ARKO Corp, a Fortune 500 company, is one of the largest convenience store operators in the United States, boasting a diverse portfolio of over 1,390 retail locations across more than 30 states as of December 31, 2024. With a history dating back to 2002, the company has established a strong presence in the industry through a strategic acquisition-driven growth strategy, complemented by organic initiatives aimed at enhancing its operational efficiency and customer experience.
Business Overview and History
ARKO Corp was founded in 2002 as GPM Investments, LLC, a Delaware limited liability company. The company initially focused on operating a chain of convenience stores, most of which included adjacent gas stations. Over the years, ARKO has grown significantly through an aggressive acquisition strategy, completing 26 acquisitions from 2013 through 2024. This expansion allowed the company to establish a strong presence across the Mid-Atlantic, Midwestern, Northeastern, Southeastern, and Southwestern United States.
The company's growth trajectory included several notable acquisitions, such as the purchase of 64 sites from a third-party in 2019, which also involved acquiring a 50% joint control stake in Ligad Investments and Construction Ltd. ARKO has held this joint control stake since January 2014. In 2020, ARKO went public through a business combination with Haymaker Acquisition Corp. II, providing the company with additional capital to fuel its growth strategy.
Despite facing challenges such as managing fuel price volatility, adapting to changing consumer preferences, and operating in a highly competitive industry, ARKO has continued to expand its operations. The company successfully navigated the difficulties posed by the COVID-19 pandemic in 2020 and 2021, maintaining its operations and executing further acquisitions. Notable purchases during this period included Quarles Petroleum and Pride Convenience Holdings in 2022, which further enhanced ARKO's retail, wholesale, and fleet fueling capabilities across its diversified geographic footprint.
As of December 31, 2024, ARKO operated 1,390 retail convenience stores under more than 25 regional store brands, which have been in existence for an average of approximately 50 years. The company considers these regional brands to be a "Family of Community Brands" that provide value to local customers. In addition to its retail operations, ARKO also supplied fuel to 1,920 dealer locations and operated 280 proprietary and third-party cardlock fueling sites.
Diversified Business Model and Operational Segments
ARKO Corp operates through four reportable segments, each contributing to the company's overall performance:
1. Retail Segment: The retail segment encompasses the operation of a chain of convenience stores, including the sale of fuel products and merchandise to retail customers. As of December 31, 2024, the company operated 1,390 retail convenience stores under more than 25 regional store brands. These stores offer a wide array of cold and hot foodservice, beverages, cigarettes and other tobacco products, candy, salty snacks, grocery, beer, and general merchandise. Foodservice offerings are available at approximately 1,190 stores, including hot and fresh grab-n-go foods, deli, fried chicken, bakery, pizza, roller grill items, and other prepared foods. The company also supplements its foodservice offering with approximately 110 quick service major national brand restaurants. Additionally, the retail segment generates revenues from car washes at approximately 75 locations and provides various traditional convenience store services such as lottery, prepaid products, gift cards, money orders, ATMs, gaming, and other ancillary offerings. For the year ended December 31, 2024, the retail segment generated $5.34 billion in total revenues, including approximately $3.51 billion in fuel revenue and $1.77 billion in merchandise revenue.
2. Wholesale Segment: The wholesale segment supplies fuel to dealers, sub-wholesalers, and bulk and spot purchasers, on either a consignment or cost-plus basis. As of December 31, 2024, the company supplied fuel to 1,920 dealer locations. For the year ended December 31, 2024, the wholesale segment sold 949.4 million gallons of fuel, generating revenues of approximately $2.83 billion.
3. Fleet Fueling Segment: The fleet fueling segment includes the operation of proprietary and third-party cardlock locations, as well as the issuance of proprietary fuel cards that provide customers access to a nationwide network of fueling sites. As of December 31, 2024, the company operated 280 cardlock locations. Diesel fuel currently accounts for approximately 80% of the fleet fueling segment's sales. For the year ended December 31, 2024, the fleet fueling segment sold 148.9 million gallons of fuel, generating revenues of approximately $524.6 million.
4. GPMP Segment: The GPMP segment engages in the wholesale distribution of fuel to substantially all of the company's sites that sell fuel in the retail and wholesale segments, as well as charging a fixed fee primarily to sites in the fleet fueling segment that are not supplied by GPMP. ARKO owns 100% of the general partner of GPMP and 100% of the GPMP limited partner units.
Financial Performance and Liquidity
For the full year ended December 31, 2024, ARKO Corp reported total revenues of $8.73 billion, a decrease of 7.3% compared to the prior year. Net income for the period was $20.8 million, down from $34.6 million in the previous year. Adjusted EBITDA, a non-GAAP metric, stood at $248.9 million, compared to $276.3 million in 2023. Operating cash flow for the year was $221.86 million, while free cash flow was $107.94 million.
In the fourth quarter of 2024, ARKO reported revenue of $1.992 billion, a 2.9% decrease compared to Q4 2023. The company recorded a net loss of $2.3 million for the quarter, down from a net income of $1.1 million in the same period of the previous year.
Despite the year-over-year decline in financial performance, ARKO Corp maintained a strong liquidity position as of December 31, 2024, with approximately $841 million in total liquidity, including $262 million in cash and cash equivalents, as well as $579 million in available capacity under its lines of credit. This robust liquidity profile provides the company with the financial flexibility to navigate the evolving market conditions and execute its strategic initiatives.
The company's financial health is further demonstrated by its debt-to-equity ratio of 0.305, current ratio of 1.62, and quick ratio of 1.10. ARKO's available credit lines include a $140 million PNC Line of Credit (undrawn), $29.1 million available under MT equipment line of credit, and $418.7 million available under an $800 million Capital One Line of Credit.
Operational Initiatives and Transformation Plan
In 2024, ARKO Corp continued to make progress on its multi-year transformation plan, which includes the strategic conversion of retail stores to dealer sites within its wholesale segment. During the year, the company converted 153 retail stores to dealer sites, and it expects to convert a meaningful number of additional stores throughout 2025, including approximately 100 more by the end of the first quarter.
This dealerization program is a key component of ARKO's strategy to optimize its portfolio and focus its resources on high-performing retail stores, while leveraging its dealer network to enhance profitability across the entire platform. The company estimates that the dealerization program will generate an annualized benefit of over $20 million in combined wholesale and retail segment operating income, with additional opportunities for G&A expense reduction.
Alongside the dealerization initiative, ARKO Corp has also been investing in targeted capital allocation toward strategic sub-segments of its retail stores, with a focus on enhancing the customer experience and strengthening its value proposition. This includes an expanded and refined merchandise assortment, with a particular emphasis on food offerings, as well as an enhanced in-store experience. The company has initiated a pilot program in seven stores within one of its regions, with plans for a region-wide rollout before a potential expansion across its entire retail footprint.
Adapting to Changing Market Conditions and Consumer Preferences
The convenience store industry has faced a challenging macroeconomic environment in recent years, characterized by persistent inflation, constrained consumer spending, and evolving customer preferences. ARKO Corp has demonstrated its ability to navigate these headwinds through strategic initiatives and operational adaptations.
In response to the challenging market conditions, the company launched its "Fueling America's Future" campaign, which offers customers significant savings at the pump through the ability to stack discounts earned through qualifying purchases within its loyalty program, the fas REWARDS®. This initiative aims to provide relief to customers while also driving increased traffic and engagement within ARKO's stores.
Additionally, the company has observed changing customer preferences, with a growing demand for other tobacco products (OTP) and higher expectations for foodservice offerings. ARKO Corp has responded by enhancing its OTP category through optimized merchandising, expanded promotional activity, and strategic supply partnerships, leading to a 200-basis-point improvement in gross margin for the OTP category during the fourth quarter of 2024.
Furthermore, the company is actively investing in the expansion and refinement of its foodservice offerings, including the launch of a successful pizza program and the introduction of other value-driven options, such as Nathan's Famous hot dogs and Roller Grill deals. These initiatives have gained traction with customers and are expected to continue driving traffic and enhancing the overall customer experience.
Outlook and Guidance
As ARKO Corp navigates the evolving convenience store industry landscape, the company remains focused on executing its transformation plan, adapting to changing customer preferences, and leveraging its diversified business model to drive long-term growth and profitability.
For the full year 2025, ARKO expects total adjusted EBITDA to be in the range of $233 million to $253 million, reflecting the anticipated benefits of its dealerization program and continued operational improvements. This guidance assumes a retail fuel margin of $0.395 to $0.415 per gallon and mid-teen percent operating profit growth in the wholesale segment.
For the first quarter of 2025, the company anticipates adjusted EBITDA in the range of $27 million to $33 million. The Q1 2025 retail segment guidance is based on key assumptions including an average retail store count of 1,339 stores (reflecting the impact of the ongoing channel optimization/dealerization program), a low single-digit decline in merchandise sales per average store compared to Q1 2024, merchandise margin rates generally in line with the year-ago period, a low single-digit increase in fuel gallons per average store compared to Q1 2024, and a retail fuel margin in the range of $0.37 to $0.39 per gallon.
ARKO expects mid-single-digit operating income growth in the wholesale segment driven by ongoing channel optimization work. The fleet segment is projected to see high-single to low-double-digit operating income growth, driven by resilient fuel margin per gallon.
Conclusion
ARKO Corp's ability to adapt to the evolving market landscape, execute its strategic priorities, and maintain a strong financial position positions the company well to navigate the challenges and capitalize on the opportunities within the convenience store industry. As the company continues to refine its operational strategies and enhance its customer offerings, it remains poised to deliver value for its stakeholders in the years ahead.
The convenience store industry in the U.S. has seen a compound annual growth rate (CAGR) of approximately 4-5% over the past 5 years, and ARKO's diversified business model across retail, wholesale, fleet fueling, and GPMP segments has allowed the company to generate significant revenues and profitability. With its ongoing transformation initiatives and focus on operational improvements, ARKO is well-positioned to leverage industry trends and drive sustainable growth in the competitive convenience store market.