably thinking that doesn't sound very good. What I would tell you is we don't worry about it. Why it might be a pain early on, eventually, the markets normalize, and we are set to win our fair share of the customers.

I'll show you what this looks like. When we see pockets of competition emerge, we see a recurring pattern, 3 different themes. The first stage is the emerging phase where the new entrant comes in, we see very aggressive pricing as they are trying to get their share, and that generally results in lower margins for the players in that trade area, us included. Eventually, though, the market stabilizes. The promotional pricing ends because that new entrant has to earn a rate of return on that store, and so they cannot continue to hold margins low or negative. And you see the volumes get redistributed across the market with the advantaged players such as ourselves holding on to our fair share. And then you see margins recover to more sustainable breakeven levels. And then over time, the market matures and you have steady volumes, predictable behavior and orderly gas pricing structure.

So this is the analog we have seen. Obviously, it varies from market to market but I'm going to show you one particular market and what it looked like. I'm showing you an example of a competitor entry with a large store model entering one of our Texas markets where we had an incumbent position of 27 stores. We saw these same 3 phases. At first, yes, we felt the volume and margin pressure as the new competitor blanketed the market. And we didn't sit still from that. We were aggressive, too, trying to fight for our share. Eventually, though, we saw the market stabilize. Yes, it took a couple of years from the first store to the last store before we saw the behavior change. And during that period, we're investing in our store and our capabilities. After 6 years, you can see we still retain about 90% of the volume pre-entry. So our stores are performing well. And we see the competitors start to lean into margin beginning year 2. And they're usually inflating margin not just to pre-competition levels but even higher levels to account for their larger stores, higher wages, higher inflation in the market. And then over time, the market becomes orderly. So we know the end state is going to be incredibly advantageous to us in our winning business model. So while it hurts for a period of time, we know that we will win in the future.

Now I want to talk briefly about our product supply and wholesale business. We get a lot of questions about this. I'm going to try to explain it really simply. We are really trying to strike an appropriate balance within 4 areas: ratability, flexibility, sustainability and low cost. So let me see if I can summarize for you what we do. We purchase fuel in 2 different ways, proprietary barrels that we buy at refinery gates and through contracts that we have with suppliers in our markets. Yes, we have a wholesale function, but it's not a high risk-taking organization. It's not a material profit center. We think about it as an inventory balancing function for the retail business.

We also have a long shipper history major pipelines. This complements our ability to buy product at the refinery gate and move it where we need to. We own and operate several terminals -- 7 terminals where we process third-party volumes. Once the leaves the terminal, we use third-party carriers to get it where it needs to go. And lastly, given all the assets and capabilities, we are able to optimize sending the right logistics partner to the right store and sourcing supply for every store at the most optimal location. Over time, this set of assets earns $0.02 to $0.03 a gallon. I know it's hard to model because it can be volatile quarter-to-quarter but it does even out over time. It is really complex to own and to manage all these assets but that's what we expect it to deliver.

We have delivered strong EBITDA growth over the years, and we acknowledge that it has been low since 2022 but we believe this is an inflection year. This is a bottoming year, and we're confident we can deliver [Audio Gap]. So confident, in fact, we continue to be active repurchasers of our stock.

So what does all this mean for long-term value creation? We have inherent volatility in our business, and so that can result in a rather large expected result of outcomes. But we have a baseline view of the business, which we are showing with the Navy blue solid bars. We are also showing you potential upside for the business, too. Our baseline, however, is underwritten by our new stores, growing at a pace of 50 stores per year or 3% annually. We're also intent on growing our merchandise margin 3% to 4% a year also. So we are going to control our ratable growth driven by our NTIs, driven by our initiatives but also put ourselves in the best position to capitalize on volatility when it happens.

Our strategies have endured the test of time, and they're going to serve us in the future. How we execute on the strategies, though is critically important. It's my job as CEO to enable leaders to run the business and drive results. And to do that, we need a culture that is intent on delivering those results. We've made some important leadership changes in the past several months, putting the right leaders in position to grow the business. And in conjunction, we have rethought about how do we refresh our focus, how do we need to work together.

To help drive a culture of change, we've introduced what we like to call our ABCs. So accountability, being accountable to each other, to our customers, to our stores, to investors. We're still going to keep in our process but we need flexibility to move faster. And we had a lot of success over the years. So it will be easy to be complacent but we're not going to be. We're going to be curious because curiosity is the spark that is going to enable the idea that is going to drive shareholder value, the next thing that we need to be doing in the stores, and it keeps our team engaged.

So in closing, the 5 strategic pillars that we've leaned on to grow this company since spin are still valid. They are still intact. We're undergoing a culture shift intended to make sure that we are agile and adaptable, unafraid to challenge ourselves while maintaining a relentless focus on delivering our results. I can assure you, as a management team, we are 100% not happy with flat EBITDA. But I can tell you, I believe that these days are behind us, and I feel fully confident that when we are at this conference next year, we will not be talking about why EBITDA is going to be lower again. We will be talking about how much growth and potential we have ahead of us, and we are happy to jump start that today right here.

Thank you. We have time for question.

I think you might have time for one question. We got about 1 minute. I don't know if there's any from the audience.

So I guess it's a 2-part question. First, you said the new stores at full ramp generate like 16% returns. How does that compare to the old store formats?

How does it compare to what?

To the old store formats, like how much better is the 16%?

Well, it depends on what margin environment you're talking about. But the new stores we expect to deliver 16% return. In the past, when we first built kiosks, those were high performers too. So I'm not saying -- it's not that is any different. It's just that we have an even better store [Audio Gap] aging network that is continuing to hold its own but it's certainly not able to contribute the kind of value that the larger store formats can with the more expanded offer.

Got it. And the second part of the question, so you guys have talked about capital allocation kind of 50-50 shares. Is that still your goal?

It is still valid. It can differ from year-to-year period to period, right? So our capital is going to go to growth. [Audio Gap] are going to fund additional cash flow back into the business. We're also investing in initiatives that are going to drive value, too. And share repurchase is going to maintain is going to still be a critical component. But as you look year-to-year, we may be doing more of one less of the other, but that is certainly our intention.

Very good. I think that's right on time. Thank you, Mindy.

Thank you for standing by. My name is Carly, and I will be your conference operator today. At this time, I would like to welcome everyone to the Murphy USA Fourth Quarter 2025 Earnings Q&A Call. [Operator Instructions] I would now like to turn the call over to Christian Pikul. Please go ahead.

Thanks, Carly. Good morning, everybody. Thanks for participating in our first Q&A only session covering fourth quarter and full year 2025 results, I would remind everybody to refer to the forward-looking statements commentary we included in our prepared remarks yesterday, which I hope you all took the opportunity to listen to or read. With me this morning are Mindy West, President and Chief Executive Officer; Donnie Smith, Chief Accounting Officer and Interim Chief Financial Officer; and Ash [ Olds, ] Director of Investor Relations and FP&A. [Operator Instructions] Carly, you can go ahead and open us up for questions.

[Operator Instructions] Your first question comes from Bobby Griffin with Raymond James.

Yes. I like the new format getting that out there after the press release. I guess my first question is more on the competitive comments that you put in the prepared remarks. Just curious if you can kind of conceptualize where the competitive kind of pressure is versus 6, 8 months ago? Is it getting worse or getting better? And then, I guess, more importantly, after you see that initial competitive response of new entrants how long does it take the store that's impacted to kind of come back to what you'd say are company-wide trends or company-wide averages.

Right. That's a great question, Bobby. Our same-store gallons in particular, are impacted by those factors of competitive intrusion. And really the pressures vary market by market. So for instance, in 2025, some of our stores had average per store month volumes that were actually higher. We saw that in 9 states that we operate in. Margins were higher in 10 states. .

But those markets are in different stages of competitive intrusion and pricing behaviors. When we look at Texas, has both higher margins, higher volumes. Colorado and Florida, though had lower volumes and lower margins but those states over time are going to look more like Texas as they mature and stabilize, and those new competitor entrants their share and then ultimately raise prices because they have to make a return on their sites, too.

So our new stores also take share from others, and they're outperforming the network. But same-store remains under pressure. So we have to invest an extra $0.01 or so in order to maintain volumes. So typically, when a new entrant enters the market, they do exactly what we do. They price very low at the outset while they try to gain their share from the other competitors that are already entrenched in the market, and that could take 3 months. It could take 6 months. It could take a year.

And then it depends on how many stores that particular market entrant wants to build and that -- and what density do they want to build in that market as to how long it's going to last. But ultimately, everything goes back to normal and margins rise and we are able to increase our margins as well.

So in a way, we actually like competition because while it creates a disruption when it's happening, as that market matures and stabilizes, and the winners have acquired their share of customers, then the higher margins ultimately follow.

And we're disciplined where we build and continuously upgrade. So we're going to be there for the long term, and we're going to be a winner also.

Okay. That's helpful. And I guess, secondly for me, and I'll turn it back over. The comment there about the step-up or the acceleration in the maintenance capital spending, I found interesting. And more so and just like the fact about it limiting disruption, is there any -- can you put any more details around how big of a brag those, call it, disruptions have been?

Or is more this step-up just kind of getting ahead of what could have been a drag. And just kind of trying to see if we've been -- there's been an EBITDA impact that actually will start to go away after you do this maintenance capital step up.

Sure. What I would say is it's more of the latter. It's more of a getting ahead of things before it happens. We have been entirely within a break 6 mode for our history. That means that maintenance comes in lumps, but it's difficult to predict.

And as our market -- as our fleet ages, we found the need to go ahead and proactively invest in equipment that is end of life or near end of life because that does 2 things. It results in maintenance expense that we can predict. It also enhances uptime with that equipment, so enhances the customer experience and therefore, their loyalty to us. So the kinds of things that we're talking about doing is a step-up in proactively replacing some dispensers HVAC units, space, things like that, which are going to cost us a little bit in capital from the beginning.

But we'll improve it in uptime and store performance over time. And we think the projected savings from just doing that is roughly $6 million to $8 million, somewhere in that range of maintenance cost -- maintenance expense that we would avoid by doing that.

And then, of course, the impact on our customer goes even beyond that by being able to serve them in a more consistent fashion.

That's helpful. Best of luck here in the first quarter.

Your next question comes from Bonnie Herzog with Goldman Sachs.

Just trying to get -- how are you? I actually had -- I actually had a question on your long-term guidance, I guess, through -- and I guess I'm just thinking about it, this for modeling purpose guy this year of $1 billion, it does imply stronger EBITDA growth in, I guess, '27 and '28 to ultimately reach that long-term guidance of EBITDA target of the $1.2 billion.

So I was just hoping maybe you could talk about the drivers of maybe faster expected growth in the out years? And where you see maybe the most upside or maybe most downside. Just trying to think through the potential for you to kind of meet that long-term EBITDA guidance?

Great question, Bonnie. And what you're seeing in our EBITDA guidance is really a function of several factors for 2026 so the guidance is capturing the timing and scale impacts of our new store program. So as we get to a level where we can sustain 50-plus NTIs a year and those classes mature, then that EBITDA contribution becomes more visible because we would expect that 50 stores can contribute $35 million to $40 million of EBITDA once they complete their 3-year ramp.

However, for this year, when an entire class of 50 from last year opens at once, it does create a temporary drag that outweighs the strong 2- and 3-year contributions that we are getting from our earlier smaller classes.

So it isn't that the stores aren't performing, it's about scaling up our program to deliver the 50-plus stores going forward. So that's one of the factors is us just being able to build 50-plus stores a year and then ramping as expected. The other factor is in a more normalized, more volatile fuel environment, our EBITDA growth will become even more sustainable.

Because, as you know, and we've talked about at length, the current fuel environment does impact our same-store performance that the new stores right now are not able to offset this early into their ramp, and that's going to be a headwind this year.

Now when you look at the path to the $1.2 billion, it really depends on 3 levers only 1 of 2 of which we can control. We talked about one, the normalized fuel environment. That's one unfortunately, we cannot control sustaining the 50-plus NTIs annually, we can, and we are in a great position to do that and accelerate our growth there, also executing on our initiatives.

So making our business better is also a material driver of that future growth. So when the environment changes, I think investors are going to be very surprised about the earnings power of this business.

But if I was going to handicap how can we achieve 1.2, what am I -- what are the pluses and minuses I believe in the pipeline that we have, I believe, it's a quality pipeline that will deliver the $35 million to $40 million at ramp and a 50-plus store ramp per year.

I believe in our ability to achieve our initiatives. But again, the $1.2 million does depend on a little bit more volatility and I think as we saw in the fourth quarter, when we can just get brief spurts of that, our business is functioning well, and we are attributing the value to the company that we would expect in periods like that. but we do need a little more help from the macro environment in order to get to the $1.2 billion.

Yes. That's super helpful. And honestly, it makes a lot of sense. And yes, volatility is your friend as you kind of stages and maybe a quick follow-up, Dan, on that because also just in the context of that, the fuel margin, I know, again, it's for modeling purposes, but it did suggest that $3.5 million CPG.

And so if I'm right, I think that's maybe 4 years of flat to down field margins. So just trying to think through that for how you're kind of thinking about fuel margins. And again, and then also just the breakeven costs? Like how have they been trending recently?

So for fuel margins, our outlook for the year really reflects what we believe is the highest probability and most likely environment. So it's -- we think it's going to still be characterized by relatively low volatility as we go through the year.

We think we're going to see relatively stable and still low fuel prices, which impacts our business model because it makes our customers on margin a bit less price sensitive. So we believe it is a base case similar to last year.

And of course, we're comping several years ago when we experienced the other extreme of things, which we benefited from tremendously where we saw really high volatility, higher prices, which made our offer even more compelling so we are going to focus on the things we can control and improve our business and the earnings power, including levers that in the future could be more fuel immune.

But for right now, for the fuel margin, we think that, that $0.30-ish all in is right where we need to be. And it's still reflective of that structural component because to be able to earn margins at this level despite the fact that we're putting a $0.01 or $0.02 on the street. And despite the fact that we have low volatility is really speaking to that structural element that, that is still there and supporting the stock -- the margin.

So when you talk about the breakeven, what I can say is the cost to serve is really not going down and that breakeven component is still alive and well and playing out industry-wide.

So the fact that margins were flat this prior year given the low volatility and really nothing that was there to macro support margins being that high shows you that those marginal retailers are still requiring those higher margins to break even, much less continue to invest in their business, which they're not able to do, and we are able to do that.

Actually makes sense. So I appreciate that, and I'll pass it on.

Your next question comes from Irene Nattel with RBC Capital Markets.

Before I get to my question, I just wanted to clarify something you just said, Mindy, which is -- you're still planning on putting $0.01 to $0.02 a gallon on the Street this year and that -- and even with that, you're still looking at sort of 1% to 3% same-store volume pressure. Is that correct?

We still think that we will continue to see volume pressure in this lower price environment, and we will still need to protect our position, especially against competitive entrants in certain markets by putting some sense on the street in order to do that and maintain our competitive position. So yes.

Yes. Understood. And then just moving on to the back hard. Can you talk about how you see the nicotine environment unfolding this year? We had some bright spots last year do you think it plays out that in 2026 and moving ahead?

I think that we are still the ideal retailer for manufacturers as they help our customers progress down the risk spectrum from cigarettes to other products. We will continue to be very promotion-driven throughout the year. And I think that we have delivered strongly on promotions. I think you saw that earlier in the year when we have a promotion, our sales force can get behind that and really sell it. .

We are having our national leadership conference over these several weeks. I just got home from St. Louis, where we toured the Midwest. We had all our store managers from the Midwest in one location a couple of weeks ago, we were in Houston for the Southwest. And I can tell you, all of those store managers are so excited and they are very promotion-driven. They are very content driven. And I think that, that culture really underpins our ability to be the most effective use of our manufacturers promotional dollars and meanwhile, we still continue to take share in cigarettes, and we will continue to do that.

But the other categories, the other nicotine categories are growing strongly, and we don't expect that to slow down any. Now we do realize that we're going to be comping a very special one-off promotions. So we are not anticipating in our guidance being able to duplicate that but we have put in our numbers accelerated promotional funding from what we had last year.

Your next question is from Ed Kelly with Wells Fargo.

Good morning I wanted to ask you about per store expense growth. You had a very strong year in '25 below the initial guidance that you had mentioned. The '26 outlook assumes that you'll still be running below that 5% level that I think at one point, you maybe thought was more normal in terms of run rate. I'm just hoping that you could talk about the drivers of that for '26 and then just taking a step back, what's the right -- the correct run rate over time for per store expense growth over the next few years?

Great questions. Let me take that. And you're right. We have -- the team has done a great job of managing their expenses, so hats off to them delivering OpEx at only up 3.3% last year. It was really good. And obviously, our guidance is still forecasting that we're going to be below that 5% number.

I'll talk about some of the drivers this year that we expect to maintain going into this year. We've done a lot of work with our store excellence campaign and our self-maintenance in particular, and just changing -- being able to change our card reader batteries, ourselves versus calling in a technician allowed us to save almost $2 million on maintenance expense last year.

Our team has also done a great job of cutting overhead almost in half and that's attributed to our store managers just doing a great job with staffing and with scheduling and motivating their teams and running their stores more efficiently and then done a great job on loss prevention as well. We've moved some of the higher shrink items closer to the register.

We also really dialed in on our cash loss and our merchandise inventory management. That alone allowed us to cut shrink by over $4 million, and that's inclusive of price increases, growth. We were still managed to save over $4 million. So we expect the impacts of those things to continue and even amplify. And then things like I talked about with proactively going ahead and replacing some of our equipment those will earn some savings in our maintenance line over time.

And then I think your last question was, what should you expect going forward? I would expect something around 4% going forward. And bear in mind, we are building a lot of new-to-industry stores. Those stores are bigger than some of our existing networks.

So those are going to come with higher costs from the -- and especially in the beginning as we are going to make sure that those stores are fully staffed to make a really good first impression to our customer. And then, of course, the fuel on the merch will ramp over time.

So a lot of the driver of our OpEx is actually the new-to-industry growth building the bigger stores. But we are going to hold the line on making sure that we are operating as efficiently as possible.

Your next question comes from Jacob Aiken-Phillips with Melius Research.

I just wanted to double quick on the larger format stores and some of the cost pressures. I think last year, there was a dynamic where a lot of stores open towards the end of the year, beginning of the year. And the winter storm in February like exacerbated some of those cost pressures.

We had this January storm and I guess, February is still pending. But how should we think about like the 1Q dynamics there? And then the evolution of that or cadence throughout the year?

What I would tell you is we will experience some higher maintenance costs from this first quarter winter storms, but we also got were the beneficiary of some higher margins to heading into those storms. So we think that on balance, all that is going to offset and was fully baked into kind of the $1 billion-ish that we already talked about. So you are correct that when we build a bunch of stores, these larger stores, all at one time, those come with full OpEx really from day 1, while our fuel takes a bit of time to ramp and merchandise takes a full 3 years to ramp.

And then, of course, the field does ramp faster, but we are also probably aggressively in order to take that share as well. So that definitely has an impact on our overall OpEx. And I would say that half of it or so is it just attributable to those larger stores.

Got it. And then just on the small tuck-in acquisitions like you just did for and then could potentially do some this year. it's new or dynamic. And I'm just curious what exactly do you look for? And I know it's early, but I think what do you envision like economic improvement of the stores when like you get the Murphy's merchandising into the stores?

We really like that Colorado acquisition in particular because we got to pick and choose which ones we wanted versus taking a whole portfolio where you get the good and the bad, and you just have to make the best of the bad. In this case, we got the kind of cherrypick.

And it was a market in which, one, we wanted to add density. This was a very quick and easy way to do it. It was also an economic way to do it. And we were able to get those stores open in what, 30 days or so, less than 30 days, we were able to put our signage up get our assortment, how we wanted to get those stores back open.

So we were able to hopefully retain most of the customer base that was already going there. and then leverage our Murphy Drive Rewards loyalty app and our density of stores in that market to drive more traffic into that store. So we like it from the standpoint we got to cherry pick it. It was a market in which we wanted to add density.

It also allowed us to do that very quickly without having to go through -- we like organic growth, but it takes a long time to go through the let's pick the site, let's permit the site, let's construct the store, let's get all our opening permits. That just takes a long time. So having the ability to bolster that with some of these maybe smaller ones two, 5G type acquisitions. We are certainly in the market looking at some of those right now.

Congrats on your new role.

Thank you very much.

Your next question comes from Pooran Sharma with Stephens Inc.

Just wanted to -- just wanted to maybe start off with understanding the contribution from the in year 3. I think you mentioned $35 million to $40 million in yesterday's prepared comments and today as well. And I think you mentioned in the prepared comments, you maybe expected?

Was it 2 years worth of these 50 class builds contributing $30 million to $35 million to $40 million. So higher level, should we be thinking that you're going to get about $70 million to $80 million in contribution dollars from these stores and then that would rise to around $100 million to $120 million by 2028 or just wanted to get the right way to frame up that contribution?

It's more of a stair step. And granted, we're always going to be -- for the foreseeable future, we're going to be building a new class of 50, which are going to be a drag on that as they didn't incur full cost, but have to go to ramp. So what we said was we expect -- each new build cost of 50 stores to generate between $35 million and $40 million of EBITDA at maturity after their 3-year ramp.

So as we enter 2027, we will have the 32 new stores from our 2024 bill class, the 51 stores from our 2025 bill class and the 45 to 55 from this year, helping to grow EBITDA in 2027.

So cumulatively, this will begin to move the needle even if the fuel environment does not normalize, and we expect and continue to potentially increase our ability to add more than 50 stores in the network as we look even beyond 2027.

So that's why we say looking back, 2026 will be viewed as an inflection point in our ability to deliver sustained EBITDA. But the $120 million is a bit extreme because you're going to still have that 50 new stores coming on, which in that first year, especially or a decrement to EBITDA.

Okay. That's very helpful. I appreciate the color there. And I wanted to maybe understand kind of the higher-than-expected PS&W and RINs contribution for the quarter. I wanted to understand more specifically what the dynamics at play were during 4Q?

And as we look and think about S&W margins in 1Q I know you're expecting $0.05 for the year. But just with the run-up in RIN prices, should we expect PS&W margins to stay a little bit above that [ $0.02 to $0.025 ] per gallon range you'd previously mentioned?

Sure. When you compare the fourth quarter versus prior year on PS&W, this year were really supported by stronger arbitrage, stronger line space values. But less than prior year because we did have some downward movements in the price. So that's what's explaining that, but just there was a little more volatility in the fourth quarter than in the third quarter, for example.

And so you saw the benefit of that in the PS&W line. As we look forward into the first quarter, obviously, these winter storms are having an impact on the network. It's also having an impact on price. Too early to say where we're going to end up on PS&W for the quarter at this point because the swings can be pretty dramatic.

But safe to say for the full year, we think that we're still going to be within that band unless we can see some more prolonged volatility sustain itself but that's where we would expect [indiscernible] for the full year, too early to say really for the first quarter. And then with regard to the RINs, as we always say, the price of the rent is baked into the price the gas we pay. So while there may be some temporary dislocations if RINs run up very quickly or run down very quickly, over the sweep of time, it all balances out.

Your next question comes from Corey Tarlowe.

Can you talk a little bit about what happened on the tobacco side from a margin perspective in the quarter? And then also maybe what to expect ahead there?

Sure. And that's a great question. What you were seeing there, something we talked about frequently last year. So for the fourth quarter, it's really the timing of promotional dollars impacting that cigarette category, in particular, and the volumes. .

So importantly, though, although volumes were down, we did grow share of market in the cigarette category for both the 4-week and 13-week periods ending January 4. So our volumes did remain strong compared to the market. But keep in mind, these categories are highly promotional, so you won't necessarily ever see straight-line growth even on a year-to-year basis.

But as we've demonstrated over longer periods of time, we do have -- we have significantly grown those contribution dollars in the overall nicotine category, and we are definitely seeing strength in pouches and other products. And I will tell you, too, the business has already normalized in January, and we expect to continue to show consistent margin performance when viewed over time, but it can be lumpy quarter-to-quarter.

Okay. Great. And then I have 2 quick follow-ups. I know we're lapping severe weather from last year. Can you provide any context around the storm impacts this year? And then also any impacts from changes in SNAP as well?

Well, I would just reiterate what we said for January, it's shaping up to be a good month. We are lapping winter storms from last year, but we're not finished with the winter storms from this year because now we have one impact in the Carolinas and other parts of our network. So while we were pleased with January's results, that was one of the reasons, quite frankly, that we were not willing to increased EBITDA guidance materially because we don't know what's going to happen for the rest of the year, and we know that we're going to have some impacts on the back end of these winter storms as well.

So turning to [indiscernible] that is a great question. And we do have some exposure there, but it is relatively small. It's actually less than 2% of our sales but we did have those SNAP changes take effect January 1 and 5 of the states in which we operate, as you I'm sure know, they primarily affect handy, Pace and specifically energy drinks.

I'll share with you some data points, but I want to caveat these are very preliminary, but our early read suggest kind of a modest headwind and candy and energy drinks. We're going to continue to monitor the data, obviously, as the space is in, and we do expect some impact in the very discretionary categories, which is included in our guidance, by the way, we put in our guidance a headwind and I think it's roughly less than $5 million overall for Snap.

Our top EBT item, you might not guess it. It's actually Red Bull. So while some customers may pull back, we believe that most are going to continue to buy those products even if they are not eligible for the SNAP benefit. So there is some category noise there, but the overall impact to the business is modest. As I said, it's $5 million or less.

Your final question comes from Brad Thomas with KeyBanc Capital Markets.

Maybe I'll just add my congratulations as well on your first call. as CEO. And I know that last quarter, the main message welcome. I know last quarter, the main message was around much of the leadership transition, keeping the core strategies of Murphy in place. But just wondering if I could ask directly, if there are specific areas that you think the priorities will change a little bit now that you've taken over?

That is a great question. Thank you, actually for asking that. What I said in those certain terms, some things are going to stay the same. Our everyday low price strategy, our continuous improvement mindset capital allocation will remain unchanged. So when I think about it, it's really more of our culture that is evolving.

So we're pushing for things like quicker collaboration, more nimble decision-making reorganized the company to create more clear roles in accountability. We've already made some leadership changes to help us work better together, remove some inefficient reporting structures and increase accountability.

I can tell you people are excited because their work and ideas can have more impact and then that excitement ends up being infectious. And we have an incredibly strong platform to improve this business and dedicated to growing shareholder value. So our 5 strategic pillars in which we have grown the company since spin, are still intact.

It's really just a culture shift, which I think is necessary to make sure that we are agile and adaptable and really unafraid to challenge ourselves and stretch further and try new things. So you may see SP, and I hope you will see us be a bit more innovative going forward than we are in the past.

And as we have these macro conditions pressuring our stores, we have accelerated competition. I think that's a smart thing to do. We need to be able to fight back in our business model, reducing our reliance on fuel and tobacco where we can, but still preserving the strength in both of those.

We need to figure out how to attract and retain new customers, how to grow trips and spend and how to make our store teams life easier and our stores more productive. And then what are those niches of opportunities of value that we can exploit.

So we're going to be looking to innovation to support our core business and also drive for more business. And we're really already looking at it around 3 main pillars, which are our portfolio, our customer and advanced technology, and we're going to attack all of those types of opportunities and absolutely believe that we have untapped potential in this business to improve, not just our existing stores and serving our existing customers, but the ability to stretch for more with different stores and different customers.

So I'm excited about the future. I know the team is to and stay tuned to see what we will deliver on this topic.

That's really helpful, Mindy. If I could squeeze in one last follow-up just on the quick check brand. I don't think I heard any commentary about how it performed in the quarter. Could you just address that? I mean, how you're thinking about its impact on EBITDA in 2026?

Yes. Great question. It is continuing to exhibit stronger sales. Margins continued to be pressured. Traffic continues to be pressured. What we're doing really there is really simple. We are refocusing on the fundamentals of the business. We are focusing on the core, which are mainly coffee, breakfast and sandwich as our traffic drivers -- we are simplifying the menu, rationalizing the assortment based on performance, not legacy, not what we've always done.

So we're choosing where we win and really not trying to be everything for everybody. We're also focused on improving margin. We need to balance the innovation with cost and margin control because while growth is important, we have to earn money. I can't take growth to the bank.

We have to take margin to the bank. So being disciplined around that. And then building a better operating model that simplifies operation, reduces complexity, enhances that customer experience because we're -- our speed to service is better.

So overall, it took really just a recognition that execution and ability to scale are as important as idea generation because ideas which can't be implemented well or executed consistently are actually a bad idea.

So I would add to that we have new leadership at Quick Check in that new structure and that will help speed up execution and also, I think, spark some innovation. So I really like where the team is headed and I believe they're focused on the right thing. So really appreciate you asking about that part of our business.

There are no further questions at this time. I'll turn the call back over to Murphy Presenter Panel for any closing remarks.

Thank you for your time and participation on the call. All great questions. As we look to upcoming calls, I want you to know that we are committed to strengthening our core business while pursuing incremental sources of value that endure across the field cycle. .

And we are building from a very solid foundation, and I have solid conviction in this leadership team's capacity to unlock Murphy USA's next level of potential. So thank you again, and I look forward to the next quarter's call.

This concludes today's call. Thank you for participating. You may now disconnect.

Good afternoon, everyone, and thank you for listening in today. With me are Mindy West, President and Chief Executive Officer; and Donnie Smith, Chief Accounting Officer and Interim Chief Financial Officer. After some opening comments from Mindy, Donnie will review some performance highlights from 2025 and discuss 2026 guidance metrics, followed by some closing comments from Mindy. As a reminder, we will be publishing a transcript and recorded playback of these remarks this afternoon, and then we will host a live question-and-answer session tomorrow morning at 10:00 a.m. Central Time. Details can be found in our Investor Relations website and in today's earnings release.

Please keep in mind that some of the comments made during these remarks, including the Q&A portion tomorrow, will be considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. As such, no assurances can be given that these events will occur or that the projections will be attained. A variety of factors exist that may cause actual results to differ. For further discussion of risk factors, please see the latest Murphy USA Forms 10-K, 10-Q, 8-K and other recent SEC filings.

Murphy USA takes no duty to publicly update or revise any forward-looking statements. During today's discussion, we may also provide certain performance measures that do not conform to generally accepted accounting principles or GAAP. We have provided schedules to reconcile these non-GAAP measures with the reported results on a GAAP basis as part of our earnings press release, which can be found on the Investors section of our website. With that, I will turn the call over to Mindy.

Thank you, [ Kirsten ]. I want to start off our conversation today by thanking Andrew Clyde for his extraordinary leadership since our spin-off in 2013. His strategic vision, operational discipline and formative impact on our culture helps shape Murphy USA into what it is today, a company that is high-performing, resilient and customer-focused. As current or prospective investors, you may be wondering what might be different under my leadership.

But I believe the more important question is, what is going to stay the same. I want to be very clear on this point. Our commitment to value creation through organic growth, our continuous improvement mindset and our disciplined balanced capital allocation strategy will remain unchanged. My leadership style is grounded in transparency, accountability and empowering people, giving them the opportunity to innovate and challenge the status quo. Having served as CFO and COO since the spin-off, I understand this business, and I am excited to lead Murphy USA into its next chapter.

We will carry forward the habits, processes and principles that have driven our success as a stand-alone company. My mission going forward is to unleash even more creativity and innovative thinking within our senior leadership team so that we can extend our value creation journey well into the next decade. Our foundation is strong, our opportunities are compelling, and our team is fully aligned around the next phase of disciplined growth. When considering how I wanted to run these earnings calls going forward, I took a page from the book of one of my favorite presidents, Franklin Roosevelt. What I like most about his leadership style were his fireside chats, a commitment to truth, clarity and transparency delivered in simple straightforward language that resonated deeply with the American public.

By speaking plainly and directly, he built trust, dispelled rumors, strengthen morale and help unify the country behind important actions. The term fireside chat is perhaps more familiar to you all as an industry term for the forms where corporate leaders talk candidly with analysts. So this idea feels like a natural fit to me. It also reflects how I like to interact with my teams every day with candor, clarity and accessibility. And that is the same tone and format I hope to bring to these quarterly discussions with you. In that spirit, there are 3 key points I want to make before I hand the call over to Donnie. And the first is retail margins in 2025 were flat to 2024 at $0.281 per gallon despite experiencing far less volatility in 2025.

Given that retail margins remain flat in this environment is a strong indicator that we are seeing structural support for higher retail margins when normal levels of volatility are reintroduced to the market. RBOB prices ranged from $1.60 per gallon to about $2.15 in 2025 or a range of only $0.55 and with only about $0.30 through the first 3 quarters of the year versus much wider ranges of $0.72 in 2024 and $1.07 in 2023, years which we would characterize as more typical with respect to price volatility. As we would expect, given a little fourth quarter volatility, fuel performance was the best we have seen all year.

Retail margins were up about $0.02. Same-store volumes were down only slightly at 0.6% and total volumes were up 3.1%. Therefore, importantly, we believe retail margins are likely at or very near a bottom, and there is far more likelihood of upside potential versus further downside pressure going forward. My second point is on new stores. We added 51 new stores to the network in 2025, an achievement we are proud of and a level of activity we expect to sustain in 2026 and beyond. The new stores are delivering results aligned with our high expectations. For instance, the 2022 and 2023 build classes collectively comprised of 56 stores contributed $32 million to EBITDA in 2025 in the second and third year of their ramp, respectively.

As such, we still expect a full build class of 50 new stores to generate roughly $35 million to $40 million of EBITDA annually at maturity after 3 years of ramp. As we enter 2027, we will begin to see the cumulative effect of several years of approximately 50 new stores per year and expect to see sustainable EBITDA growth as these stores ramp to maturity. Third, I'm going to go ahead and discuss the EBITDA outlook for 2026. While there were puts and takes in the 2025 results, total EBITDA of $1.02 billion is roughly in line with what we indicated the business would generate using $0.305 per gallon to achieve $1 billion of EBITDA as noted in our original 2025 guidance and again reiterated in the third quarter call in November. All-in fuel margins of $0.307 per gallon in 2025 were 20 basis points higher year-over-year, attributable to slightly better performance from the Product Supply and Wholesale segment, which delivered $0.026 of contribution margin within our long-term expectations of $0.02 to $0.03.

Looking back over the last several years, all-in fuel margins since 2022 have landed within our expected short-term range of $0.30 to $0.32 as initially described in our third quarter 2024 conference call. As we look into 2026 and weigh, assess and risk the set of factors that drive our business, our expectations are that we will face a similar environment to what we encountered in 2025, characterized by low absolute prices, low volatility and continued competitive pressure. As such, we think these factors will continue to limit retail margin expansion in the near term. Although geopolitical risk has heightened over the last few months, we don't expect a year of above-normal earnings for the supply business in 2026 and are using approximately $0.025 a gallon in our plan.

Therefore, to anchor net income and EBITDA expectations in 2026, using the midpoint of all other guided ranges, we would expect EBITDA of about $1 billion at $0.305 a gallon, which is comprised of retail margins of $0.28 and PS&W contribution of $0.025 per gallon. Our forecast of flat to slightly lower EBITDA reflects several different inputs from across the business. From a volume perspective, we expect same-store pressure will continue to impact volumes as laid out in our guidance. These same-store pressures are a function of the ongoing low price environment where our customers will occasionally choose convenience over price and the active pace of new store growth from competitors in our markets, primarily Colorado and Florida.

Further, low price volatility impacts our ability to profitably widen our discount versus the competitor set in each market, limiting our ability to take share. Importantly, while likely to persist in 2026, we do view these factors as transitory. Additionally, while we are excited about our accelerated new store growth, the larger high-performing stores do tend to come front-loaded with higher operating expense in the first year as the store begins its 3-year maturity ramp to higher merchandise growth, resulting in a temporary drag on earnings. That being said, as the program builds momentum, the plus or minus 100 new stores that will be in service in 2027 will provide a material boost to our earnings power even if fuel markets do not normalize by then. That momentum will continue into 2028 as roughly 3 years of 50-plus store build classes will stabilize the earnings base with one class reaching maturity as the newest class enters the first year of its ramp.

At which point, 2025 results and whatever happens in 2026 will likely be viewed in retrospect as an inflection point in our ability to deliver higher sustainable EBITDA growth. Importantly, as I mentioned earlier, as we accelerate new store growth, we do not view the risks above and below the $0.305 benchmark as balanced. We think there is far more upside potential given the price volatility that was introduced in the fourth quarter of 2025 and which helped to generate stronger fuel performance. Given the extremely low relative volatility in 2025 and a tendency for markets to revert to mean levels of volatility over time, the likelihood of all the margins to outperform our $0.305 forecast remains higher versus the factors that might drive year-over-year margins lower in the near term.

I will now hand it over to Donnie to discuss performance against our 2025 guidance metrics and introduce our 2026 guidance.

Thanks, Mindy. Let me start off by reviewing 2025 performance results and highlights in combination with the elements of our 2026 guidance. Starting with new store growth. We placed 51 new-to-industry stores into service in 2025, slightly exceeding our guided range of up to 50 stores. Special thanks to our store development and asset management team, along with our sales and operations team for helping us achieve this important milestone. We also completed 23 raise-and-rebuilds, transforming a smaller kiosk to a 1,400 square foot walk-in store. Since year-end, we have opened 2 additional stores with 18 stores currently under construction, giving us high confidence in the sustainability of our organic growth strategy for the next several years. Our pipeline remains healthy, and we are on track to deliver 45 to 55 new stores in 2026 with the lower end of the range representing our internal organic growth plan and the higher end representing the ability to bolt on a few stores through opportunistic acquisition in strong markets, much as we did in 2025 with the purchase of 4 stores in the Denver area.

In addition, we expect to undertake up to 30 raise-and-rebuild projects in 2026. To reiterate, our primary focus remains adding highly productive 2,800 square foot stores to the network as part of our long-term goal of building 500 or more new stores over the next decade. Going forward, we are taking a more holistic approach to formats, understanding in some markets, larger or smaller formats may be more desirable than our standard 2,800 square foot format. We will keep you updated on the evolution of our new store program in the coming quarters as we continue to prioritize our organic growth strategy as the primary vehicle to grow shareholder value.

Turning to fuel volume. In total, we sold 4.85 billion gallons of fuel in 2025, up about 0.6% from 2024, translating to a 2% decline on an average per store month basis and a 2.6% decline on a same-store basis. Average per store month fuel volumes of 235,800 gallons in 2025 finished near the midpoint of our revised guided range of 235,000 to 237,000 as updated in our third quarter earnings release, but below the original guided range of 240,000 to 245,000 gallons issued in early February 2025. As we discussed last year, there were several factors pressuring volumes in 2025, including severe weather in the first quarter, above normal competitive pressure in some of our markets and more impactfully, the low absolute fuel price environment, rendering our customers less price-sensitive and prone to losing an occasional trip to a convenience-driven occasion versus a price-driven decision.

Importantly, as Mindy referenced earlier, we view all these elements as transitory over time. Weather will come and go, pockets of competition have waxed and waned in intensity as long as we have been in business and fuel prices are unlikely to stay low over the long term. Given these factors, we are pleased with our overall fuel performance in 2025 and maintain the highest level of conviction that our low-price strategy will continue to win with customers over time. Against that backdrop, our current view is that 2026 could look pretty similar to 2025, with low prices likely to persist over the near term as supply remains healthy and markets remain balanced despite what appears to be an increase in geopolitical risk surrounding oil-producing regions around the globe. Going forward, we expect average per store fuel volumes to remain relatively flat with high-performing new store gallons largely offsetting legacy declines in our older smaller format stores, a more likely outcome now that new store activity is ramping to previously expected levels.

As such, we expect to maintain average per store month volumes within a range of 233,000 to 237,000, the midpoint of which represents flat to slightly below 2025 APSM volumes. In 2026, we expect to sell just over 4.97 billion gallons of fuel in total, up from 4.85 billion gallons in 2025. These figures correspond to a 1% to 3% decline in same-store fuel volumes, which is a guided metric we have added in an effort to provide additional transparency around our volumetric performance and align more closely with other retail peers. Moving to merchandise. We generated $869 million in merchandise contribution margin dollars in 2025, up 4.2% versus 2024, largely in line with our expectations. Robust promotional activity and steadfast category management offset a challenging customer environment and continued margin compression, particularly in the food and beverage categories.

In 2026, we believe our core customer remains strong, and we expect that strength to continue to drive merchandising growth opportunities. In 2026, we are forecasting total merchandise contribution dollars to come in between $890 million and $900 million, the midpoint of which represents approximately 3% year-over-year growth. Importantly, our 2026 merchandising growth outlook incorporates several incremental headwinds relative to 2025, including expected changes to the SNAP program, which have been conservatively reflected in this guidance. Additionally, while our nicotine promotional engine is expected to remain a durable contributor to growth, our 2026 outlook does not assume a repeat of the outsized onetime event that supported performance in 2025.

Rather, we anticipate a normalized promotional environment and meaningful investments in both core and emerging segments, supported by a healthy pipeline of nicotine-related opportunities enabled through broader vendor support. These promotions are expected to drive traffic and support both sales and margin performance. [ Absent these factors ], we would expect merchandise growth to track at our normal cadence of approximately 4%. Moving to OpEx. In 2025, the team continued to drive efficiencies at the store level as initiatives around labor planning and loss prevention helped offset continued pressures in store maintenance.

Collectively, per store expense growth in 2025 was only 3.3% for a total of $36,100 per store month, just below the low end of revised guidance of $36,200 to $36,600 and well below originally issued guidance of 36,500 to 37,000. In 2026, we will continue to find ways to make the network more efficient, helping to offset the impact of the higher number of larger stores we are adding to the network in both 2025 and 2026. As such, we expect a slight increase to 37,000 to 38,000 average per store month in 2026, the midpoint of which represents roughly 3.8% growth versus 2025.

As a reminder, nearly half of our projected total OpEx increase is again a direct outcome of our decision to build larger format stores, which are more costly to run than the network average. Also, keep in mind that when new stores are put into service, operating expenses are running very close to the target maturity rate as we schedule above normal labor hours to ensure new customers have a positive experience their first time visiting the store. Merchandise dollars, on the other hand, take about 3 years to reach maturity. Thus, in the early years of accelerating these stores, you will see OpEx growing a little bit more than merchandising contribution until the stores reach maturity, at which point the coverage ratio turns positive in our new larger format stores.

Now moving to corporate costs. SG&A expense was $232 million in 2025, down about 1% from $235 million in 2024, towards the low end of our adjusted guidance range of $230 million to $240 million and well below the original guided range of $245 million to $255 million. As we announced in the third quarter, we completed an organizational restructuring, which helped streamline our workflows, simplified our processes and eliminated technical redundancies, all while preserving our agile, data-driven decision capabilities. In 2026, we expect SG&A expense to run between $240 million and $250 million, largely reflecting annual merit-based wage adjustments and continued growth in other employee-related benefit costs such as health care.

From a tax perspective, income tax expense was 22.8% versus 22.9% in 2024. 2025 taxes were lower than planned due to some discrete state tax refunds we received and acquisition of some federal energy tax credits. In 2026, we anticipate an all-in effective tax rate between 23% and 25% for the full year, which would assume no retroactive WOTC approval and continued use of federal energy tax credits. Finally, the capital spending. Total capital spending in 2025 came in at $432 million, slightly below our adjusted guided range of $450 million to $500 million, primarily due to timing of new store construction and equipment orders for the 2026 and 2027 build class. In 2026, we expect a capital program between $475 million and $525 million as the new store growth program accelerates to a higher level of ongoing activity. Of this amount, $375 million to $400 million is allocated to retail growth, including new stores and raise and rebuilds, $80 million to $95 million of maintenance capital with the remaining funds earmarked for strategic initiatives and other corporate investments.

Of note, our maintenance capital budget is about $30 million to $40 million higher than in prior years due to a slate of initiatives intended to proactively replace equipment that has reached end of life, limiting operational disruptions from broken equipment and increasing uptime across the network. Before I turn it back to Mindy, there is a few more pieces of information I want to provide. Retail prices averaged $2.66 per gallon in the fourth quarter and $2.77 for the full year. Total debt on the balance sheet at year-end was approximately $2.18 billion, resulting in a consolidated leverage ratio we report to our banks of 2.1x. Additionally, in conjunction with the guidance metrics provided to further help analysts and investors model the business in 2026, I will provide our expected store months by quarter.

In the first quarter, we expect 5,403 total store months. In the second quarter, we expect 5,336 total store months. In the third quarter, we expect 5,377 total store months. In the fourth quarter, we expect 5,446 total store months. For the full year 2026, we expect a total of 21,562 store months. This forecast is subject to variance largely connected to potential delays we may experience in planned new store openings, the amount of time our raze-and-rebuilds are under construction and to a lesser extent, the timing of any planned store closings.

Lastly, as mentioned in the earnings release, we continue to execute against our balanced capital allocation strategy, repurchasing approximately 175,000 shares in Q4, reaching a total of over 1.5 million shares in 2025. The exact number of shares we purchased in any given year will depend on a number of factors, including overall indebtedness levels, share price and our expectations for future value creation in which we remain steadfast. Given our ability to generate strong free cash flow in any given year, we intend to maintain a balanced capital allocation strategy, investing in the growth and improvement of our store network and repurchasing shares to enhance the benefits of future earnings growth for long-term shareholders. I'll now turn it back over to Mindy.

Thanks, Donnie. Before I wrap up the call, I want to provide a few data points around January results. Winter Storm fern resulted in significant store outages and highly limited customer mobility across a large part of our network in the last week of January, hampering results in what remains a very strong month of performance for Murphy USA. In fact, we set a new record for daily volumes as customer prebuying behavior accelerated ahead of the storm, just above 18.2 million gallons in a single day, surpassing the prior record of 17.5 million gallons set in March of 2020.

I want to take this opportunity to directly address all our store managers and associates who performed like champions during this challenging weather event. I could not be prouder of you and the way the team stepped up to serve our customers, enabling us to sell record volumes of fuel. I am grateful for your service and extremely glad that everyone made it through safe and sound. Due in no small part to the team's efforts, I am pleased to report that January average per store month volumes were about 1% to 2% higher than prior year. And on an even brighter note, retail fuel margins of roughly $0.26 per gallon are running $0.02 above January of last year. As such, we expect all-in fuel contribution dollars to be well ahead of our internal plan, getting us off to a great head start in 2026.

Despite the strong start, we recognize near-term challenges to EBITDA growth may persist in 2026. January results are encouraging, but 1 month does not make a trend, and I don't want to overpromise on our ability to deliver. We don't know when the fuel environment will normalize. But when it does, as we saw in the fourth quarter, the business delivers the kind of results we would expect with stronger volumes and elevated margins. This optionality around future volatility gives us even more confidence that the earnings power of the business continues to improve. I assure you, this management team is not happy with a forecast of flat to lower EBITDA.

And while we can't control many elements of the environment we face from year-to-year, I promise you this. Our entire organization is digging into every part of our business to uncover new revenue opportunities, increase operational efficiencies and drive further savings to the bottom line. As long as we continue to invest and grow the business through high-performing new stores, we remain confident that our low-price strategy and low-cost business model will win over time.

Value and affordability remains central to more and more American consumers every day, which makes our offer that much more durable and well positioned to win in the long run. In the meantime, we will maintain our relentless focus on growing the earnings power of the company, all of which means Murphy USA Investors will win over the long term. Thank you, everyone, and I look forward to the Q&A session tomorrow morning.

Thank you for standing by. At this time, I would like to welcome everyone to the Murphy USA Third Quarter 2025 Earnings Conference Call. [Operator Instructions]

I would now like to turn the call over to Christian Pikul, Vice President of Investor Relations and FP&A. You may begin.

Good morning. Thank you, everybody. Thank you, Jeannie. With me are Andrew Clyde, Chief Executive Officer; Mindy West, President and Chief Operating Officer; and Donnie Smith, Chief Accounting Officer and Interim Chief Financial Officer. After some opening comments from Andrew, both Mindy and Donnie will provide an overview of the financial results, operating performance and a review of our 2025 guidance metrics before we open the call to Q&A.

Please keep in mind some of these comments made during this call, including the Q&A portion, will be considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. As such, no assurances can be given that these events will occur or that the projections will be attained. A variety of factors exist that may cause actual results to differ. For further discussion of risk factors, please see the latest Murphy USA Forms 10-K, 10-Q, 8-K, and other recent SEC filings. Murphy USA takes no duty to publicly update or revise any forward-looking statements.

During today's call, we may also provide certain performance measures that do not conform to generally accepted accounting principles or GAAP. We have provided schedules to reconcile these non-GAAP measures with the reported results on a GAAP basis as part of our earnings press release, which can be found on the Investors section of our website. With that, I'll turn the call over to Andrew Clyde.

Thank you, Christian. Good morning, and thank you all for joining today's call. I'm quite positive. This is a call I will always remember as I expect it to be my last earnings call as Chief Executive Officer of Murphy USA. It has been an incredible honor to serve as Murphy USA's leader, and doing so has been the pinnacle of my professional career.

For those joining live today or reading the transcript later, I would encourage you to take away 3 things from today's call: continuity, resilience and momentum.

In terms of continuity, yesterday's announcement signaled both continuity in Murphy USA's leadership and continuity in our long-term capital allocation strategy. Having foretold this day to investors as a hypothetical in the past, we certainly appreciate the need to be as clear about future strategy and capital allocation as we are about future leadership. And as both our 50-50 strategy, and Mindy are well known to investors, we believe this announcement sends a clear message about what Murphy USA will continue to deliver and what investors should continue to expect.

At the end of our Murphy USA Board meeting last Thursday, I officially notified the Board of my intent to retire as President and CEO at the end of the year. The timing reflects a very thoughtful, intentional and multiyear CEO succession plan, which led to Mindy's appointment as Chief Operating Officer back in February of 2024. And after almost 2 years in the current structure, we are ready to make the final transition.

As you saw in yesterday's press release, Mindy becomes President of Murphy USA immediately and will become CEO and a member of the Board of Directors on January 1, 2026, and I'll remain as adviser to the company through February 2027.

Mindy and I took this company public in 2013, and she has been by my side every step of the way through the peaks and the troughs, through the campaigns that made the business better, through the major inflection points like COVID and the Walmart transition that shape the business we run today, leading by example in establishing a winning culture. In short, she is well positioned to lead Murphy USA into its next chapter, providing the continuity that all our stakeholders will value from a successful transition.

In terms of continuity in our capital allocation strategy, the Board took this opportunity to authorize a new $2 billion share repurchase program as we were about 80% through the existing $1.5 billion program, while at the same time renewing our dividend policy at its 4-year anniversary where we have naturally increased the cash pool for dividends. Having repurchased about 60% of the share since the spin ahead of target dates and increasing dividends at a compounded annual growth rate of 20% since inception of the dividend, Murphy USA is committed to the continuity of its capital allocation approach to reward long-term investors.

Complementing our 50-50 approach is the Board's commitment to new-to-industry store growth and reinvestments within the existing network, and Mindy will touch on both sides of the 50-50 strategy in her remarks as she will carry this very bright torch into the future.

In terms of resilience, Murphy USA's third quarter results speak for themselves. Despite earning $0.02 per gallon less on fuel margins, we generated the same EBITDA as Q3 a year ago due to the underlying improvements made to the business and the enduring strength of our core category capabilities that yielded outsized results. Updated guidance metrics for the full year highlight the team's efforts as merchandise contribution is expected to be in the upper end of the guidance range as exceptional Q3 results and Q4 momentum more than offset first half temporal effects. And OpEx and G&A expenses are both expected to finish positively below the low end of our guidance due to ongoing initiatives and our previously announced staff restructuring.

With regards to fuel, in our most recent investor meetings, we described the low price, long supply and consequently low volatility environment as a trough, the most challenging for an EDLP fuels retailer and contrasted it to the 2022 peak. Ultimately, how a firm responds in a trough speaks to its true resilience and whether it can sustain its commitment to an EDLP strategy and emerge a winner on the other side when the cycle normalizes. And Murphy USA has done just that.

Through capabilities that strengthen its competitiveness and enhanced customer stickiness, we are performing significantly better than in the prior trough environment, and we continue to lean into value. Most importantly, we continue to see the structural component of the retail fuel margin grow as the marginal retailer remains challenged and passes through to customers its higher breakeven requirements. This does not only supports Murphy's ability to lean into price in the current low price environment, but highlights the upside potential for when margins normalize, and we certainly expect the cycle to normalize. In fact, over the life of any 25-year store investment, one should expect 3 peaks every 6 to 8 years and 3 troughs based on the last 25 years experienced with normalized periods in between. And when we invest, we are basing our economics on mid-cycle factors, noting there is significant upside over time from the consistently increasing structural component of the margin.

In terms of momentum, while Q3 merchandise results are exceptional, we would argue that on an annualized basis, the performance reflects ongoing trends that we expect to continue. For example, nicotine promotional dollars have grown at an impressive 12% CAGR since 2020. While we will never be able to predict exactly what products are being promoted in which quarter, our capabilities to engage consumers in the category are unparalleled. In other areas, QuickChek reported its fourth successive quarter of same-store food and beverage sales growth, and total center store categories grew by 5%, while same-store operating expenses moderated, increasing by only 2.8% for the quarter, and ongoing campaigns are designed to further this momentum.

New store openings are now projected to be over 45 for the year with a strong pipeline supporting 50-plus stores in 2026 and into the future. Currently, nearly 40 stores are under construction that will open in Q4 and early Q1 of 2026. While the newest stores ramping do not have the same subsequent year EBITDA impact of stores further into the ramp, getting this first group of about 50 stores under our belt creates a line of sight to future earnings growth as new build classes come on board.

Before handing over the call to Mindy and Donnie for additional remarks, on a personal note, my announcement comes with a great sense of accomplishment for what the Murphy USA team has achieved together in the past 13 years and a deep appreciation for an opportunity one can only dream about. As I noted in our internal announcement yesterday, the most resilient for us in our business is our team members, the people who make it all happen each and every day. I cannot begin to express my appreciation for their leadership and followership as we have strived to make the business better. Their efforts and sacrifices are too numerous to name, and provide the inspiration and energy for future initiatives to keep on making the business better. They define the winning spirit culture at Murphy USA, and I believe it is one of the greatest hallmarks a company can have. And for that, I'm both internally grateful and exceptionally proud. So it is with confidence of an enduring business model, a robust growth and capital allocation strategy and a winning Murphy USA spirit reflected in our future leader and leaderships and team members that I'll look forward to in my next chapter, both personally, professionally and as a Murphy USA shareholder.

I'll now turn the call over to Mindy to review some highlights around our capital allocation strategy and third quarter results. Mindy?

Thank you, and good morning, everyone. But before I start, it has been a great ride, Andrew, with a lot of ups and downs. You built the foundation of this very successful public company and have improved it in every type of environment, which is just remarkable. And I want you to know, I truly appreciate your wisdom, your mentorship and your friendship. You will be missed. But it is not goodbye because you know that I'm going to be calling you.

For those of you who don't know much about me, I joined Murphy Oil, the same year in which we opened our very first Murphy USA store. I was also here by Andrew's side as we launch this company as a public entity. And at that time and since, we highlighted 5 key value pillars still relevant today, one of which investing for the long term has been illustrated through our continued commitment to our 50-50 capital allocation, balancing growth and share repurchase. So with our new Board authorization, as you said, I am happy to carry the torch into the future.

Now let's talk about third quarter results. As Andrew alluded to, we are pleased with the third quarter. As mentioned, third quarter EBITDA was $285 million, virtually flat to the prior year despite all-in margins running about $0.02 lower. This is a significant achievement and is representative of our philosophy that especially during challenging times, we dig in and make the business better. So when the next peak environment presents itself, the earnings power and operating leverage will be that much stronger for longer-term investors.

Let me break down fuel performance just a little more, which remains strong despite that low price, low volatility environment. Average per store month volumes were down 1.8% in the third quarter and down 0.7% on a 2-year stack. However, all-in margins of $0.307 including retail margins of $0.283 are stronger than one might expect in this environment. If we compare to peak all-in margins of $0.343 that we experienced in 2022, that included roughly $0.04 of impact attributable to that once and every 6-year falloff in prices in the third year of 2022, coupled with about $0.015 to $0.02 of margin attributable to the tight supply and high volatility environment, and then further adjust for the $0.02 we are now investing to short volumes in the current low price environment. Given all that, we might expect all-in margins to be in the $0.26 to $0.27 range.

So to reiterate, we firmly believe the current margin structure includes $0.03 to $0.04 of structural uplift since 2022, which would translate to materially higher fuel contributions in a return to normal environment for Murphy USA. Important to note, fuel margins are highly correlated with the environment in which we are operating. While investors frequently ask why margins are lower year-over-year, why can't they see more of a structural uplift, our answer continues to be that current results are largely attributable to the low volatility and low price environment, which is masking the potential of our business in a normal environment where we believe we would experience several pennies of incremental margin opportunity.

Turning to merchandise. Total margin contribution dollars were up $24.4 million or 11.2% in quarter 3. There are 2 key drivers of these exceptional results. First, nicotine categories are up over 20%, driven by strong promotional activity and center of the store categories grew approximately 5%. Through the continued evolution of Murphy Drive Rewards and other capability building initiatives, Murphy USA has dramatically increased the efficacy of our promotional efforts across the store, especially when it comes to executing needle-moving product offers to support our vendor partners.

While promotional opportunities of this size do not show up every quarter, when they do, manufacturers recognize our ability to execute. We don't always know when or how these opportunities will arise. But when combined with our team's innovative and creative approach to optimizing promotional impact, it's important to recognize the third quarter margin benefit is not onetime.

For instance, while not a data point we would otherwise go out of our way to provide, in the third quarter, we also saw strong promotional activity in the traditional [ spokes ] products that drove double-digit margin growth in that category. So taken together across a wide variety of products over time, the collective impact of nicotine promotional dollars has been both significant and sustainable. In fact, since 2020, nicotine promotional dollars have grown at a very impressive 12% CAGR, as Andrew mentioned, and performance that we would expect to replicate going forward.

Turning to center of the store, where total margin dollars were up about 5%. We saw strength across the board, driven by mid-single-digit gains in our largest categories, packaged beverages, general merchandise, candy and lottery, where the $1.9 billion Lotto jackpot did help to drive traffic and transactions. Total food and beverage sales were up 2.7% in the third quarter. Margins remained pressured, though, down 2.2%.

At QuickChek, we continue to focus on price and value for our customers, which is propping up sales and traffic and translating to better performance across the rest of the store. Excluding food and beverage, total non-nicotine sales and margin at QuickChek were both positive for the first time in 2025, up 3.1% and 5.8%, respectively. Of course, merchandise sales do not happen in a vacuum. To grow sales and effectively execute promotional opportunities, the store has to look good, be well stocked and in functional working order, in addition to being properly staffed. Yet per store operating expense was only up a modest 2.8% in the third quarter or 5.6% on an absolute basis, 2/3 of which is attributable to new and bigger stores.

So we continue to enforce restraint in our expense profile, controlling what we can control to ensure the network is running as efficiently as possible. We are making significant strides in reducing loss prevention year-over-year and holding labor expense steady, which is helping to reduce our overall cost structure. Bottom line, Murphy USA is performing at a fundamentally different level than it was in the prior trough due to the capabilities we have built and our ability and commitment as a management team to make the business better. As a result, we are improving our competitive position through best-in-class promotional execution and relentless discipline around maintaining a low cost structure, both at the store level and the home office.

I am highly confident in the resilience and durability of our business model. And as noted in the capital allocation update we released in conjunction with our third quarter earnings, we are taking action to strengthen shareholder distributions and help maximize shareholder value as we navigate towards the next peak in the cycle.

First and foremost, we remain steadfastly committed to new store growth, primarily through our acceleration of our new-to-industry store program to 50-plus stores and opportunistic supplementing organic growth with small-scale M&A opportunities as they arrive.

Second, we have received board authorization to begin executing against a new $2 billion repurchase program through 2030 once we close out the remaining $337 million on the existing $1.5 billion authorization.

Third, we expect to continue to grow the dividend payout 10% annually starting with an additional 10% increase or $0.63 per share for the dividend payable on December 1 of this year.

Lastly, we will explore other reinvestment opportunities in the network to help improve the customer offer and reinvigorate the same-store base while maintaining a leverage ratio at or below 2.5x for the long term.

I'll close out my comments with a little color around October's performance. Preliminary October fuels results continue to reflect the strong fundamentals I mentioned earlier, despite the transitory impact of low prices and low volatility. Average per store month volumes are running 98% of prior year at retail-only margins approximating $0.32, exhibiting resilience amidst an otherwise lackluster price profile.

Here is another important takeaway for October. Even at these lower absolute price levels, when we saw prices fall early in the month and margins ran up to the mid-$0.30 level, we were able to put some of that on the street to create separation against our peers. And in that environment, we saw volumes at about 100% of prior year. The run-up in prices towards the end of October mitigated some of that impact, resulting in slightly lower volumes. But the point is, the team is executing extremely well against our strategy and the fundamentals are supportive when a little volatility in margin shows up even if only for a brief period.

So that business is behaving as we would expect and October results reflect underlying strength that would be even more apparent in a higher price, higher volatility environment. With October largely behind us, we do have a higher degree of confidence in our 2025 guidance metrics, which we updated in our earnings press release.

So I will now turn the call over to Donnie.

Thanks, Mindy and Andrew. Starting with our new store development program. We are continuing to make excellent progress. During the quarter, we brought 8 new stores into service, along with another 11 raze-and-rebuilds, bringing the year-to-date total as of September 30 to 22 and 20, respectively. In Q4 2025 and Q1 of 2026 combined, we expect to open roughly 40 new stores, all of which are currently under construction. This figure includes a small package of 4 stores we purchased in the Denver market that should be opened by year-end, an example of an opportunistic small-scale real estate play in an attractive market where we want a bigger presence. This gives us line of sight to at least 45 new store openings in 2025 and as we continue to grow the new store pipeline, positioning us for 50-plus stores in 2026 and beyond.

For fuel volume, we expect 2025 volumes to come in below the low end of our original guided range, which was 240,000 to 245,000 gallons per store month. Year-to-date through the third quarter, average per store volumes are approximately 236,000 gallons per month, reflecting both the Q1 storm impact and the lower relative price sensitivity of customers in a low absolute price environment as we have discussed in previous calls. Based on current trends and our expectations for the remainder of the year, we're adjusting our full year fuel volume guidance to between 235,000 to 237,000 gallons per store per month.

For merchandise contribution dollars, as previously discussed, third quarter results highlighted the strength of our promotional engine, causing us to tighten our full year guidance at the upper end of the range to between $870 million and $875 million.

On the expense side, if you've seen us on the road over the last 6 months, you've probably heard us talk about self-help and how we're actively managing our costs and driving savings across the organization to help improve performance amidst the challenging fuel environment. Our efficiency initiatives continue to demonstrate benefits as evidenced by the new labor model we rolled out in the spring that has helped ensure we have the right people in the store at the right time, which is also controlling labor costs and reducing overtime.

Similarly, we are seeing benefits in loss prevention where in-store training and other investments have paid dividends through reduced shrink. Collectively, these efforts are making an impact, resulting in a lower projected monthly per store operating expense range of $36,200 to $36,600 per store month, down from our original guided range of $36,500 to $37,000 thousand per store mine.

On the home office side, as noted in the press release, we completed an organizational restructuring during the quarter, which will help streamline our workflows and processes and eliminate technical redundancies while preserving our agile, data-driven decision capabilities. As such, our 2025 SG&A guidance range is being adjusted lower to $230 million to $240 million for full year 2025, which is exclusive of the restructuring charge.

From a tax perspective, year-to-date income taxes have come in lower than planned due to some discrete state tax refunds we received and acquisition of some federal energy tax credits. As such, we are tightening the all-in expected effective tax rate to between 23.5% to 24.5% for the full year.

When you input all this into the models and used $0.30 per gallon as a fuel margin placeholder for the full year 2025 versus the $0.295 year-to-date through Q3, you should end up somewhere pretty close to $1 billion of adjusted EBITDA, which likely shouldn't surprise anyone given how we framed our original 2025 guidance in January. At that time, the midpoint of our ranges suggested adjusted EBITDA of about $1.06 billion at $0.315 a gallon. At $0.30 and about 5 billion gallons, $0.015 variance in margins would generate plus or minus $75 million, all else being equal. As we look at year-to-date performance, we have more than offset the impact of lower volumes with improved merchandise performance, OpEx efficiencies and G&A cost savings.

With that, I'll hand the call back to Andrew.

Thanks, Donnie and Mindy. And let me close out the call by thanking the analyst community and our investors for your support, your challenge and your candidness over the last 13 years. Your questions early on about a business that wasn't necessarily well understood when we spun off really pushed us to think more deeply about our unique way of creating value, allocating capital and building a flywheel that played to our strengths, helping us win with all our stakeholders. Your challenges around future potential headwinds and the sustainability of fuel margins pushed us to think more analytically about industry structure and the behavior of the marginal retailer. I can probably point to less than a handful of slides over 13 years across all our conferences and meetings where over 90% of our discussions focused around.

I would like to thank our conversations that helped to shape the broader narrative, not just for Murphy USA but for the convenience industry as a whole. Thank you for being a catalyst, a partner with us and keep pushing us in the years ahead. We'll now turn the call over to questions.

[Operator Instructions] Your first question comes from the line of Ed Kelly with Wells Fargo.

And Andrew, congrats on your retirement. So I wanted to start just on fuel margins. It sounds like the quarter is off to a good start on the margin front, rack prices have been down. But the data would suggest that's -- and I think you're telling us that maybe that's fading a bit. Any color on the cadence in terms of fuel margins so far in the quarter and maybe what you're seeing in the last week?

And then I just wanted to follow up on something that you mentioned about investment to drive volume. Obviously, you've seen some elasticity on more of the recent work. So what is that telling you about your plans moving forward in terms of putting some money on the street to drive better volumes in this environment?

Thanks, Ed. I'll take that question. Yes, as I said for the month of October, we did see a run-up in prices towards the -- we did see a run up in margin at the beginning of October. That spike kind of normalized itself as we ended the month. So while the impacts were short lived, the market did behave exactly as we would expect during that time.

And so when you talk about your questions about investing for traffic, we absolutely know on a site-by-site basis where we need to be versus our key competitors and where the right pricing position is. And so really, our margins are more a function of the slow and our volume are really more a function of just this low price environment where our customers are just not as price sensitive and are going to go to a more convenient location. It doesn't mean we leak off every trip, but assuming we may leak off 1 of every 3, 1 of every 4, that certainly starts to have an impact.

When I look over this last quarter, the thing that sticks out to me most was it was remarkable for its flatness, which really resulted in little volume or margin creation opportunities. And just to illustrate the lack of volatility as I looked at this with my analyst group a couple of days ago, post-COVID, we have never seen a quarter where every month's retail margin was pretty much exactly the same. And in fact, you can add May and June to that list because they weren't that different either. So essentially 5 consecutive months of flat margin.

So when we look at the margin side, despite very low volatility, fuel margins are remaining strong at $0.30 all in. So that's showing that even in an environment entirely unproductive and value capture opportunities or volume capture opportunities, what we managed to do was actually pretty impressive and really speaks to that structural component still being in there. And then as I said, in October, when we saw that brief price run-up, we executed, we generated the margin and volume recovery you would expect.

So what I would say is the fuel engine isn't broken. It just needs to jump start to get things moving. We saw them in October. It wasn't long lived, but we will see it again, and we will be there to capitalize on that.

Great. And just maybe a follow-up on the [ ZYN ] promo in the quarter. Obviously, a nice event for you. Can you just maybe talk about your execution of that event and what differentiates you there, the traffic benefit that you saw? And then looking out the potential for additional similar promos or events that you might see that I think you're indicating that you don't see it as a one-off. So just more color there.

Yes, great question. And we don't get into the details of any particular promotion. I'm sure you can appreciate, in any given quarter, as we say, there are dozens that contribute to our results. Some are more material than others. Obviously, this one was material. So I do appreciate your question because I think what's important about this one is it really does showcase the strength of our ability to execute for our vendor partners. This is really more about a strategic partner investing to drive share, utilizing our large and very loyal nicotine customer base. It also provided the added benefit for us growing awareness in an already growing category and driving traffic to the store and utilizing our operations, just outstanding ability to execute and deliver on a promotion.

We will expect that to continue as manufacturers are going to continue to invest and reduce risk products. And Murphy USA can be an important catalyst to that because when you think about it, we sell 5x the industry average volume. Our promotions also have about 4x the industry average upsell. So that makes us 20x more effective using their money. And we also are able to measure that halo effect of promotions because of our loyalty engine that really major in nicotine.

So when the promotions come, and they will, we're happy to execute on their behalf, and we have the engine in the store with the sales culture that is very strongly reinforced, our manufacturers know that we can deliver. So while this one, yes, was maybe a one time this year and really material impact, we certainly expect there to be other promotions throughout the sweep of time and continue to propel that CAGR of promotional dollars going forward.

Your next question comes from the line of Bonnie Herzog with Goldman Sachs.

Congratulations to all of you. Andrew, you're going to be missed. So stay in touch, but happy for you in this next chapter. I had a quick follow-on question on ZYN. You guys just raised your merch contribution guidance for the year after, I guess, pointing to the low end of the range last quarter. So obviously, expectations improved and you had good performance in the quarter. Should we assume most of that's driven from this ZYN promotion in September? Or were there other drivers that give you the confidence to kind of raise your merch contribution guidance for the year?

Bonnie, I'll take that one. It does definitely include ZYN. When we think about the first half of the year, the timing of cigarette promotions and also the Lotto jackpots resulted in comps kind of below our expectations, which we talked to in the last call. Those did turn around in the second half. Obviously, this one promotion was part of that. But also one key data point I'll share. Nicotine pouch volumes were growing around 45% in promotion. In October, we have seen that jump to 120% of prior year volumes, and we will likely see that halo effect continue on into November.

And also, just as importantly, noncombustible nicotine products have fully offset our decline in cigarettes, but it's also not just a nicotine story. We have seen growth in the center of our store categories, as I said, up 5% in margin dollars, and importantly, also saw strength across the board. It wasn't just in one place. It was in packaged bev, it was in general merch, it was in candy. So I think that highlights the underlying strength of our offer in addition to the nicotine.

Bonnie, one thing I will add here is if you think about some of the investments we talked about a year or so ago, our digital transformation initiative and the expected impact on sustainable center of store growth, we're seeing all that benefit, and we've been seeing it for the last few quarters. The relaunch of QuickChek Rewards driving food and beverage same-store sales growth there and investing in value through that advanced program suddenly driving the food and beverage, but also the center of store. So these are some of the investments that we've highlighted over the last couple of years that in this environment are really flowing through across categories. So it's just coming together in a really nice way.

Okay. That's helpful. And if I may, I wanted to ask about capital allocation. You raised your quarterly dividend by an impressive 19%. And the Board also authorized a new share repurchase program. So it does seem like you're increasing returns of cash to shareholders. So how should we think about that relative to your ability to grow the business? I mean, should we assume growth moving forward might be more moderate and maybe you're seeing a bigger opportunity to return more cash to shareholders versus reinvesting? Just any color there would be helpful.

Yes, Bonnie, let me take this one. When we say our 50-50 capital allocation, I mean -- we mean 50-50. We've done strategic work over the last couple of years to test the bookends of that. And we're really confident at that level of balanced capital allocation that makes sense.

If you remember, when we initiated a dividend 4 years ago, we benchmarked it against peers at about a 0.67% yield. We haven't kept up with that yield because of the outstanding share price performance. And so with this auto pilot program, where the cash pools raised 10% every year and the quarterly dividends simply then a function of the shares outstanding, we simply took this as an opportunity to increase that, to bump up the yield for long-term investors who are holding the stock, especially when the stock is a little bit in a trough. If you think about the incremental $4 million from that extra 10% in the pool, that's one store, right? And we're going to more than make that up given the growth pipeline that we have in front of us.

The other thing I would note, the bonus depreciation benefits that we're going to get from the One Big Beautiful Bill is over 10x that amount, and that's going to go back into reinvesting in the stores, whether it's remodels, maintenance programs with dispensers or future raze-and-rebuild growth in out years. So the dividend is just simply a way to recognize long-term shareholders holding the stock.

When we model out the business at the 50 store a year growth in a normalized environment, we're generating significant excess free cash flow in years in the future that more than allow us to do that, take care of the balance sheet, take care of the share repurchase program. And so as we complete the end of a $1.5 billion program, we heard loud and clear from investors, it's really important as you think about the transition to be just as clear about future strategy and capital allocation. So it's really important to send this message at the same time that we're committed to this balanced growth and returns to shareholders, and we'll continue to maintain that balance as well as our conservative balance sheet.

Your next question comes from the line of Irene Nattel with RBC Capital Markets.

I'll echo the congratulations, Andrew, and it's been great. Just a couple of follow-up questions, if I may. You talked about the halo effect on in center of store of the ZYN promo. If you kind of dissect out the transactions from those -- from the customers that benefited from the promo versus those that maybe didn't because they just don't use nicotine, was there any difference in consumer behavior? I guess in other words, how much was the growth really just a halo from the promotion versus the rest of the customer base?

I'm not sure, Irene, that we're fully able to parse that out. But what I will tell you is that the uptake for the ZYN offer were largely customers that were already coming in there to purchase another nicotine product anyway. So it wasn't necessarily an extra trip or incremental traffic that we were driving. It was just kind of an and to a visit they already had.

So I think that, that speaks well to the center of store because I think that, that category was increasing on its own, and we would have seen that even despite the nicotine promotion. Obviously, the Lotto jackpot helps us as well because we know that, that also is a factor that can drive an incremental trip into the store. But for the ZYN only, I would say that there may have been some secondary impact on center of the store, but I think it would have been very small as those customers were in the store to buy nicotine anyway.

Yes. And one thing to add to that, Irene, is we talked about the temporal effects of the lottery and the nicotine promotion in the first half of the year, we are reporting a really strong Murphy only center of store activity in the first half of the year. So this is many -- says, this maintains that momentum. It offsets the temporal effects for the first half of the year. And when you look at it over any 12-, 24-month period, it's a really steady cadence despite some lumpiness from quarter-to-quarter that we saw this year.

That's great. And then coming back to the whole capital allocation discussion. I'm wondering what level of EBITDA or free cash flow underpins that $2 billion program if you want to keep your leverage at around 2.5x., because if we kind of look at current consensus numbers and we assume that 50-50, the $2 billion implies about $400 million a year over 5 years, let's say. And it's a little -- you're kind of getting a little tight there.

Yes. So we'll lean into the balance sheet, as we've talked about, in '26, '27 with the cadence of the new stores and the expectations from those which are ahead of our projections in terms of returns. We expect that to turn the other side. So just like we did with the $1.5 billion program, we gave ourselves 5 years to do it. We're completing it in just a little over 3, given ourselves 5 years to do the $2 billion at current equity prices. We can see ourselves doing that quicker as well.

So you're right, it gets a little tighter. We've always said we can go over 2.5x. Our covenants aren't hit until 3x, 2.5x is a longer-term target that we expect to stay within. So if we bump above it for a short period of time to take advantage of some downward pressure, we'll absolutely lean into that and the balance sheet that we've established.

Your next question comes from the line of Pooran Sharma with Stephens Inc.

Just wanted to say, hey, congratulations, Andrew. I know we'll probably interact a few more times here, but wanted to say it's been a pleasure working with you and wish you nothing but the best in the future. Absolutely.

My first question, maybe just for Mindy. Mindy, you've talked about how you've been with the company really from the beginning. And I just maybe wanted to focus on your prior positions. I mean I think you held the CFO role. You were put into the COO role. Can you maybe talk about how that kind of prepared you or how that has prepared you to take on the CEO role coming this new year?

Great question. And you're the first one that's asking that. So I'll be thinking through my response here. I think I have a great background for this role. One, I grew up in this business, so very familiar with our culture and the way that we do things and the way that we work.

Through the CFO lens, especially at [indiscernible], Andrew and I got to take this company public. And so we're taking public a company that existed within a subsidiary of a subsidiary of what used to be a fully integrated oil and gas company that was investment grade. So it kind of got to incubate under that environment in a very entrepreneurial way, which was fantastic.

But obviously, when you think about taking something public, suddenly you need to have a lot of discipline. You need to have guardrails in place. You're now no longer investment grade, so every penny matters. Everything that wasn't material in that business before, now suddenly became material. So that gave me a great basis for what does it take for a public company? What do we really need to care about? How do we manage our performance? How do we make commitments to our shareholders and keep those and at the same time, balance our growth prospects and ambitions with maintaining a very solid and resilient balance sheet?

So I think from the financial aspect, I have that pretty much down. I don't remember exactly what year it was that Andrew decided to add fuels to my CFO role. I want to say it was around 2017, 2018. And so that got me a real feel for one of the main engines of growth within this company, one of the main drivers of EBITDA fuels. Obviously, a very complex department as well. And so that gave me some exposure to some of the more commercial aspects of the business, especially the main commercial aspects of our business. So I got to season in that for a while.

But then when you think about, okay, what was missing, it was really that connection with the customer because I had never done anything that was business to customer. It was only business-to-business from the commercial side. So bringing the COO role underneath me gave me one exposure to what we sell inside the store, so the merch category for the first time, but also a real understanding of the mission that we are serving for those value-conscious customers, how much they really count on us to be able to get through their lives on a month-by-month basis.

And so that experience really rounded me out because now, I understand absolutely the financial discipline side, I understand the commercial aspect side, but I also understand that connection with the customer and also the connection with the staff that is actually serving that customer and how much we absolutely expect from them and how we need to make sure that whatever we do, we're simplifying their ability to serve our customers every day.

So hope that answers your question. That's the first time anyone has ever asked me that, but I think that, that all 3 of those roles really did serve to round me out and prepare me in this journey to become CEO.

Yes. No, absolutely. I appreciate the color there. I guess on my follow-up, maybe just wanted to focus on costs. I think in the past, we're following a peak margin environment. You've been known to focus on costs and take them out. And so with this earnings release, we saw a reduction in store OpEx and SG&A. Just wanted to get a sense of how much opportunity is there ahead? Do you see like a good amount of opportunity to take out cost in 2026 and 2027 if you need to? Just wanted to get a sense of potential magnitude there.

Obviously, this onetime restructure with order of magnitude far above what we would be able to do in the future because this was intended to be kind of a onetime reset of SG&A costs. But look, we're going to continue to optimize our business. So what you saw at this restructure, we streamlined our operations to scale the business properly and to force us to do more with less. So we've now made us leaner, but I think now we're uncovering opportunities, identifying what are those other opportunities for automation, for consolidating resources where it makes sense to streamline the workflow, to look at some of the overlaps in the business where we're not as efficient as we could be. So now that we've become leaner, I think the next step is how do we get more efficient. And so I do think that there is more to come there.

And then we're going to continue to optimize the performance of our existing store network. I think we're off to a great start with our store productivity excellence initiative and other ones. And so we will continue to hold the line on costs. It's obviously really important now when the external macro environment for fuels is a bit of a challenge. But it also will reap benefits for us in the future when that does turn around and does normalize because we will be able to bank more of that extra margin because of the efforts and diligence that we're applying now.

So do I think that it's going to be order of magnitude in a one time, one sell swoop, what it was in this quarter? No. But there are certainly plenty of opportunities that we already do see, and I'm sure we'll uncover new ones as we go forward.

Your next question comes from the line of Bobby Griffin with Raymond James.

My congrats to both of you guys as well on the new roles. Andrew, it's been a pleasure to work with you and get to know you over the last years. And Mindy, I look forward to continuing the relationship.

I guess, first, I wanted to circle back. It was a comment in both of you guys' prepared remarks, and it's the nicotine promo CAGR over the last 5 years, I believe, 12%, which is pretty notable on a 5-year basis. And during that time, we start to see the evolution of the nicotine category with alternate nicotine.

So I'm just kind of curious, as you think about that type of environment over the next 5 years, what does the change of the category and the composition of the category would alter nicotine due to that type of opportunity from promo dollars? Is altering nicotine going to, in your view, be accretive to that, make it look even better or less? Or just kind of curious how you think about that changing of the category.

Absolutely, Bobby. Yes, we look at that as an opportunity because we own that customer. We know that customer better than anyone. And so again, just to our knowledge and ownership of that customer, along with our ability to execute, along with our loyalty program which majored and nicotine, we are ideally suited to help the manufacturers move those customers down the risk spectrum and incidentally moving them into what are higher-margin products. So we would absolutely expect that to continue because they get a great ROI. They know what they are getting when they invest with us.

Yes. Bobby, I think back over the last 13 years, and some of the things that have surprised me the most and someone who pays attention to industry structure and how that influences performance and competition, I think about the tobacco category, it's a fairly concentrated industry amongst the manufacturers. And you can put the packaged beverage companies in the same category, yet the amount of innovation we've seen over the last decade is phenomenal from what you would expect to see in a concentrated industry, right?

So you're seeing this continuum of risk introduce new products. You're seeing the different players making investments. Some working, some not working as well. Making acquisitions, some working, not working as well. And there's actually pretty good competition amongst those players. And as they introduce new products, new brands within those products, et cetera, part of their go-to-market strategy has to be through retailers who can get their product in front of customers. And on the nicotine side, as Mindy noted, we're the only retailer in the space who intentionally build a loyalty platform around the nicotine category. And so the benefits that we're able to provide to these manufacturers who continue to innovate, which we are very thankful for, I think is just going to continue to evolve.

There's also a lot of upstarts in the category, right? So as others try to get a toehold into nicotine pouches where the top 3 players might control 90%, there's companies out there that want a shot, and they just have to look at packaged beverage like energy drinks to see well, Celsius was one of those small players. And you know what, they finally got a toehold in the category. So there's a lot of Davids out there looking at the Goliaths, and they, too, realize the only way they can get the customers' attention, right, is going to be through the broader capabilities we have, especially the store upselling capabilities because they're not going to get the preferred shelf space where the customer can see it in the back bar, they're going to get it because of the upselling.

So I'm really excited about the future of these categories, but even more excited about our capabilities as we continue to hone them for both packaged beverage and nicotine providers.

Very good. That's helpful. And I guess lastly for me, when you think about the $0.02 that you guys referenced, a margin on the street to help drive volume, and the potential of that going away where you could keep it or not have to do that, is that purely just a volatility pricing environment returns to "more normal," or is there also a competition aspect in certain key markets for you guys that is basically independent of the underlying commodity environment? So that would actually have to behave differently, too, for you to be able to get those $0.02 back.

Well, I would say yes and yes, kind of. So when I think about your first scenario, it's really more a function of just this low price environment, especially given that we're sub-$3 because prices do matter. People just, for whatever reason, are just not as price sensitive, are not willing to go across -- drive across town to save $0.02 a gallon when prices are below $3 versus above $3. So really, the phenomenon that would need to change would be the overall price profile being higher.

With regard to competition, that obviously has an impact, especially in key markets where we're seeing competitive intrusion because really good competitors are going to act the same way that we do when we go into a new market, which is the price load to gain share. That's not actually irrational, that's a very rational thing to do. And what happens is when everybody gets their share, then everybody raises prices and plays nice.

So over the sweep of time, that doesn't have an impact, but in certain key markets during certain months, absolutely. But we disrupt the market in the exact same way when we open our site. So that's why I say, yes and yes, kind of because, yes, there will be a competitive response for those new-to-industry sites, but it only lasts for a few months for just a short period of time.

And Bobby, the only two cents I would add there, no pun intended, is -- and we've always seen competitive entry. And I think what we're seeing now is just kind of more isolated in locales, as Mindy said, that dissipates. It's not like there's the big play like where Walmart rolled out so many neighborhood markets in a period, and you saw that effect more at scale.

I think another thing when we talk about peak to trough, fundamental difference between, I would say, kind of the low price trough we're in now versus the one post 2014 is when we had $0.16 all-in margins and you had significantly lower margins after your variable cost, putting $0.01 or $0.02 on the Street was a significant, much more significant part of your available gross margin. And so if you go back to those periods, the volume impact that we witnessed is significantly more impactful than what we're seeing now. And so in this type of environment, you can put $0.02 on the Street because partly, you're getting a couple of cents every year from the structural dynamic that happened then, but not at the same level of inflection. And at $0.30 margins, the variable margin that's left is significantly greater. And so it's much more beneficial to maintain that volume, even if it's at 98%, 99%, no one in the higher price, more normalized environment, the customer goes back to their more normalized behavior and you get that back.

So those are the kind of trade-offs, and I'd say this trough, we're doing much better than the prior one for a whole set of reasons. But part of it is the fact that the higher structural margins we're enjoying allows us to make some different decisions with respect to price-volume trade-offs.

Due to time constraints, our final question comes from the line of Jacob Aiken-Phillips with Melius Research.

I guess congrats is in order to all 3 of you given the next -- you've taken a new step in your professional journeys. So I guess to start off, a little bit more on fuel. I'm curious. The run-up in early October, were you also putting a couple of cents back on the street? And can you give a little more color on what drove the increase in October?

Then also the updated guidance seems to imply that you'll have positive fuel gallons and maybe positive same-store fuel gallons in 4Q. So any thoughts generally on that?

Yes, I'll take that question, Jacob. Thanks for your question. The tightness in the market was due to a refinery that was briefly offline for a week or 2. But in a well-supplied environment, it all normalized pretty soon. The pipeline was reversed in order to get product back up into the Midwest. And so it ride itself quickly.

But during the course of those couple of weeks, that was literally the most sustained run-up that we had seen in a while. So that allowed the market to completely restore. We restored with it, which then allowed us to create some separation and essentially achieve some really nice margin and get 100% of our volume.

Carrying that forward, I can't extrapolate that into the rest of the fourth quarter because we really haven't seen that yet. I was just giving that as an example of when we do see that happen, we are able to respond. The market is also responding in the way that we would expect it to, which will then allow us to create time periods in which we can get outside margin and as well as volume. But this past quarter was just essentially flat, which we've always said is the worst environment for us from a fuel standpoint. We did see some pickup in October. I hope we see it going into Thanksgiving. That would certainly be nice to carry some high margins over the holiday period. But not ready to extrapolate the rest of the quarter that we're going to be at 100% of last year's volume.

Got it. That's helpful. And then sorry to ask another question on capital allocation. But you reaffirmed the 50-50 and the share buybacks and increased the dividend. I'm just curious, it seems like you're trying to accelerate new store growth to 50 plus next year, maybe some accelerated R&Rs and perhaps some other remodels or other smaller projects. So I'm just curious how we should think about CapEx next year? And if that number is elevated, should we expect repo to be up or is that more balanced over the next few years?

We haven't given our CapEx guidance for next year, and we're finalizing our plan on that, certainly as part of our ramp to get to the 50. This year, we had real estate that goes into that. So one of the things we're clearly looking at is the trade-off between more raze-and-rebuild versus remodels and maintenance programs. We do expect significant bonus depreciation benefits from One Big Beautiful Bill, that can actually address a lot of that incremental capital that we're talking about and using those tax benefits for reinvestment. And as we said on the share repurchase, we'll continue to be disciplined and also opportunistic on that given we've got the balance sheet we can lean into should we want to take advantage of particular opportunities.

So we look at this like anything over a 3- to 5-year period, not just the next 12-month period. And that's why we remain very bullish about the business as we think about where we're going to be, '28 to 2030, where we view the fuel margins to normalize, where we look at our store count, where we look at EBITDA and look where the outstanding share count is. So we expect to see attractive returns, both on new stores to reinvestment capital as well as the share repo over that period. And we'll be back -- actually, Mindy will be back in February with the guidance for 2026, which will include that capital.

So I think this wraps up today's call. I've enjoyed these earnings calls. I talked to CEO peers, they kind of speak to me, oh my gosh, we got our earnings call coming up or we've got the investor meetings or whatever.

Spending time with the analysts and investors has been one of the most fun parts of this job. We've had an incredible story to tell. We've had incredible people to tell the story with. We have an incredible talented group of team members that actually live the story where we get to be the chief storytellers, and we're really proud of that, but also the capital allocation discipline that we know investors care about.

And I think this message coupled with continuity of leadership with Mindy succeeding me and clearly knowing the business and the people and the team and how we create value and our capital allocation approach positions this company in excellent shape for the near term as well as the longer term.

I look forward to seeing some of you on the road or one-on-one calls as we kind of wrap up some year-end investor discussions. And thank you again for supporting Murphy USA and me as CEO during this tenure. Thank you very much.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.