Rise in e-commerce fuels truck stop demand amid COVID-19
Jon Pertchik, TravelCenters of America CEO, joins Yahoo Finance's Zack Guzman to talk about how the coronavirus is impacting truck stops, as online product demand soars while many Americans are working from home.
Video Transcript
ZACK GUZMAN: We've talked a lot about commercial real estate getting hit during this pandemic. Retail, of course, slowly clawing its way back. Hotels still a long way from seeing normal. But one key less talked about space is actually catching a boost due to an increase in shipments for e-commerce purchases and a jump in home building sentiment as well, and that would be truck stops. The opportunity is largely controlled in the US by three companies, the largest two being privately held, including the top dog in Pilot, which even attracted an investment from Warren Buffett three years ago.
But the third largest is Westlake, Ohio-based TravelCenters of America, which trades on the NASDAQ, and is up more than 50% since reporting quarterly results at the beginning of the month, when the company revealed a nearly 80% increase in net income over the same quarter a year ago. Joining us now for more on that momentum and the opportunity ahead is TravelCenters of America CEO, John Pertchik joins us now. And John, thanks for coming on. I'm having this discussion, my own father was a trucker for a little bit here. So talk to me about what you're seeing during all this, because we've seen such pain in a lot of these services. But trucking apparently not one of them. So what are you seeing right now?
JOHN PERTCHIK: So trucking, we're viewed, and all related things to trucking, we're viewed of course, as essential services. Truckers have been really through all of COVID, things are moving on the backs of trucks. And so the business dropped off a bit, but has continued to do pretty well. And for us, we've done at least as well in terms of diesel volumes through the second quarter than we did last year, which is pretty amazing. Some of our businesses, like the full service restaurants, were quite a bit down. They were not essential. But the rest have done well, and frankly, continue to improve.
ZACK GUZMAN: And on that front, I mean, I'd be remiss if I didn't dig into why we saw net incomes improve so much in the quarter. You did make note of furloughs for your guys as employees, specifically, I guess tied to some of those restaurants that were closed. You have about 50% of those that were closed back open. But talk to me about how that's sustainable, since obviously, you can't furlough workers for the rest of the year. But what exactly are you doing to kind of change that, since I know that it's not just furloughing workers? What else is going on to see that income improve so much?
JOHN PERTCHIK: Well, partly the furloughing I think put a spotlight on a part of our business that probably was fairly inefficiently managed in the past. And those were our full service restaurants. And that's one of the takeaways. And so we are very focused on managing very differently. I've been here six, seven months, and we have a whole new leadership team in here, and we're doing things very, very differently.
In addition, nothing to do with COVID, we undertook a comprehensive corporate restructuring where we pulled $13 million in actual run rate savings. That's 8% of corporate SG&A we pulled out, and within that, actually brought in a whole number of new SVP leaders, who are really, really warriors and really strong at what they do, and are making very different decisions every day.
ZACK GUZMAN: Well, you're heralded as a turnaround guy, and as you said, I mean, starting a few months ago here, you're really thrown into it with the pandemic hitting here as well. But over the last few months, you guys highlighted a bit of an uptick here, not just in April to May to June, but also in July, continuing on that trend line, doing better even than what you saw in prior year over the month of July.
So when you talk about the turnaround that's going on right now, even during COVID, as a turnaround man, what right now has you most excited to see these trends continue if a lot of these catalysts not being just e-commerce, but also home building sentiment here, what do you want to capitalize on the most?
JOHN PERTCHIK: Boy, it's pretty boundless. I mean, with the entire new team and an entirely different perspective on how to run our various businesses, we have so many areas, and we are just getting started. May 1 is when we onboarded the new team. Imagined onboarding, finding and onboarding senior leadership during something like COVID. I mean, it's hard enough. And we've done that. We're only three months into it. So this team is really just getting started.
The way we purchase things, the way we procure, was not really in a consolidated organized fashion. We didn't benefit from our Fortune 500 economies of scale purchasing power. We very much are now. So in general, how we buy stuff, we're dusting off and re-initiating a new set of mission, vision and values I think are going to be pretty powerful, to kind of pull the 20,000 plus people together, be marching to kind of a single drumbeat. So I'm really, I'm excited about a lot of things right now.
