Arko Nears 500 Dealer Conversions, Eyes 2027 Finish

Arko Corp. has converted roughly 500 stores to dealer sites, nearly one-third of the locations it operated when the program launched in spring 2024. Chairman, President and CEO Arie Kotler disclosed the figure on the company's Q3 earnings call on Thursday. He expects the "dealerization" program to be largely completed by the end of 2027.

The timeline has stretched. Earlier this year, Kotler said conversions would wrap up by the end of 2026. Arko first announced the plan in May 2024, when targets were inexact. Kotler said then it would involve "a meaningful number" of locations.

Why did Arko extend the program?

Refined results drove the decision, Kotler said.

"As we continued to focus and as we continued to see results, we just refined the numbers, and that's why we decided to extend our program a little bit and extend the amount of stores in some areas," Kotler said during the call.

Arko now has 55 additional locations under a letter of intent for conversion. Kotler estimated the company will retain around 900 stores once the program ends.

The retained stores outperform the converted sites. Kotler said Arko is keeping top performing stores that post significantly higher merchandise sales and fuel gallons than locations slated for conversion.

What do the retained stores' numbers show?

Across the retained portfolio, merchandise sales growth excluding cigarettes rose almost 1% year over year. Same-store merchandise margins improved by 50 basis points to 34.8%, Kotler said.

Remodeling is the second lever. Arko continues to update locations with its proprietary Fas Craves foodservice and other improvements. The company expects to complete 25 remodels this year. Eleven are already finished.

Initial reports show remodels are delivering low-double-digit sales growth, according to Kotler.

Chief Financial Officer Galagher Jeff said on the call that there's "a lot of headroom" for foodservice sales to keep growing.

New construction adds a third growth path. Arko completed three new builds during the first nine months of the year. Those sites generate a nearly 20% return on investment, Kotler said.

The extended 2027 deadline gives Arko time to convert the 55 sites under letter of intent while sharpening the split between company-operated and dealer-run locations.