Convenience Stores: In-Store Sales and Consolidation

Introduction

The sign out front advertises the price of gasoline, but the money is made inside. A convenience store sells fuel at a margin of a few tens of cents per gallon to bring drivers onto its lot, then earns most of its profit from what they buy once they walk in: coffee, prepared food, cold drinks, snacks, tobacco and lottery tickets. The best operators treat fuel as the reason for the trip and the store as the business, which is why in-store sales decide the economics of the format.

Casey's, which runs nearly 3,000 stores across the US Midwest and South, shows the mix. In its fiscal year to April 2026 it earned an inside margin of 42.2% on in-store sales, a 58.6% margin on prepared food and dispensed beverages and 42.6 cents per gallon on fuel, with revenue of $17.56 billion and earnings before interest, taxes, depreciation and amortization (EBITDA) of $1.48 billion, according to Casey's full-year results. This article explains why in-store sales matter so much, how scale and density drive margins and why the industry keeps consolidating.

Fuel dominates convenience store revenue because gasoline is expensive per transaction, but it contributes far less of the gross profit. Fuel margins are quoted in cents per gallon rather than as a percentage, because the retail price swings with oil markets while the margin a retailer keeps per gallon is relatively steady. Margins often widen when wholesale prices fall, because retail prices lag on the way down, and narrow when wholesale prices spike, so fuel margin volatility makes single-quarter results a poor guide. The fuel supply chain and its economics are covered from the energy side in the Energy guide's fuel marketing and retail convenience stores.

Inside Sales

All sales made inside a convenience store, excluding fuel: prepared food and beverages, packaged drinks, snacks, tobacco and nicotine, groceries, general merchandise and services. Operators report inside same-store sales and inside margin as their main measures of store performance.

The arithmetic shows why the store matters more than the pump.

Fuel also brings risk. Electric vehicles, better fuel economy and changing commuting patterns threaten gallon volumes over time, so operators with strong inside sales, especially foodservice, are better placed than those that depend on the pump.

Inside the store, categories differ sharply in margin and direction.

Foodservice is the category operators fight over. Fresh pizza, sandwiches, breakfast items and coffee carry the highest margins in the store and give shoppers a reason to choose one store over the one across the road. They also need kitchen equipment, trained staff and food safety systems, so they suit operators with scale and a consistent format. Casey's prepared food and dispensed beverage margin of 58.6% compares with its overall inside margin of 42.2%, showing how much foodservice lifts the mix.

Tobacco and nicotine remain one of the largest categories by sales, but cigarette volumes decline steadily. Retailers offset part of the decline through price increases passed on by manufacturers and through growth in nicotine pouches and other alternatives, a shift covered in tobacco and nicotine: cash flows and next-gen products. An operator heavily exposed to cigarettes faces a slow erosion of traffic and sales that foodservice has to replace.

Convenience retail rewards density: many stores close together in a region. Dense networks let an operator run its own distribution, deliver fuel and merchandise on short routes, share management across stores and advertise efficiently. Some large chains, including Casey's, distribute merchandise to their stores themselves rather than relying on third-party wholesalers, capturing margin that smaller operators pay away.

Scale brings further advantages. Larger chains negotiate better terms with fuel suppliers and consumer brands, develop private label snacks and drinks, run loyalty apps that track customers' visits and fund the kitchens and store formats that foodservice needs. Small operators, by contrast, often buy through wholesalers, lack the capital to remodel and struggle to add foodservice, which is why the economics favor consolidators.

Labor and the store format

Store labor is the main operating cost inside the store, and foodservice adds to it. Operators balance staffing against hours, since many stores open around the clock, and newer large-format stores with more kitchen space, seating and parking cost more to build but produce higher inside sales. The format decisions resemble those for any retail fleet, as described in store fleet and real estate decisions for retailers.

The US convenience industry is fragmented, with many operators running only one store or a handful. That creates a steady supply of acquisition targets, as founders retire or small chains lack the capital to compete, and a group of consolidators ready to buy them.

The logic of a convenience store acquisition rests on a few sources of value:

Casey's largest deal shows the model. It completed the acquisition of Fikes Wholesale, owner of 198 CEFCO convenience stores, 148 of them in Texas, on 1 November 2024 for $1.145 billion in cash, with tax benefits of about $165 million bringing the net after-tax price to about $980 million, according to the National Association of Convenience Stores (NACS). The deal extended Casey's into a new region where it could add its food program and distribution. By April 2026 it operated 2,944 stores and planned at least 120 openings in the following year through acquisitions and new construction.

Large cross-border deals are harder. Alimentation Couche-Tard's roughly $47 billion approach to Seven & i Holdings, owner of 7-Eleven, was withdrawn in July 2025, with Couche-Tard citing a lack of constructive engagement. Such deals face shareholder, political and antitrust hurdles that small roll-up acquisitions avoid.

Real estate in c-store deals

Many convenience operators own the land under their stores, and well-located sites with fuel rights are valuable to other users. That makes real estate a funding source in c-store M&A: a buyer can arrange a sale-leaseback, selling acquired stores to a net-lease investor and leasing them back, recovering part of the purchase price and lowering its equity cheque. The trade-off is a long-term rent obligation and less flexibility if a site weakens. The structuring of those transactions is covered in the Real Estate guide's sale-leaseback advisory, and environmental liabilities from underground fuel tanks are a standard diligence item on any owned site.

How regulators define those local markets is covered in antitrust in consumer deals: markets and divestitures.

When advising convenience operators or their buyers, bankers concentrate on the drivers of inside profit and the durability of fuel volumes:

For a coverage banker, convenience retail is a consolidation story built on one insight: the operator that wins inside the store, with better food, better drinks and better density, can pay more for the next store than anyone else, and the industry keeps rewarding the buyers who can prove it.