ARKO (NASDAQ:ARKO) reported second-quarter results that reflected softer retail demand in June amid elevated gasoline prices and pressure on consumer spending, while management said disciplined fuel pricing, wholesale performance and growth initiatives supported profitability.
Adjusted EBITDA totaled $72 million in the second quarter, down from $76.9 million a year earlier. Net income was $9.4 million, compared with $20.1 million in the prior-year period, which included an approximately $21 million non-cash gain related to a sale-leaseback transaction. For the first half of 2026, Adjusted EBITDA increased 14% to $123 million from $108 million a year earlier.
Retail Sales Decline Modestly as Margins Expand
Same-store merchandise sales excluding cigarettes declined 0.9% in the quarter, while total same-store merchandise sales fell 1.7%. Chief Financial Officer Galagher Jeff said lower spending through SNAP/EBT programs reduced same-store sales growth excluding cigarettes by about 75 basis points, primarily across three states. SNAP/EBT represented less than 2% of company sales, he said.
Despite the sales pressure, ARKO’s merchandise margin increased 110 basis points to 34.7%. Same-store merchandise margin rose 40 basis points to 34.7%, supported by dealerization efforts, pricing discipline, product mix and vendor-funded promotions. Kotler said the company delivered nearly flat same-store merchandise margin dollars despite the softer demand environment.
Retail fuel same-store gallons declined 5.7%, but same-store fuel margin increased 6.5% to 48.7 cents per gallon from 45.7 cents per gallon a year earlier. Same-store fuel contribution rose to $97.8 million. Management said higher fuel margins more than offset lower gallon volumes, though higher gasoline prices also raised credit card fees.
Same-store operating expenses increased to $156.5 million from $148.2 million, mainly due to approximately $3.3 million in higher credit card fees tied to elevated fuel prices, along with somewhat higher insurance, personnel and rent costs. Consolidated general and administrative expense rose to $43.7 million from $40.7 million, largely because of stock-based and normalized incentive compensation. Regular personnel expense declined by $1.3 million from the prior year.
Loyalty, Food Service and Dealerization Initiatives Continue
Kotler said ARKO is using its loyalty programs and targeted promotions to attract value-oriented consumers. Under the company’s Fueling America’s Future program, fas REWARDS members can earn stackable fuel discounts of up to $2.50 per gallon on up to 20 gallons through qualifying in-store purchases. The program has saved enrolled members more than $4 million since inception, according to the company.
ARKO added more than 100,000 loyalty members during the quarter, a 5% increase. Enrolled members spent more than twice as much per month as non-enrolled customers, while their visits and average basket sizes were nearly 50% higher, Kotler said. The company’s 10-cent Tuesdays promotion, launched in June, contributed to double-digit growth in enrolled gallons sold on Tuesdays.
The company completed two store remodels during the quarter and had 12 more projects underway, with approximately 25 remodels planned for 2026. Completed remodels produced double-digit growth in merchandise sales and gallons compared with pre-remodel periods, management said. ARKO also opened one new-to-industry retail store, with several newer stores generating returns approaching 20% while still in their ramp-up periods.
ARKO has expanded its fas craves food and beverage offering to about 140 stores and expects to add more locations this year. Kotler said food service has helped lift margins, while management continues to test menu options, pricing and operating models.
Dealerization remained a central part of the company’s cost-transformation strategy. ARKO converted 21 retail stores to dealer locations in the second quarter, bringing total conversions to 471 since the program began in mid-2024. About 70 additional stores were under letters of intent, contract or in process following the quarter. Kotler said the company expects to dealerize slightly more than 500 locations, though it has not set a formal target.
Wholesale and Fleet Results
Wholesale operating income rose 7.1% to $24.9 million. Wholesale gallons declined to 241 million from 252 million, while fuel margin increased 8.7% to 10.9 cents per gallon. Management attributed the margin increase primarily to higher prompt-pay discounts.
Fleet fueling operating income increased 1.6% to $13.3 million, while gallons were essentially flat at 36.4 million. Fleet fuel margin declined to 46.9 cents per gallon from 49 cents per gallon. Jeff said margins were affected by a declining fuel-price environment because certain customer contracts are priced at a fixed amount relative to OPIS pricing while inventory costs can lag.
ARKO has identified 20 new cardlock locations to open during 2026 and has opened three so far. Management said the business offers low capital requirements, expected mid- to high-teens returns per location and recurring cash flow.
APC Plans USPP Acquisition
ARKO also highlighted the planned acquisition by its approximately 74%-owned subsidiary, APC, of the business of U.S. Petroleum Partners, or USPP. The transaction is expected to add approximately 280 million gallons of annual fuel volume, more than 400 dealer locations, two terminals on the Buckeye Pipeline and a transportation fleet that handles more than 80% of USPP’s distributed fuel volumes.
Consideration at closing is expected to include $205 million in cash plus inventory costs. APC also plans to issue $30 million in Class A common stock into escrow, subject to EBITDA-based performance targets during the first four fuel quarters after closing. The deal is expected to close later in 2026 and add approximately $30 million of annual Adjusted EBITDA to APC.
Kotler said the acquisition would increase APC’s trailing 12-month gallons sold by about 14%, enhance its position in the Great Lakes region and provide additional terminal, transportation, storage and logistics capabilities. He also said the greater scale could strengthen supplier relationships and potentially improve fuel costs across ARKO’s retail and wholesale operations.
Guidance and Liquidity
ARKO reaffirmed full-year 2026 Adjusted EBITDA guidance of $245 million to $265 million. The company increased its outlook for full-year retail fuel margin to a range of 45.5 cents to 47.5 cents per gallon, saying higher margins are expected to offset lower retail fuel volumes.
During the quarter, ARKO repurchased $38 million principal amount of its 5.125% senior notes for $35 million in cash. The company ended the quarter with $246 million in cash and cash equivalents, approximately $1 billion of total liquidity and $675 million of long-term debt excluding lease-related financing liabilities. Subsequent to quarter-end, ARKO increased aggregate capacity under its PNC credit lines by $74 million to $214 million.
About ARKO (NASDAQ:ARKO)
ARKO Corp (NASDAQ: ARKO) is a downstream energy and convenience retail company based in Matthews, North Carolina. The company’s core operations encompass fuel supply, distribution and retailing through a network of terminals, independent dealer locations and company-operated convenience stores. ARKO’s fuel offerings include branded and unbranded gasoline and diesel, as well as lubricants and other petroleum products marketed under various regional and private labels.
In its retail segment, ARKO operates a portfolio of convenience stores under the Kangaroo Express banner, serving on-site customers with fuel, grab-and-go food items, beverages and everyday household essentials.
