Arko Corp. (ARKO) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the Arko Corp. First Quarter 2025 Earnings Conference Call. [Operator Instructions] This call is being recorded on Thursday, May 8, 2025. I would now like to turn the conference over to Jordan Mann, Senior Vice President, Corporate Strategy and Capital Markets, Investor Relations. Please go ahead.

Thank you. Good afternoon, and welcome to Arko's First Quarter 2025 Earnings Conference Call and Webcast. On today's call are Arie Kotler, Chairman, President and Chief Executive Officer; and Rob Giammatteo, Executive Vice President and Chief Financial Officer. Our earnings press release and quarterly report on Form 10-Q for the first quarter of 2025 as filed with the SEC are available on Arko's website at www.arcocorp.com. During our call today, unless otherwise stated, management will compare results to the same period in 2024. Before we begin, please note that all first quarter 2025 financial information is unaudited. During this call, management may make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Please review the forward-looking and cautionary statements section at the end of our first quarter 2025 earnings release for various factors that could cause actual results to differ materially from forward-looking statements made during our call today. Any forward-looking statements made during this call reflect our current views with respect to future events, and Arko is under no obligation to update or revise forward-looking statements made on this call, whether as a result of new information, future events or otherwise, except as required by law. On this call, management will share operating results on both a GAAP basis and on a non-GAAP basis. Descriptions of those non-GAAP financial measures that we use, such as adjusted EBITDA and reconciliations of these measures to our results as reported in accordance with GAAP are detailed in our earnings release or in our quarterly report on Form 10-Q for the quarter ended March 31, 2025. Additionally, management will share profit measures for our individual business segments along with fuel contribution, which is calculated as fuel revenue less fuel costs and exclude intercompany charges by our subsidiary, GPMP. And now I would like to turn the call over to Arie.

Thank you, Jordan, and thank you all for joining. This quarter, the company and our industry faced headwinds from lower traffic and consumer spending to severe weather. Even though we managed the business effectively and deliver results above the midpoint of our guidance, I have higher expectations for the business. We continue to demonstrate that even in a tough environment, we are executing with discipline and remaining focused on what we can control. This quarter, persistently high inflation and high consumer debt put increased financial pressure on lower and middle-income households, especially in the communities where many of our stores are located. Further, the currently unpredictable tariff environment has created uncertainty around spending as customers try to manage their expenses. However, we believe we are well positioned to deliver on the value that our customer is seeking through our promotional and merchandising efforts. Like many in our industry, we're seeing consumers stretch their dollars further, increasingly shifting their purchases towards value-oriented options and exhibiting more price sensitivity. This quarter also brought a unique set of external challenges that compounded these macroeconomic pressures. The combination of persistent cold weather and widespread winter storms across several key geographies reduced customers' mobility and constrained store visits. In addition to pressure on gallons and merchandise sales trends, the unfavorable weather drove an incremental $1.7 million in operating costs related to snow and ice removal. While inclement weather is expected in the first quarter, the range and intensity of adverse event this year, especially in February, were notably greater than typical seasonal norms. Looking behind external factors, our team is committed to the company's transformation strategy, including the ongoing deal erization program, the expansion of high-margin categories like other tobacco products and food service and targeted promotional initiatives, both in the stores and at the pump, which we have designed to deepen customer engagement. These actions are helping us navigate the current environment, and we believe they position the business for long-term growth. Our strategies are driven by experienced leadership and executed daily by a committed operation team that prioritize the customer experience. These strategies are optimizing our retail footprint by deal erizing stores that don't fit within our go-forward operating model, driving value and relevance to our consumers through innovative promotional activities. One example is our Fueling America Future campaign, which provides discounts on fuel up to $2 off per gallon for up to 20 gallons. Another example is our investment in the tobacco back bar to support shifting consumer demand to OTP products, which we are supporting with elevated value promotion. OTP and cigarettes together represent approximately 39% of sales. Implementing a new consumer-centric remodel centered around a delicious menu of app and cold grab-and-go food and dispense beverages. We will be introducing a new brand for this strategy called Fast Craves. Our first store will be in a Fastmart in Richmond, Virginia, advancing our store remodel program with our first pilot store starting construction this week, filling the pipeline for the new-to-industry stores in our existing markets and increasing customer trips and spend through our Fast Rewards loyalty program by offering the best deals to our best customers. Now let me provide a high-level update for each of these core strategies. On our transformation plan, we continue to execute our strategy to convert company-operated stores into dealer sites where we believe the long-term economics are more favorable for those stores under our dealer segment. Year-to-date, as of the end of April, we converted 77 stores to our wholesale network, and we have more than 130 stores under contract for conversion with a meaningful number still on our list to convert. As we previously disclosed, at full scale, we continue to expect this initiative to deliver a cumulative annualized operating income benefit in excess of $20 million. Our high-value Fueling America Future campaign kicked off in stores on March 12. This campaign is centered around providing enrolled loyalty customers with both value promotions inside the store and significant discounts at the pump. In partnership with many of our supplier partners, we are offering our loyalty members up to $2 off per gallon up to 20 gallons when they purchase select products in store. While the campaign just started, we have seen an increase in our average enrollment per day by 35% and an increase in gallons for previously enrolled loyalty members taking advantage of this great offer from approximately 6.8 gallons to 9.8 gallons per transaction with an average basket increase of approximately $2.38 or 16%. Turning to our cigarette and OTP back bar refresh. To date, we have completed these projects in more than 900 stores, which is driving improvement in merchandising and assortment for total nicotine. When combined with our expanded promotional efforts, we're capturing market share across select OTP categories, creating momentum for in-store performance as we broaden our assortment and fine-tune our promotional strategy to drive growth. Of the approximately 675 stores where we believe we have enough new resorts to draw conclusions, we are seeing that these resets are starting to improve our total nicotine performance. We have implemented very strong monthly OTP promotions supplemented by a store manager and district manager sales contest to assist in driving OTP sales. Our OTP mix continues to evolve to meet customer demand, and we view it as a lever to drive basket growth amid challenging macro backdrop. Turning to our remodel program. We started construction on the first of our 7 pilot remodels this week and expect to start work on the second remodel in the middle of May. As a reminder, the pilot store are expected to include an expanded and refined merchandise assortment with an enhanced in-store experience and focus on food centered on hot and fresh grab-and-go food, bakery, pizza, roller grill and other prepared foods, including our new branded food offering, Fast Grade. The intent is to take learnings from the pilot stores and implement the right remodels across a larger portion of our retail locations through targeted capital deployment. This initiative are fundamental to our long-term retail transformation strategy and represent our commitment to organic growth and store level reinvestment. In addition to our remodel program, in the first quarter, we opened a new Dunkin' store in a fast market location. Additionally, we currently have 4 NTIs in development, 3 have started construction and 1 store is awaiting a final permit. These NTIs are expected to open in the second half of the year. These 4 stores will the pilot remodel concept I discussed moments ago. We are pleased with the results of our Fast Rewards loyalty program. Our loyal customers continue to make more trips and spend more per month than our non-enrolled members. In the first quarter of 2025, enrolled Fast Rewards members spend approximately 47% more and visited 2.5x more per month than non-enrolled members. Enrolled loyalty OTP sales now account for 18.5% of OTP sales versus 18.1% in Q4 2024. Enrolled loyalty members are purchasing 23% more gallons per transaction than non-enrolled members. Overall, we added approximately 27,000 enrolled members in Q1, reaching over 2.3 million enrolled members in total, which was up 11% from the end of Q1 2024. We continue to learn and evaluate the rich customer data and adjust our tactics to ensure we provide meaningful value to our most loyal customers. As adoption grows, we believe loyalty will continue to be an increasingly powerful lever to improve same-store performance over time. The team is executing many initiatives in our retail segment to drive results despite the current macroeconomic headwinds. Outside of retail, our wholesale and fleet segments have delivered stable and reliable cash flows, providing meaningful support as we navigate ongoing macro and consumer pressures. Over the past 4 quarters, these segments have generated approximately $130 million in operating income. Combining all of the positive and the negatives this quarter, we again delivered results above the midpoint of our quarterly guidance. Much of this performance was driven by controlling the things we can control, especially on the expense side as we mitigate higher costs related to snow removal through disciplined management and execution. Turning to capital allocation. We remain committed to a strategic and thoughtful approach. Based on our stock price in the first quarter, we repurchased approximately 1.3 million shares during the quarter at an average price of $4.01 per share with almost all of those repurchases executed in March. Additionally, we repurchased approximately 1.3 million additional shares in April. We believe our current market valuation reflects discounts for a scale convenience stores retailer with a diversified revenue across merchandise, retail fuel and wholesale and fleet fueling. Our approach to capital allocation will continue to focus on long-term value creation and disciplined capital deployment. We believe in the strength of our plan, the capabilities of our team and the transformation path ahead and remain committed to executing step by step to unlock value for our shareholders. With that, I will hand it over to Rob.

Thank you, Arie. Good afternoon, everyone. Turning to first quarter 2025 results. Adjusted EBITDA was $30.9 million for the quarter compared to $33.2 million in the year ago period, with the decrease caused primarily by lower retail fuel and merchandise contribution. At the segment level, our retail segment contributed approximately $40.2 million compared to $46.5 million in the year ago period. Same-store merchandise sales, excluding cigarettes, were down 5.2% versus the year ago period, while total same-store merchandise sales were down 6.9%. Same-store margin rate was up approximately 50 basis points versus the prior year. Same-store fuel contribution was down approximately $3.2 million for the quarter, caused by a 6.2% decline in gallons. Same-store fuel margin of $0.379 per gallon was up $0.01 per gallon year-over-year. Same-store operating expenses were down approximately 1.4% for the quarter. Moving on to our Wholesale segment. Operating income was $18.6 million for the quarter versus $18.3 million in the year ago period. Fuel margin was $0.088 per gallon versus $0.092 per gallon in the year ago period. Gallons were up modestly to the year ago period, driven by our channel optimization program, which contributed close to 14 million gallons for the quarter. Gallons from channel optimization more than offset a gallon decline from comparable sites, which were down 4.6% from the year ago period, reflecting similar trends experienced in our retail segment. For our Fleet segment, operating income was $11 million for the quarter versus $9.8 million in the year ago period, with total gallons down 4.2% to the prior year. Fuel margin for the quarter was $0.436 per gallon, up from $0.38 per gallon in the year ago period. Total company general and administrative expense for the quarter was $41.6 million versus $42.2 million in the year ago period. Net interest and other financial expenses for the quarter were $13.9 million compared to $2.5 million in the year ago period, with the increase primarily related to roughly $9 million in recorded income in the year ago period related to settlement of deferred purchase price obligations for our TEG acquisition on favorable terms. Net loss for the quarter was $12.7 million compared to a net loss of $0.6 million for the year ago period. Please reference our press release for a detailed reconciliation from total company net income to adjusted EBITDA. Turning to the balance sheet. Excluding lease-related financing liabilities, we ended the first quarter with $880 million in long-term debt. We maintained substantial liquidity of approximately $847 million, including $265 million in cash on hand at quarter end, along with remaining availability on our lines of credit. Total capital expenditures for the quarter were $27.4 million. Turning to forward guidance. For our second quarter, we expect total company adjusted EBITDA to be in the range of $70 million to $80 million. This guidance is based on the following key segment assumptions. First, for our Retail segment. We are estimating our Q2 2025 average retail store count to be approximately 1,300 sites. We expect merchandise sales per average store to be flat to up low single digits, reflecting the higher productivity of retained stores versus the year ago period, partially offset by same-store merchandise sales performance, which is positioned down low to mid-single digits. We expect gallons per average store to be up low single digits, reflecting the higher productivity of retained stores versus the year ago period, partially offset by same-store gallon performance, which is positioned down mid-single digits. And finally, we are modeling total retail fuel margin in a range of $0.425 to $0.445 per gallon. Moving to our Wholesale segment. We expect mid- to high single-digit operating income growth driven by our ongoing channel optimization work. And for our Fleet segment, we expect operating income to be up modestly as we begin to cycle prior year fuel margin cents per gallon in the mid-40 range. I'll wrap up with our full year total company adjusted EBITDA guidance, which we are maintaining in a range of $233 million to $253 million. This outlook is based on an average retail fuel margin of $0.40 per gallon on the lower end and $0.42 per gallon on the higher end of our guidance range. With that, I'll hand it back to Arie for closing remarks.

Thanks, Rob. To our team members, customers and investors, we appreciate your continued support. As we head into our historically strongest season of the year, the 100th day of summer, we're energized by the opportunities ahead. We know the journey requires discipline and transparency, and that's exactly how we plan to lead. While the environment remains dynamic, we remain focused on execution and are optimistic about the path forward. Through consistent, deliberate action, we are committed to creating long-term value for our customers and shareholders. We will now open it up to questions.

[Operator Instructions] Your first question comes from the line of Bobby Griffin from Raymond James.

I guess, Arie and Rob, first, maybe just touch a little bit on how the business has performed of late once we got by some of the winter weather. I think the weather issues that impacted the convenience store space are pretty well known by a few different companies that have talked about it. So what have you seen kind of maybe more in April in May? And have you seen anything get better as we've approached normal weather conditions again?

Sure. Bob. I will start maybe with the recap for first quarter and then maybe talk a little bit about what we see moving forward. So as we started the year, we reported right now that the sales were down 6.9% for the quarter and 5.2% ex cigarettes. When we started the quarter, the January results were actually 5.8% on total sales, but 3.8% negative on sales, excluding cigarettes. That was January. When you go into March, excluding sales excluding cigarettes in March, were minus 3.9%. So you're talking 3.8% negative in January, minus 3.9% in March. And then all of a sudden, February hit with a severe weather, the sales excluding cigarettes in February were minus 9.3%. And that's really the story of the quarter. So the weather -- we believe that the weather was probably 2% to 3% drag just because of that. As we move behind March going into April, we see a slightly improvement inside sales. And of course, we see elevated fuel margin that, of course, offset some of those sales decline that we see over here. So overall, I'm very optimistic in Q2. And as I said, we see slightly improvement in April.

That's helpful. And then maybe switching gears into the dealerization network, the work you guys have been doing. Just honestly, two questions. One, is the savings starting to flow through the P&L as we look at the results today, so in 1Q? Or is that still to come? And then, Rob, that $20 million number that you're referencing on an annualized basis, what does that assume for the total number of stores? Is that the number of stores that you -- is that the savings from the number of stores you've already done or that are under contract or ultimately, the entire program, which I don't think we know the full number of stores you guys have identified yet?

Yes, that's right, Bobby. So the $20 million is going to be at scale when we're done. And as you know, we've not shared that total. But as Arie mentioned in his prepared remarks, we do have a meaningful number that is still continued in addition to the sites that we have under contract today. So that is certainly a total program amount. If you think about this quarter, the channel optimization delivered about $2.4 million, the sites that were transitioned over. So on an annualized basis, that's about $10 million at the run rate. So we're pretty much roughly halfway through the program. But again, I wouldn't attribute that necessarily to store counts, but more in terms of the financials that we talked about. But this quarter was $2.4 million. The last quarter was $2 million on a quarterly basis. So that's -- you can see the accretion starting there. And obviously, the wholesale channel, the base business, as I mentioned before, the gallons were down mid-single digits. So we're hoping to kind of get that base a little bit closer to that flat number and have the channel optimization be accretive on top of it, but still seeing growth out of that channel even with some of the headwinds in gallons.

Yes. That's helpful. And then I guess, lastly, Arie, you touched a little bit on the remodel initiative, kind of making a little progress there. When does that potentially get accelerated? Is that more 2026 where we can see that actually rolled out across a large portion of your fleet? And what is the CapEx that will require on a per store basis just where we can think about that on a multiyear kind of impact to the model?

Sure. Our plan really right now with respect to those 7 pilot stores, our plan is really to finish the 7 pilot stores -- as I mentioned, we started this week the first store started construction. We have the second store starting mid-May. We hope to basically to continue to see progress over here probably towards the third quarter of 2025. And again, subject to results, we're probably going to start to increase the pace on the regional level, of course, subject to results. For your benefit today, the investment in a remodel store is anywhere between, I would call it, $700,000 to $1 million, $1.1 million. That's probably the cost per location. But again, it's all about how we feel about those pilots, if we need to tweak anything with respect to those pilots. But the idea is really to take the initial learning and then basically apply them across a full region and then we're going to continue to go. So I think with your question, I think the assumption is that probably towards the end of 2025, we'll have better results, and we will probably see this uptick in, assuming we enjoy from the results and happy with the results, probably going to see an uptick in 2026.

Your next question comes from the line of Anthony Bonadio from Wells Fargo.

I want to start with fuel margins. It seems like you guys are seeing quite a bit of strength into Q2, just given your guidance and some of your comments in response to Bobby's question. I guess, one, is that reflective of what you guys are seeing out there today? And then two, can you just talk about what's driving those fuel margins as we think about price dynamics, break evens, that kind of thing?

Sure. Well, what's driving the fuel margin, I think the #1, of course, is the volatility in the market. As you saw what happened in the last probably 4, 5 weeks. prices of fuel drop and they drop all the way to -- at some point, I think it was like $57 or $55, which, of course, reflects. So volatility is the first thing that, of course, reflects those things. And the second thing, besides volatility that increased fuel margin, my belief, this is Arie's belief, I believe that the pressure that everybody is seeing inside the store, they're going to have to -- they're going to need to pay for their expenses. People are going to need to run their businesses, and this is what we're doing over here. And everybody is trying to be, of course, competitive as much as we could. And given that 63% of this industry is mom-and-pop, and we are also selling fuel to many of them. We have almost 2,000 locations, including digitalization that we're doing right now. I believe that some of it is just shifting basically cost. I mean when you have soft sales inside the stores given the macroeconomic pressure and the weather, et cetera, et cetera, I believe that people need to figure out a way how to make changes in order for them basically to be profitable and changing the price at the pump is probably the fastest and the easiest way to do so. And we saw something very similar to that, if you remember during COVID, it was very, very similar. So that's really my belief. I think those 2 components are the ones that are driving basically fuel margin.

Anthony... Just for reference, we've seen $0.46 per gallon in April and May week 1 has kind of been sticky. So I'm pleased with that so far.

Got it. Super helpful. And then just on the repo, you guys bought back quite a bit of stock in the quarter. You're still sitting on a lot of cash. I think you've got another $20 million under the authorization. But can you just talk about how you're thinking about the cadence of buybacks at this point? And just maybe more broadly, how you're thinking about capital allocation?

Yes. So we repurchased, like you mentioned, 1.3 million shares in May. We repurchased something similar to that. But at this time, I can't really comment on the cadence of the stock repurchase at this time.

Your next question comes from the line of Ben Wood from BMO.

This is Ben on behalf of Kelly and BMO. I wanted to do 2 follow-ups on Bobby's line of questioning. Just the first on the deal erization. It seems like the language you guys are using is pretty consistent to 4Q, but can you talk about the pace of deal erizations in 1Q and how that tracked relative to internal plans? What's kind of the visibility on the pace that these could happen? And is there anything in the current environment that might make it harder to progress through kind of the outlined targeted numbers?

Sure. Sure. Thank you for being over here, Ben. And hello to Kelly, of course. So we are actually moving in accordance to our plan over here. We closed in Q1, 59 locations and additional 18 up until May 1. And the reason that we closed 77 versus 100 that were on our plan, it's really all subject to licensing and permits that some of those dealers. As a matter of fact, we have 130 stores under contract right now. And it's just a matter of those dealers getting licenses and permits. It's very, very important for us, given that we are moving some of those stores from our company-operated stores to dealers, it's very important for us that those guys are going to continue to maintain the sales. We're going to continue to be profitable. And in order for that to happen, they must have leak licenses, for example, that usually will take a little a little bit longer to get leak licenses from different municipality. And of course, some of those guys are interested to close even earlier. But for us, it's very, very important that the minute they take over, they will have all of their licenses and permits in place, so they will not leave basically any sales on the table. So it's really just a matter of permits and just a matter of licenses that I believe because of the winter and because of the bad weather in February, some of those municipalities will probably close or something like that. But everything is moving along in accordance to plan. And as I mentioned, behind the 77 locations that we closed up until May 1, we have another 130 locations under contract already, and they're going to continue to close as soon as they receive permits and licenses.

Ben, in terms of like possible cadence, I mean, I think you saw in Q4, we did 100 sites, right? So to Arie's point, there's counterparties we're dealing with, there's licenses or states that are involved. So that number is going to ebb and flow. But if you're saying, hey, what's possible, we've done 100 in Q4. So again, ranging up to that level, I think, is reasonable.

No, that's very helpful. And then just kind of going back to the remodel initiative conversation we were having. Is there -- between now and when you start to get feedback on those and think about rolling them out more aggressively, what's the pipeline of maybe some smaller initiatives that you guys can take on and spread throughout the store base? And is the idea once we get a remodel that we like that we'll stick with the remodels? Or is there an opportunity to pull bits and pieces of that pilot program and spread them to the base a little bit faster? Just trying to get a sense of kind of your pipeline of different organic growth initiatives you guys have.

Sure. No, no, that's a great question. So the 7 pilot stores should have everything from soup to nuts. That's, I think, what we're trying to basically to explain over here. But for example, every one of those stores need to have an improved back bar. So I'll give you an example. The back bar is just an example of the things that we are not waiting. We are basically getting very heavily into the OTP category -- we believe that in this environment, when the consumer has a lot of pressures when consumption of cigarettes are down, we believe that OTP is one of growing categories. And as you remember, we mentioned that we invested in 900 stores in the back bar. So this is just one lever that we already start to move forward. The second thing, of course, is Fueling America campaign that we started. And that campaign, of course, involved between the beverage promotion that we're putting out there -- at the same time, we continue to add food service features, for example, grab and go as and cold in stores that we basically know that we're going to need to invest in that when the minute we finish the remodel. So there are small things that we are doing. There are big things that we're doing. But as I said, the largest one was really the back bar that it was very important for us to finish as we're moving into 100 days of summer.

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

As a part of the transformation plan, you all mentioned targeted capital allocation towards strategic retail stores. What are some of the characteristics of retail stores that are in that strategic bucket? Is there anything from a quantitative or a qualitative standpoint?

Can you explain a little bit more your question?

Yes. Arie, I'll take that one. Sorry. So we look at sites that are in what we consider strategic markets, so markets where obviously, there's favorable demographics, favorable competitive and favorable physical plant that's existing, Daniel. So again, for markets that are heavily competitive where our physical plant may not be as competitive currently and where there's subpart demographics. That's the way we look at this. We had a strategic engagement with a consulting leader beginning of last year. We looked at this market by market, where physically we think markets are growing, where our physical plant with location and existing physical plan has a right to win, where we think it makes sense to invest. That's how we've broken this down and why how we determine which stores we would be investing in and which would behave more appropriately in our wholesale channel.

Okay. That's really helpful. I appreciate that. And then one more on the transformation plan. A risk that you all have laid out was the ability to realize benefits from the new dealer fuel supply contracts. Now that it's been another quarter, can you talk about how that benefit realization has played out versus your expectations?

Yes. I think the -- again, as we talked about before, there are going to be some puts and takes with the timing of deal erization, right, based on counterparties and some state regulations. But in terms of the expectations, the stores that we pushed the wholesale channel are performing in line with our expectations. As I mentioned in my prepared remarks, there's about 14 million incremental gallons. So a significant amount of volume that's starting to come over to this channel, performing in line generally with our expectations. And what we're hoping to see again is that baseline prior year business, comparable accounts getting closer to 0 versus the negative mid-single digits. So -- but we're pleased with what channel optimization has been doing so far. I mean that's one of the reasons, Daniel, before you covered us, why we significantly expanded the count that we were looking at for that channel because we've been very pleased with the performance to date.

Yes. Just to add one more thing for what Rob just said, which is everything is accurate. Every one of those deals that we did was accretive from day 1. So we didn't have to change something and wait a period of time to see if this is going to change anything. All of those deals were accretive for the minute we actually convert them into dealers, just to be clear.

Your next question comes from the line of Karru Martinson from Jefferies.

This might be simplistic, but just a housekeeping. When you do the deal erization, does that loyalty member stay within the program? Are they still able to access the program's benefits?

Yes. So when we actually dealerize a store, the loyalty program do not stay with the store that we dealerize. They don't have the systems and the bands. But usually, those customers will travel or will move to some other locations that we basically have the loyalty program. The loyalty program is only beneficial in our retail stores.

Okay. So it is with you because I was just wondering like you're growing, but you're also taking customers in theory out from locations from that perspective. In terms of liquidity here, your bonds are kind of in the high 70s, 11%, 12%. How do you balance kind of the share buybacks versus the potential for bond buybacks here?

Like I mentioned earlier, everything is being analyzed by the company, by our Board, and this is not something that I'm prepared to answer at the moment.

Your next question comes from the line of Hale Holden from Barclays.

I just had one big picture question, which is since you gave your guidance on the fourth quarter call, the one thing that's changed is the price of crude has come down a lot and the price of retail fuel has come down a lot. So I was wondering how that flows into the guide that you gave that you just reaffirmed and puts and takes around that in terms of positives or negatives.

Yes, sure. Yes. So as you mentioned, we have taken a more constructive view on fuel margin for the year. As I mentioned, we're running $0.46 from April through first week of May. So that is obviously something we factored in. We've taken a step back a little bit in terms of some of the expectations for inside sales and gallons. So we've taken those down a bit from our prior view. And we've also taken down OpEx. As you might imagine, we're being very, very careful with OpEx in this environment as well as G&A. One of the things we haven't spoken about in detail yet is our G&A attached to the dealerization program. Arie hinted about this in prior quarters that we do intend to lean out the G&A structure as we push more retail sites to the wholesale channel. If you look at our press release, you'll see that the G&A, excluding an accrual on legal was down a couple of million dollars year-on-year. So again, not -- I don't want you to be taking that specific number, but you should be expecting us to be a little more aggressive on G&A as well. So a little bit back on gallons and merch sales, more constructive on CPG and more aggressive on OpEx and G&A.

So just as a follow-up, the inside sale and gallons, that's more like a weaker consumer view. And then the G&A is something as you get further into the deaelization plan, maybe that gets a little bit more heavy in terms of cutting there?

I think that's a fair way to look about it, yes.

There are no further questions at this time. I will now turn the call over to Arie Kotler. Please proceed.

Thank you very much, everybody, for participating this afternoon. I really appreciate that. As I mentioned earlier, Fueling America campaign that we started in stores on March 12. This is a big initiative for us, especially as we go -- as we move into 100 days of summer. And as I said, with those promos and with those campaigns, we hope to see more customers in our stores at the pump, and we hope to see you guys soon. Thank you very much. Have a good evening.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.