ARKO Q1 Earnings Call Highlights

Key Points

• Adjusted EBITDA rose about 65% year over year to roughly $51 million and the net loss narrowed to $5.6 million, while ARKO finished the quarter with $272 million in cash, about $1.1 billion in total liquidity and used APC IPO proceeds to pay down $206.7 million of debt (long-term debt now ~ $704 million).
• Management emphasized dealerization as a major profit driver—41 stores converted in Q1 (450 total since 2024) with roughly $30 million of transformation benefits realized, contributing to a 12% decline in retail site-level operating expenses year over year.
• Operational trends improved: same-store merchandise sales ex-cigarettes rose 0.4% (the strongest ex-cig performance in two years) with merchandise margin up 70 basis points to 33.9%, and fuel performance strengthened (retail cents per gallon $0.479 and same-store fuel contribution up ~20%) despite a 3.2% decline in gallons.

ARKO NASDAQ: ARKO executives said first-quarter 2026 results reflected what CEO Arie Kotler described as a “clear inflection point” driven by broad-based execution across the company’s retail, wholesale, and fleet fueling operations, along with ongoing cost discipline and benefits from its dealerization strategy.

Adjusted EBITDA rose about 65% year over year to approximately $51 million, while the company reported a net loss of $5.6 million compared with a net loss of $12.7 million in the prior-year period, CFO Galagher Jeff said. Management emphasized that the quarter’s performance was not attributable to a single factor, pointing instead to improvements in merchandising trends, fuel margin execution, lower operating expenses tied to dealerization, and reduced corporate overhead.

Retail trends improve amid weather disruptions

In ARKO’s retail segment, same-store merchandise sales declined 0.5% for the quarter, but same-store merchandise sales excluding cigarettes increased 0.4%, which Kotler and Jeff both characterized as the strongest ex-cigarette performance in two years. Kotler said the improvement reflected “improved execution, sharper pro-promotions, our Fueling America’s campaign, and stronger customer engagement.”

Merchandise margin increased 70 basis points year over year to 33.9%, Jeff said, attributing the improvement to product mix and targeted promotions. Kotler noted this year’s 70-basis-point gain came on top of a 70-basis-point increase in the first quarter of last year. He also said cigarette sales were better than expected due to promotional pricing and manufacturer support, while other tobacco products “continued to grow strongly.”

Winter storms in January and early February affected results across ARKO’s footprint. Jeff estimated that without weather disruption, same-store merchandise sales volumes would have been about 80 basis points stronger, and storm-related impacts to total company fuel gallons would have been approximately 160 basis points.

Management said trends improved as the quarter progressed. Kotler said traffic, transactions, and gallons strengthened in March following early-quarter disruptions.

Fuel contribution strengthens as pricing strategy resonates

Fuel was a major earnings contributor during the quarter, according to Kotler. Retail cents per gallon were $0.479, and same-store fuel contribution increased about 20%, management said. Jeff added that retail cents per gallon rose by roughly $0.10 from the year-ago period. Same-store fuel gallons declined 3.2% year over year, but management said performance improved sequentially through the quarter, with fuel transactions up approximately 7% in March.

Kotler said ARKO navigated a volatile fuel pricing environment effectively and believes strengthening gallon trends in March, “even as retail prices increased,” showed the company’s value messaging and promotions were resonating. He pointed to the Fueling America’s Future discount fuel campaign and said the company remains focused on value heading into the summer driving season. Kotler also noted that while higher fuel prices can reduce fill sizes, they may increase visit frequency, reinforcing ARKO’s strategy to pair competitive pricing with promotions.

Dealerization and cost controls drive expense reductions

Dealerization remained a central theme of the call. Kotler said ARKO converted 41 retail stores to dealer locations during the first quarter, bringing total conversions to 450 since the company adopted its transformation plan in 2024. He said approximately 75 additional stores are committed under letters of intent, under contract, or already converted since quarter end, and management expects to complete those conversions plus additional ones by the end of 2026.

When asked about the expected savings from the transformation plan, Kotler said the company had previously discussed a “$20 million upside,” but that “approximately $30 million benefits already is in place” on a trailing 12-month basis. He added that ARKO intends to “stick to our plan at the moment,” while remaining open to additional opportunities if they emerge.

Expense performance reflected the mix shift toward dealer sites. Jeff said total retail site-level operating expenses fell 12% to $155.9 million, compared with $177.2 million in the prior-year period, primarily driven by dealerization. On a same-store basis, operating expenses increased 3.3% year over year, which Jeff attributed to slightly higher labor rates, utilities, and higher credit card fees as retail fuel prices increased in March.

On a consolidated basis, G&A expenses declined 4% year over year, consistent with what Kotler called a “leaner structure and continued operating discipline.”

Wholesale and fleet fueling results; APC IPO and balance sheet update

In the wholesale segment, Jeff said operating income was approximately $23 million, benefiting from dealerization and the related expansion of wholesale volume and profit contribution. Wholesale gallons were about 234 million, and fuel margin was $0.098 per gallon.

In fleet fueling, operating income was approximately $12 million, up 9% year over year, Jeff said, citing a strong margin environment. Fleet fuel margin was $0.493 per gallon, while gallons declined 3.2% and were also impacted by weather events.

Kotler and Jeff also highlighted the February 2026 initial public offering of a minority interest in ARKO’s subsidiary, ARKO Petroleum Corp. Kotler said the structure provides transparency into the wholesale, fleet fueling, and GPMP businesses and their cash flow attributes. As of March 31, 2026, Kotler said ARKO owned 35 million shares of APC, representing an implied value of roughly $650 million based on APC’s market capitalization of approximately $900 million.

Jeff said ARKO ended the quarter with $272 million in cash and total liquidity of approximately $1.1 billion. The company used net proceeds from the APC IPO to pay down $206.7 million of debt during the quarter, bringing long-term debt to $704 million, excluding lease-related financing liabilities.

Capital allocation and outlook: remodeling, NTI stores, and loyalty growth

Management reiterated its capital allocation priorities: executing on dealerization, investing in retail initiatives and remodels, supporting new-to-industry (NTI) and cardlock growth, and maintaining balance sheet discipline. Capital expenditures were approximately $31 million in the first quarter, Jeff said, primarily focused on growth capital. He added that ARKO had 17 cardlocks and 25 remodels underway.

Kotler said the company opened two NTI retail stores and one NTI cardlock location in the first quarter. He said ARKO remains on track in 2026 for three new Dunkin’ stores, one NTI retail store, 20 NTI cardlocks, and 25 remodels. Executives described fleet cardlock expansion as an attractive use of capital due to a “modest labor model” and return profile.

On loyalty, Kotler said enrollment increased 98% in the first quarter compared with the prior-year period, with about 53,000 new members. He noted that nearly half of new enrollees joined after the launch of a new app and a $10 enrollment program in early March, and said the updated platform should improve personalization and communication.

Discussing remodel performance, Jeff said early remodels completed last year produced about a 12% increase in merchandise sales and a 14% increase in gallons compared with the pre-remodel period, with some categories up 20% to 30%. Kotler emphasized an increased focus on adding food service and value-priced meal offerings to drive traffic and engagement.

Despite the strong start, Jeff said the company would not update full-year guidance due to uncertainty in the market. Kotler added that April trends had continued year-to-date patterns and said management intends to remain “disciplined” and focused on execution.

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.

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