Murphy USA (NYSE:MUSA) reported first-quarter financial results on Thursday. The transcript from the company's first-quarter earnings call has been provided below.
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The full earnings call is available at https://events.q4inc.com/attendee/497864854
Summary
Murphy USA reported a strong start to the year with first-quarter results exceeding expectations, driven by favorable fuel supply results and strategic management of volume and margin relationships.
The company rebranded its PS&W/Rins business to 'Fuel Supply' and emphasized that April's fuel volumes were flat year-over-year on an average per-store month basis.
Despite first-quarter success, the company did not update 2026 guidance due to high market volatility and geopolitical risks, highlighting the need for adaptability in its operations.
Murphy USA observed increased customer loyalty sign-ups and a return of lapsed customers, driven by its low-price model amid rising fuel prices.
The company is focused on its everyday low-price strategy, continuous improvement, and maintaining capital allocation priorities, including expanding its store network and share repurchasing.
Operational efficiencies were noted, with well-controlled store operating expenses attributed to labor model improvements, shrink reduction, and a strategic maintenance approach.
Management highlighted ongoing efforts to innovate store formats and product offerings, despite the current favorable macroeconomic environment.
Full Transcript
OPERATOR
Press Star followed by the number one on your telephone keypad. If you would like to withdraw your question, press Star one again. Thank you. I would now like to turn the call over to Kristian Paykel. Please go ahead.
Kristian Paykel
Hey thanks Melissa. Good morning everybody. Thanks for joining us. With me this morning are Mindy West, President and CEO Donnie Smith, CFO and Ash Olds, Director of Investor Relations and FP&A. Before we get started I need to remind everybody to refer to the forward looking statements 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/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. 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 USA 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
Thank you. As a reminder, if you would like to ask a question, please press Star one on your keypad. Please stand by while we compile the Q and A roster. Your first question comes from the line of Irene Nadal with RBC Capital Markets. Your line is now open. Please go ahead.
Irene Nadal (Equity Analyst)
Thanks and good morning everyone. And yes, thank you for that explanation on PSNW and Fuel Supply. Very much appreciated. 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. Thank you.
Mindy West (President and CEO)
Good morning Irene and great question. I think it would take a lot to not exceed at this point given the amount that we're 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 one 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.
Irene Nadal (Equity Analyst)
That's really helpful, thank you. 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 you know that 6.9 cents per gallon from, let's call it inventory, reevaluate inventory gains in fuel supply. How should we think about the evolution as of that number as we go through the year?
Mindy West (President and CEO)
Well, fuel supply results were high in the first quarter as we explained. The core business though generated the, you know, two and a half cents including the impact, excluding the impact of those higher prices. So as 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 of impact. But at the same time that should serve to expand and retail margins at the same time, hopefully volume as well as we could 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.
Irene Nadal (Equity Analyst)
Thank you very much.
Mindy West (President and CEO)
Thanks, Irene.
OPERATOR
Our next question comes from the line of Bonnie Herzog with Goldman Sachs. Your line is now open. Please go ahead.
Bonnie Herzog (Equity Analyst)
All right, thank you. Good morning. 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 in the context of prices at the pump, tracking, you know, around $4 a gallon across the nation. So curious to hear, you know, how have purchasing patterns maybe changed, especially for the lower income consumers, if at all. And then are you seeing, you know, more consumers down-trading, potentially to your stores? Is this an opportunity, for instance, for you to gain share, you know, and you know, any kind of change behavior at the pump would be helpful.
Mindy West (President and CEO)
Thanks. Good morning, Bonnie. Yeah, great question. I'll start first with a 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 non discretionary categories, even in the higher price environments. 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 and 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 Store. 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 who 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 last customers returning to our stores. That's telling us two 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 price retailer and we are their store of choice when they're seeking value and low for low price goods in the store and low price 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.
Bonnie Herzog (Equity Analyst)
All right, that's helpful. If I may just ask, you know, as a follow up, I guess on a different topic because I do want to comment on your, you know, newly dubbed fuel supply business and I definitely, 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 benefit from RINs, which was really huge in Q1. And then, you know, just monitoring this, prices across the board do remain quite high. So just want to make sure I understand, you know, how we should think about the magnitude of the contribution you could recognize, you know, from fuel supply in Q2.
Mindy West (President and CEO)
Thank you, 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 cost when we purchase the product. So with sustained movement in one direction over a 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. 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 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, you know, 35 to 40 cents 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, you know, volatility that we're continuing to see in the market.
Bonnie Herzog (Equity Analyst)
All makes sense. Thank you. I'll pass it on.
OPERATOR
Our next question comes from the line of Thomas Palmer with JP Morgan. Your line is now open. Please go ahead.
Thomas Palmer (Equity Analyst)
Good morning and thanks for the question. 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.
Mindy West (President and CEO)
Sure. Tom, We've said before that last year with the very low price environment that was making our value sheet seeking customer less price sensitive and we were putting roughly 2 cents 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 2 cents is not necessarily chain wide, it's concentrated in certain areas. So where competition is very intense, we were putting more than 2 cents on other places where the competitive pressure was not so much, it was less than 2 cents. 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.
Thomas Palmer (Equity Analyst)
Okay, thank you for that. 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. Thanks.
Mindy West (President and CEO)
Yeah, that's. It's going to be a good problem to have. First column capital is always going to be the growth cutback. 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. You know, 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 you know, 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.
Thomas Palmer (Equity Analyst)
Great, thank you.
OPERATOR
The next question comes from the line of Bobby Griffin with Raymond James. Your line is now open. Please go ahead.
Bobby Griffin (Equity Analyst)
Hey guys, good morning. Thanks for taking the questions and 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.
Mindy West (President and CEO)
It does make sense. Good morning 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 US have now returned to the five year average level. So they're not, you know, 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 damage to 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 Brenton 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 you know, 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. 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 straight open and how much damage to infrastructure is there and what is the time frame needed in order to get that back up online?
Bobby Griffin (Equity Analyst)
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 quick check. 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. You know, is the drag still just competition and QSR factors or anything else for us to kind of glean out of that?
Mindy West (President and CEO)
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 Mousa markets. We're not sitting still though. We are taking steps to try to improve the business. We're focusing on the core items and the food offer. 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 Quick Check 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 thinking of ways to drive traffic that are not margin accretive. But I'm really excited to see how a sales culture at Quick Check can be implemented and really drive results because I think that we're going to be really happy with the result and I know they are really excited up there to make that change.
Bobby Griffin (Equity Analyst)
Thank you. I appreciate all the details. Best of luck here in the second quarter.
Mindy West (President and CEO)
Thanks, Bobbi.
OPERATOR
The next question comes from the line of Edward Kelly with Wells Fargo. Your line is now open. Please go ahead.
Edward Kelly (Equity Analyst)
Yeah, hi, good morning. You know, 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, you know, consumer trade down taking place as you would have expected this quarter? Is there anything else happening there?
Mindy West (President and CEO)
Yeah. 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 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 a quarter 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 signups. 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 continues 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 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 percent. 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 these price. All this price pressure really happened in March. Those customers have only had a paycheck or two, a fill up or two. They haven't even received their credit card statements for those purchases yet. So it's just going to take some time.
Edward Kelly (Equity Analyst)
Great. Thanks for that color. I just wanted to follow up on store operating expense. Really well controlled in Q1. You know, 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?
Mindy West (President and CEO)
Yeah, we take the roughly flat increase. This is 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 this 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 where 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 till 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 1800 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 guidance range in the second half as those stores come online.
Edward Kelly (Equity Analyst)
Great. Thank you.
OPERATOR
The next question comes from the line of Jacob Aiken Phillips with Melius Research. Your line is now open. Please go ahead.
Jacob Aiken Phillips (Equity Analyst)
Good morning and 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's 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.
Mindy West (President and CEO)
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 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 though 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
Jacob Aiken Phillips (Equity Analyst)
and then so. On nicotine last year there was a concern with the when there was a Zen promotion that it should be viewed as one off. But clearly like you're still performing super strongly. Can you code on just. Sorry,
SYSTEM
We are currently experiencing technical difficulties. Please stand by.
Mindy West (President and CEO)
Hey, are we back online? Hey, sorry guys, apparently we cut out. I don't know where we left off. Jacob, can you, can you cue us up?
Jacob Aiken Phillips (Equity Analyst)
Oh yeah, I'll just say the question again. So on nicotine last year there was concern that there 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? I'm sure having 600k additional rewards members helps.
Mindy West (President and CEO)
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. 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 onto those customers post promo as we continue to gain shareholders. 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 three when we laugh that. So we're probably going to want to look at a two 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.
Jacob Aiken Phillips (Equity Analyst)
Great. Thanks and congrats again.
Mindy West (President and CEO)
Thank you.
OPERATOR
Our next call comes from the line of Brad Thomas with Keybanc Capital Markets. Your line is now open. Please go ahead.
Brad Thomas (Equity Analyst)
Good morning. Thanks so much. Mindy. I wanted to ask about the I wanted 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, you know, as the months and quarters go on here at elevated gasoline prices.
Mindy West (President and CEO)
Well, I think our loyalty initiatives are key. You know, Murphy Drive rewards, Quick check rewards. What we're seeing is 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 last customers, the last 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?
Brad Thomas (Equity Analyst)
Yeah, 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, etc. To try to retain more of these potential folks coming in your stores in
Mindy West (President and CEO)
this current environment, you know, 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 non discretionary 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.
Brad Thomas (Equity Analyst)
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, you know, 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.
Mindy West (President and CEO)
I wouldn't say it's because the year is shaping up to be different. 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 in 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 would 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 is very early days and they need time to incubate and prove themselves out. And honestly, we are going to probably hit some singles and doubles, but we'll probably strike out on several things as well. But the focus isn'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.
Brad Thomas (Equity Analyst)
Very helpful. Thank you Mindy.
Mindy West (President and CEO)
Thank you.
OPERATOR
The next question comes from the line of Puran Sharma with Stevens Inc. Your line is now open. Please go ahead.
Puran Sharma (Equity Analyst)
Good morning and thanks for the question and congrats on the, 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 R Bob, you would expect to see retail, 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, that thesis even more?
Mindy West (President and CEO)
I think that's a great question, an 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 when in the Ukraine invasion back in 2022 where competitors were restoring, you know, multiple times a day they were free 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 feel 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.
Puran Sharma (Equity Analyst)
Okay. Appreciate the color there and the thoughts on that. I wanted to kind of get more specific on my follow up on the on I guess just what you've seen thus far through April. The 5 cents, I think 5 or so cents of PS&W margin. Does that include kind of the current price spikes that we've seen up since the start of the quarter? Do you expect some normalization from those price spikes from Arbob? Just wanted to just get a better understanding of the RBOB commentary.
Mindy West (President and CEO)
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 30 cents a gallon or in the low 30s and we think we're going to be in the range of 35 to 40. And that's counting all of the volatility that we've seen, the price rises that we've seen both on the retail that we're accounting for that both on the retail side when I say retail margin, but also the products plant wholesale side. But 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.
Puran Sharma (Equity Analyst)
I appreciate that. Thank you for the color.
OPERATOR
The next question comes from the line of Corey Tarlow with Jeffries. Your line is now open. Please go ahead.
Corey Tarlow (Equity Analyst)
Yeah, thanks 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. Thanks so much.
Mindy West (President and CEO)
Yeah, 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 February. And then on the fuel side, obviously the margin exploded during the month of March was challenged when we looked at the 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 non discretionary 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 the loyalty signups that we're seeing are really 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. Yeah, 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 plant wholesale results in that month to be as strong as what they were in March. And then again, I can't, certainly can't extrapolate that out over the full quarter. Remains to be seen.
Corey Tarlow (Equity Analyst)
Got it. Thanks so much. Appreciate the help. Best of luck. Welcome.
OPERATOR
There are no further questions at this time. I will now turn the call back to Mindy west for closing remarks.
Mindy West (President and CEO)
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 emphasized 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.
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