One to watch: Here comes the Corner Store
CST Brands is not a household name in the retail industry, but it is fast becoming one. The company has ambitious plans to grow through new store construction and acquisitions and just made several key executive moves to help make things happen.
CST Brands, operating nearly 2,000 units under the Corner Store banner in the Southwestern U.S. and Eastern Canada, elevated Hal Adams to the role of president of retail operations after previously serving as senior VP and chief marketing officer. The promotion gives Adams oversight of marketing, merchandising and operations at a time when the retailer is making some bold moves to become more reliant on merchandise sales for its future profitability. The company also filled the newly created position of senior vice president of growth and strategy with Stephane Trudel who currently serves as senior vice president of mergers and acquisitions. In his new role, Trudel will oversee acquisitions, divestments, strategic planning and business analytics, construction and real estate and the company’s Canadian wholesale operations. Adams and Trudel both report to CST Brands chairman, president and CEO Kim Lubel.
“By combining our operations, marketing and merchandising group under the experienced leadership of Hal Adams we will have a unified chain of command to support our high-reaching goals of increasing gains in inside store sales and margins, and providing best-in-class operations in both our legacy and new stores,” Lubel said. “By combining our organic (new to industry) growth, acquisitions, divestitures, strategic planning and business analytics under Mr. Trudel, we can better coordinate and allocate our capital and resources to achieve aggressive large format store growth and expand our geographic presence, which are key components to achieving our 2020 vision.”
The key aspect of that vision is a significant change in how the company makes money. The company’s 2020 vision is to increase gross profit with 70% of gross profit dollars coming from non-fuel sales and 30% from fuel sales versus the current even split between fuel and non-fuel sales.
CST Brands is intent on reducing its exposure to fuel price volatility and one of the best ways to do that is by expanding in-store offerings of higher margin food products in an expanding base of larger format stores and acquired stores. Since the beginning of 2014, CST has opened more than 100 new stores and secured additional locations that will enable it to construct 120 new stores this year and next. Within the next five years, CST has said it will open 350 stores that are new to the industry.
In addition, the company expanded its footprint into a new geographic area with the acquisition last fall of Flash Foods, an operator of 164 locations in Florida and Georgia. More recently, CST Brands announced plans to explore the possible creation of a real estate venture that would allow the company to unlock the underlying value of its real estate in a sale/leaseback arrangement.
“While there is more work ahead to complete the transaction, we expect the real estate venture to significantly lower CST’s cost of capital and provide an attractive financial platform to accelerate new store growth, help fund future acquisitions and potentially purchase existing real estate from CST and CrossAmerica Partners as well,” Lubel said. “We expect this innovative structure will free up substantial capital that will enhance the company’s ability to pursue its strategic growth initiatives, while also providing an opportunity to unlock additional long-term value for CST stockholders from potential upside in the company’s ownership interest in the real estate venture.”
Lubel is well-versed in complex real estate transactions and acquisitions, having served as executive VP and general counsel at Valero, prior to joining CST Brands shortly before it was created three years ago when Valero, the nation’s largest refiner of petroleum, decided to spin off its convenience store business. About the same time, CST’s new president of retail operations Adams left his position at Valero to join CST.