Crown Central Petroleum next week will make a major move into the convenience store business that will expand the Baltimore oil company's gasoline marketing operations into five states in the Southeast.
Crown expects to complete the $57 million purchase of 642 Zippy Mart and Fast Fare locations from Sun Co. on June 30, Chairman Henry A. Rosenberg Jr. said yesterday.
The purchase will transform Crown from a firm that wholesales the majority of its refinery output into a marketing specialist selling 60 percent of its gasoline through its own stations, Rosenberg said in a meeting with stockbrokers at the Amex Club of Washington.
"We hope through the acquisition of the convenience stores to be heavier in the retail side" of the business, he said.
The diversification into convenience stores should help dampen the wide swings in Crown's earnings, which have ranged from 3.1 percent to 14.3 percent of revenue in the last five years. Crown lost $10.5 million in the first quarter of this year when several major oil companies lost money on their marketing and refining operations.
About two-thirds of the stores Crown is acquiring now sell gasoline, but their volume is far lower than that of Crown's stations, which Rosenberg said pump three to four times the national average sales.
Under Sun's management, the stores did about $328 million in sales last year, roughly 30 percent of that in gasoline. The acquisition will add almost 20 percent to Crown's sales, which totaled $1.7 billion last year.
Sun failed to get the store's maximum potential from its gasoline sales, he added. "We can increase it 40 to 50 percent in the near term." Though Crown will supply them with gasoline from its Houston refinery, Rosenberg said Zippy and Fast Fare will continue to operate as separate companies.
The new Crown units stretch across a territory from Tidewater, Va., south through North and South Carolina, Georgia, Florida and Alabama.
Crown President George W. Jandacek said the company recently equipped three of its 213 stations with what it calls "express marts," selling milk, bread, cigarettes and a few other items.
By year end, another 15 to 20 stores will get the small convenience stores, and automatic teller machines are being installed in another half dozen units, Jandacek said. Five bank card machines are already in place under contracts with Union Trust Co. of Maryland and Bank of Virginia.