CST Brands Earnings Call Insights: Merchandise Side and Q2 Details

CST Brands Inc (NYSE:CST) recently reported its second quarter earnings and discussed the following topics in its earnings conference call.

Merchandise Side

Ben Bienvenu – Stephens Inc.: So, when we look at the merchandise side of the business, there are number of levers that you all can pull to improve. Could you give us a sense of what some of those initiatives could be? And then also, maybe a realistic timeframe over which those could occur? And then to any extent you could give us a sense of magnitude that might help as well, so that we could maybe monitor progress over the course of next year or so.

Kim Bowers – Chairman, President and CEO: I’ll start off and then I’ll get Hal Adams who’s our Chief Marketing Officer to weigh in as well. We are looking at couple of things kind of at the high level. We have a very strong private label brand offering here in the U.S. Fresh Choices brands. And we are working currently to identify those products to roll into the Canadian marketplace. In Canada we do not have a private label program active right now. And so our folks are teaming up together to begin to roll that out into Canada and we would expect, that happening in six to 12 months. Then separately as we continue to talk about food and look at food with our new store growth it certainly gives us the capacity inside the store for food offerings. And we are looking at our food programs and like to increase those. We’ve added some additional talent, we just recently hired a seasoned executive from the foodservice industry and he’s going to help us certainly look at our stores differently and our food offering differently and bring some fresh perspectives to the table for us. Hal do you want to add into that?

Hal Adams – SVP and Chief Marketing Officer: This is Hal Adams. Obviously in marketing and merchandising we always have several things flying around in the air to get new customers, but I’ll just outline five things I think are important that we are doing. Number one we are attacking the cigarette category on a micro market basis, with some information that we have by (Zipco). We are evaluating each of our stores to determine whether we are capable of adding share to that category by using the lever of price or whether we should be taking margin in the category depending on what’s happening in that micro neighborhood. So we’ve been successful in that in the last three to four months and I would expect that we continue to use that, we are kind of using it as 100 stores at a time, so right now we have about 200 stores that we are playing with in our network. The second is we have become pretty dedicated to attacking customer account on a micro market basis, more so than we had in the past. So for example in certain areas where we might see that we have core customer traffic problems, we’re attacking that using non-traditional categories that we might not have used in the past for example energy drinks, milk, ice. So we’ve used these things in different markets around our network to attract core customer account increases. So we like the results that we’ve seen with that in the last 100 days or so, so I would expect that we would continue to use that kind of as a guerrilla marketing technique. Third I would tell you that we are playing with the fountain category in San Antonio. We’ve got 22 stores that we’re partnering with Coca-Cola to test their free style technology in the fountain category, fountain is an important touch point for our consumers in our stores. And we are interested in finding out if we can have some break through understanding of what the – how the fountain customer react to 120 choices at the fountain machine, when we put those in. So we are very excited about that and that’s been in our store now for about 45 days. So it will take about four or five months to track back to see how we like it before we understand what place that takes in our network. Then number four I would tell you that we are getting ready to play more heavily in the e-cigarette category. We have kind of been in that category and around it. We in the next two weeks about 400 of our stores will be playing in that category more fully, to try to attack that whole tobacco business and the changing of customers to that category. Then lastly I would reinforce what Kim said about foodservice. We think that we have an opportunity immediately in the next 90 days to six months, in balancing our labor and our foodservice programs to get deeper into the daypart we’re traditionally very good in the morning and I think we’ve talked about that in the past with a few of you guys and what we are looking for is to take that morning expertise and get it deeper into the day, with the same equipment that we have in our stores. So we think that presents us a big opportunity. So those are kind of the touch points that we are using right now to attack same-store sales…

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