管理層發言
Greetings, and welcome to Arko Corp.'s second quarter 2026 earnings conference call. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Priya Trivedi, Investor Relations. You may begin.
Thank you. Good morning, and welcome to Arko's second quarter 2026 earnings conference call and webcast. On today's call are Arie Kotler, Chairman, President and Chief Executive Officer, and Jeff Gallagher, Chief Financial Officer. Our earnings press release and quarterly report on Form 10-Q for the second quarter of 2026, as filed with the SEC, are available on Arko's website at www.arkocorp.com. During our call today, unless otherwise stated, management will compare results to the same period in 2025. Before we begin, please note that all second quarter 2026 financial information is unaudited. During this call, management may make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Please review the forward-looking and cautionary statement section at the end of our second quarter 2026 earnings release for various factors that could cause actual results to differ materially from forward-looking statements made during today's call. All forward-looking statements made during this call reflect our current views with respect to future events, and Arko is under no obligation to update or revise forward-looking statements made on this call, whether as a result of new information, future events, or otherwise, except as required by law. On this call, management will share operating results on both a GAAP and non-GAAP basis. Descriptions of the non-GAAP financial measures that we use, such as adjusted EBITDA, and reconciliations of those measures to our results as reported in accordance with GAAP, are detailed in our earnings release or in the quarterly report on Form 10-Q for the quarter ended June 30, 2026. Additionally, management will share profit measures for our individual business segments along with fuel contribution, which is calculated as fuel revenue less fuel costs, and excludes intercompany charges by our GPMP segment. Now, I would like to turn the call over to Arie.
Thank you, Priya, and thank you all for joining. Before we begin, I want to welcome Priya Trivedi, who recently joined us as our new head of investor relations. Many of you will have the opportunity to connect with Priya, and we are excited to have her on our team. Before turning to the detailed results of the quarter, I want to spend some time on yesterday's announcement by APC, our approximately 74% owned subsidiary, on signing an agreement to acquire the business of U.S. Petroleum Partners, or USPP. We believe this planned acquisition is not simply another acquisition. It is a strategic step that accelerates APC's growth plan, expands scale in attractive markets, and demonstrates the earning power we believe can be created from the APC platform. As a reminder, in February, we publicly offered a minority interest in our subsidiary, APC, to give investors a clearer view of the strength and value of our wholesale, Fleet Fueling, and GPMP businesses. At the time of the IPO, we outlined a clear strategy: compound stable fee-based earnings through disciplined, accretive acquisition while giving Arko shareholders direct participation in the value created by APC. The USPP transaction is exactly the type of opportunity we built APC to pursue. This deal demonstrates each of the key pillars of APC's investment thesis. It deepens supplier relationships, expands APC's stable fee-based business model, utilizes the financial flexibility created through the IPO, builds on a proven acquisition track record and accelerates APC's growth outlook. USPP is a sizable, vertically integrated fuel distribution platform and a highly strategic fit for APC. The pending acquisition is expected to add approximately 280 million gallons of annual fuel volume, increasing APC trailing 12-month gallons sold by approximately 14% by adding more than 400 dealer locations. Upon closing, the addition of the USPP business will not only meaningfully expand APC's scale and presence in the Great Lakes region, it will also add two fuel terminals on the Buckeye pipeline and a transportation fleet that currently handles more than 80% of USPP's distributed fuel volumes. By adding terminal and transportation capabilities, APC can participate in more of the refined product value chain, thereby potentially capturing incremental margin opportunities, strengthen last-mile logistics, and add another source of stable fee-based earnings. The consideration at closing will consist of $205 million in cash plus the cost of inventory. Additionally, at closing, APC will issue $30 million in Class A common stock to be held in escrow and be released to USPP, subject to the acquired business achieving certain EBITDA-based financial targets in the first four fuel quarters after we close the transaction. This earn-out payment is subject to adjustment if the acquired business does not achieve $31.7 million EBITDA and $2.2 million EBITDA generated by certain fuel-related components. EBITDA is defined in the purchase agreement. Also, the earn-out may increase if the acquired business achieves results that are greater than these financial targets. We expect the transaction to close later this year, to be accretive upon closing, and to add approximately $30 million of annual adjusted EBITDA to APC and enhance its discretionary cash flow. This is a clear example of the strategic value creator APC, a growth vehicle with access to capital and attractive conversion of adjusted EBITDA to discretionary cash flow and a disciplined balance sheet supporting a dividend from which Arko Corp and our shareholders benefit. APC gives us a second public platform for value creation while allowing Arko to remain focused on transforming the retail business. Turning now to Arko's results, we operated against a challenging consumer backdrop and a highly volatile fuel pricing environment during the second quarter. Consumer sentiment reached historic lows while prolonged higher fuel prices placed additional pressure on household budgets and influenced purchasing behavior. The national average for gasoline prices climbed from $4.24 per gallon in April to nearly $4.61 per gallon in May, before finally easing to roughly $3.96 per gallon at quarter end. While trends held relatively steady throughout much of the quarter, the cumulative pressure showed up more visibly in June as retail demand softened. Trips to the pump actually increased as customers fueled up more frequently, but we saw pressure on both gallons sold and in-store spending. Despite these pressures, we closed out the first half of 2026 in a solid position with adjusted EBITDA up 14% versus last year. As a reminder, when fuel prices rose rapidly earlier this year, we reacted quickly and disciplined pricing delivered an exceptionally strong first quarter with adjusted EBITDA up 65% year over year. We knew that as elevated prices persisted, a portion of that outsized fuel margin benefit would normalize. Through strong execution, we minimized the give back in the second quarter, delivering adjusted EBITDA of $72 million compared to $76.9 million in the prior year period. The year-over-year decline in the second quarter was largely driven by $3.3 million of increased credit card fees on a same-store basis associated with elevated fuel prices. Taken together, first half adjusted EBITDA was $123 million compared to $108 million last year, up a strong 14% year-over-year. The consumer environment tested the model, and our results showed the benefit of scale, disciplined pricing, and a more diversified earnings base. We remain focused on what we can control: delivering clear value, maintaining disciplined pricing, managing expenses, and executing initiatives that improve the long-term productivity and cash flow profile of the business. Now turning to the results by segment. In our retail business, trips to the pump increased 4% as customers fueled up more frequently, though gallons sold remained under pressure and convenience store spending softened in June. Same-store merchandise sales excluding cigarettes declined a modest 0.9%. At the same time, disciplined category management, vendor-supported promotions, market share gains in several key categories and our dealerization program drove merchandise margin to 34.7%, an expansion of 110 basis points versus last year and delivered nearly flat merchandise margin dollars on a same-store basis. In a pressured consumer environment, maintaining nearly flat same-store merchandise sales excluding cigarettes while expanding margin by 110 basis points is an important proof point for the quality of our retail execution. Fuel remained an important earnings stabilizer during the quarter, and we continue to balance competitive pricing and customer value while maximizing fuel gross profit dollars. Same-store fuel contribution increased slightly compared to the prior year period, as an increase in same-store retail cents per gallon margin driven by disciplined pricing and the benefit of our scale more than offset lower same-store gallons. We remain committed to using targeted fuel offers to drive traffic, loyalty enrollment, and profitable in-store engagement while recognizing elevated fuel prices and associated credit card fees will continue to be a headwind. In wholesale, cents per gallon margin increased year over year, primarily reflecting higher prompt-pay discounts while gallons declined due to higher retail fuel prices, partially offset by retail sites converted to dealer locations through our dealerization program. Fleet Fueling operating income was relatively flat year over year as margin compressed this quarter and the prior year period had a higher-than-average margin. Our value proposition remains central to driving traffic and engagement in a pressured consumer environment. We believe we have the best fuel discount program in the country. Through Fueling America's Future, enrolled Fast Rewards members can earn stackable fuel discounts of up to $2.50 per gallon on as many as 20 gallons by purchasing qualifying items in our stores, which has saved our enrolled members more than $4 million since inception. This is not only a customer value program; it is a traffic, loyalty, and gross profit engine that strengthens our relationship with high-value customers. The data reinforce why we are so focused on loyalty. In the second quarter, enrolled members' average monthly spend was more than twice that of non-enrolled members. Numbers of visits and average basket size were almost 50% higher versus non-enrolled members. These are not incremental differences. They represent a fundamentally more valuable customer relationship and a meaningful opportunity to grow repeat traffic, basket attachment and margin over time. In June, we introduced 10-Cent Tuesdays, offering enrolled members a fuel discount on Tuesdays. Since launch, enrolled gallons sold on Tuesdays have grown double-digit, demonstrating strong engagement with the loyalty program and its compelling value proposition. We're also leveraging vendor-supported promotion with major vendors and consumer product partners, which delivered a further 6% in customer savings while protecting our merchandise margin. We took action in Q2 to win value-seeking customers, adding more than 100,000 new members, or 5% during the quarter. We will continue working with our supplier partners to help customers save on everyday purchases while driving profitable engagement for Arko. This engagement is already showing up in our financials. Enrolled sales growth and enrolled margins both increased 30 basis points in Q2 compared to Q1. With loyalty, our focus is increasingly on the quality of the engagement: active users, repeat visits, incremental basket attachments, gross profit contribution, vendor funding, and measurable return on promotional spend. Behind loyalty, we continue to invest in initiatives designed to modernize our retail offerings, improve customers' experience, and strengthen long-term store economics. During the quarter, we completed two remodels with 12 additional projects currently in progress and we expect a total of approximately 25 remodels in 2026. Because stores generally stay open during construction, temporary closure of a portion of the sales floor creates a modest headwind to comparable same-store merchandise sales. Completed remodels generated double-digit merchandise sales and gallon growth versus the pre-remodel period, reinforcing our confidence that targeted capital investment can unlock higher productivity from the existing store base. We also opened one new-to-industry retail store during the quarter. A remodeled and new-to-industry retail location incorporates our fas craves food and beverages offering, updated layout, and new technology and operating processes designed to improve store productivity. We are encouraged by the results we're seeing from the NTI open so far. While several are still in ramp-up stage, we're seeing returns approaching 20%, which gives us confidence as we look to accelerate the program in a disciplined way. To support the continued growth and modernization of the company's store and fueling footprint, we recently added to our real estate development team an accomplished vice president of real estate development with 30 years of industry experience. Our extensive track record in new store development, capital deployment and strategic growth will support the execution of the company's remodel, new-to-industry store, and new cardlock initiative. As planned, we continue to expand what is one of the largest cardlock platforms in the country. We have identified 20 new cardlock locations for opening in 2026, have opened three new locations thus far, and have the remaining 17 in various stages of development. We expect to continue adding to this segment because we like the low capital investment, attractive mid-to-high-end expected return per location, and recurring cash flow characteristics of this model. We now offer an enhanced food service offering in approximately 140 of our stores and expect to expand that to additional locations this year. We remain deliberate in our pace of expansion, prioritizing the regions and stores best positioned to maximize margin while incorporating learning along the way. Dealerization remains an important lever in Arko's transformation. During the second quarter, we converted 21 additional retail stores to dealer locations, bringing our total to 471 conversions since the program began in the middle of 2024. We also have approximately 70 additional stores committed under letter of intent, under contract or already converted since quarter end. Each conversion moves us further towards a lower-cost, more capital efficient operating model with stronger cash flow characteristics. While the pace of conversion moderated this quarter, our expectation for the program remained unchanged. Stepping back, I want to reiterate again, we ended the first half of the year in a solid position with adjusted EBITDA up 14% versus last year. Our execution through the first half gives us conviction in our full-year outlook. With that, I will turn the call over to Jeff to review our second quarter results in greater detail.
Thank you, Arie, and good morning, everyone. As Arie noted, our second quarter results reflected softening in our retail business in June, while APC and disciplined fuel margin management continued to support overall profitability. Adjusted EBITDA was $72 million compared with $76.9 million in the prior year period. Net income was $9.4 million compared with $20.1 million in the prior year period. As a reminder, last year's second quarter included approximately a $21 million non-cash gain related to a sale-leaseback. Despite the softer retail demand, we continue to generate healthy cash flow, manage expenses with discipline, and preserve flexibility to invest in our highest-return priorities. Looking at our retail segment, same-store merchandising sales excluding cigarettes were slightly down 0.9% versus the prior year period, while same-store merchandising sales overall were 1.7% below the prior year period. Cigarettes continued to decline as expected, but as Arie mentioned, we also saw consumer pressure impact our sales this quarter. We experienced pressure from lower SNAP EBT sales as certain states tightened eligibility rules around benefit purchases. While SNAP EBT accounts for less than 2% of our sales, lower EBT spend in the second quarter reduced same-store sales growth excluding cigarettes by approximately 75 basis points in the quarter, primarily across three states. We continue to focus on offering our customers value through our loyalty program, leveraging Fueling America's Future, 10-Cent Tuesdays, and targeted in-store pricing with key partners to win on value while protecting our margins. Merchandising margin in the quarter increased 110 basis points versus Q2 2025 to 34.7%, with same-store merchandising margin also increasing to 34.7%, an expansion of 40 basis points, compared with 34.3% in the prior year period. This reflected our dealerization efforts, disciplined pricing, favorable product mix, and vendor-supported promotions. On retail fuel, same-store gallons were 5.7% below the prior year period, while same-store fuel cents per gallon margin increased 6.5% to $0.487 per gallon from $0.457. The same-store fuel contribution grew to $97.8 million. Turning to expenses, total retail site-level operating expenses were $160 million compared with $176.6 million for the prior year period. Same-store operating expenses were $156.5 million compared with $148.2 million in the prior year period, driven primarily by approximately $3.3 million of higher credit card fees associated with elevated fuel prices, along with slightly higher insurance, personnel costs and rent. On a consolidated basis, G&A expenses were $43.7 million compared to $40.7 million in the prior year period, primarily driven by increased stock-based compensation and normalized incentive compensation. We continue to manage our personnel expenses closely, reducing regular personnel expenses by $1.3 million versus the prior year period. Turning to our wholesale segment, operating income increased 7.1% to $24.9 million from $23.2 million in the prior year period. Wholesale gallons were 241 million compared with 252 million and fuel margin increased 8.7% to $0.109 per gallon from $0.101 in the prior year period. In our Fleet Fueling segment, operating income slightly increased 1.6% to $13.3 million from $13.1 million for the prior year period. Fleet Fueling gallons were 36.4 million, broadly unchanged from the 36.3 million in the prior year period, while fuel margin was $0.469 per gallon compared with $0.49 in the prior year period, primarily due to higher-than-average fuel margins in the prior year, as well as margin compression during the second quarter of 2026, as index prices declined more quickly than our weighted average inventory cost. Cardlock location expansion remains one of our most attractive capital allocation opportunities, given its return profile, capital-efficient operating model, and recurring cash flow characteristics. Our balance sheet remains healthy and provides flexibility to invest in our strategic priorities. During the quarter, we repurchased $38 million of our 5.18% senior notes for $35 million of cash. Following this, we ended the quarter with $246 million of cash and cash equivalents and total liquidity of approximately $1 billion. Subsequent to the quarter end, we increased the size of our GPM credit line with PNC by $74 million, bringing the aggregate capacity across our PNC credit lines to $214 million. This liquidity positions us well to fund high-return organic projects, support APC's growth strategy, evaluate additional senior note repurchases, and pursue other value-creating opportunities while maintaining a disciplined capital allocation approach. We ended the quarter with $675 million of long-term debt, excluding lease-related financing liabilities, a decrease of $29 million versus Q1. Capital expenditures were $33 million in Q2 compared with $45 million in the prior year period. The majority of our capital spending in Q2 continued to be invested in growth initiatives, and our capital allocation framework remains consistent and returns-focused. Our priorities are completing dealerization and capturing the associated cash flow benefits, investing in high-return remodels, retail NTIs, and new cardlocks, and growing food service. We also maintain balance sheet flexibility, which allows us to deliver our strategy in strategic acquisitions when they meet our disciplined return thresholds, such as APC's planned acquisition of the business of USPP. We are focused on deploying capital only where we believe it can improve the durability, cash generation, and long-term value of the business. We are reaffirming our full year 2026 adjusted EBITDA guidance of $245 million to $265 million. Given the current operating environment, we are increasing our outlook for retail fuel margin range to $0.455 to $0.475 per gallon, with higher margins expected to offset lower retail fuel volumes. Reaffirming guidance in this environment reflects our confidence in the earnings durability of the business and the controllable levers we are executing across retail-operated stores and APC. With that, I'll hand the call back to Arie for closing remarks.
Thank you, Jeff. We delivered a solid first half with adjusted EBITDA up 14% versus last year. We maintained disciplined margin, continued to execute our transformation plan, and reaffirmed our full-year adjusted EBITDA outlook. Most importantly, the key pillars of our investment story are intact. APC is scaling as a public growth platform. Dealerization is improving the cash flow profile of the business. Loyalty is deepening customer engagement and our balance sheet gives us flexibility to pursue value-creating opportunities. We're also excited about yesterday's announcement. The planned acquisition of USPP's business, which we expect will add approximately $30 million of annual adjusted EBITDA to APC, marks the next phase of growth for both Arko and APC. We believe it is a clear demonstration of the value we can create through disciplined, accretive M&A as a public company. It adds scale, enhanced vertical integration, and reinforces why we believe APC can become an increasingly important value driver for Arko shareholders. Our focus remains on execution, capital discipline, and the areas within our control. We believe that through a combination of operational discipline, high-return growth initiatives, and our more diversified earnings platform, Arko is continuing to convert its large convenience and fuel network into a more resilient, higher cash flow business positioned to create meaningful long-term value for shareholders. Operator, please open the line for questions.
分析師問答
Thank you. The floor is now open for questions.
Congrats on the deal announcement. I wanted to understand a little more about the adjusted EBITDA guidance. Is the USPP deal included in the guidance? When I look at the second half, it implies lower EBITDA year over year, but the fuel margin environment seems healthy and you have made some progress inside stores. Can you walk through the assumptions and what puts and takes are assumed in the consolidated adjusted EBITDA guide for the rest of 2026?
Yes, thanks, Bobby. When we prepared the guide, we had planned acquisitions in mind, but we did not know the size or the timing, which is part of why we provided a $20 million range. Based on timing of close, we do expect some benefits this year, and we feel those are captured within the $20 million guidance range. The fundamentals of the business are good and we feel confident about delivering that guidance. The timing of the close will help us for EBITDA, but it is not expected to change our guide.
Okay. What is driving the back-half pressure? The first half EBITDA is up year over year, and the back half at the midpoint implies a decline. What are the moving parts?
It's primarily uncertainty. We've seen fuel volatility and customer volatility. We're executing our programs to drive customers into the stores for fuel and merchandising, and APC is delivering. Month to month, the environment changes, so we did not want to give too much confidence in a specific path other than that we will deliver what we can within the guidance.
Okay, fair enough. On the fleet card segment, margins were down year over year in the third-party locations. Industry retail margins seemed strong in Q2. What pressured the third-party margins so much year over year?
In Fleet Fueling and cardlock, many of our deals are OPIS plus pricing, which is a fixed price for the customer. In a falling market, we can end up paying more because our purchase price may reflect earlier, higher costs, so margin is pressured when index prices decline faster than our purchase costs. That dynamic reduced margins in the falling environment.
Arie, on the USPP deal, you mentioned other capabilities being brought into the enterprise. How do you think that helps the retail network? Are there synergy opportunities in FY '27 and FY '28 from these additional gallons and sourcing capabilities that could offer fuel benefits back into your retail-owned stores?
The biggest benefit is economy of scale. USPP adds about 280 million gallons to our roughly 2 billion gallons, which is a meaningful 14% increase in volume. That scale can drive efficiencies and better cost of goods. It also deepens relationships with major oil companies and provides throughput opportunities and terminal capacity in the Great Lakes region. Bringing terminal and transportation capability allows APC to participate more of the value chain, which can capture incremental margins, strengthen logistics, and potentially lower cost of goods across retail and wholesale. We always negotiate fuel supply contracts as we grow; it's not only about timing. Adding volume and terminal throughput can create better terms and opportunities to enhance overall margins.
The next question is coming from Daniel Guglielmo of Capital One. Please go ahead.
You've talked about the retail store investment with fas craves and the food & beverage offering. As that's had more time to develop, can you share any learnings? Are there certain F&B products that are performing better than others? Any additional color would be helpful.
That's a good question. We've been refining the menu regularly. The results that contributed to the increased merchandising margin to 34.7% reflect, in part, the additional food service offering. Food service adds high-margin items and helps overall margin. We continuously update the menu and also focus on value. For example, loyal members can purchase a chicken sandwich plus a Coca-Cola and wedges for $5. Our goal is not only the menu but the value creation for customers, especially when household budgets are under pressure.
Daniel, we're still in a test-and-learn phase rolling out food, but customer response has been very positive. We've seen double-digit growth in remodeled stores for both merchandising sales and fuel gallons. We're focused on the operations, ensuring the menu is right and the cost model supports the sales growth. This year is about testing, learning, and scaling prudently given the encouraging customer response.
You mentioned retail customer wallets being stretched and volumes down. Given your national footprint, are you seeing softness concentrated in particular areas or is it broad-based?
It's broad-based rather than concentrated in one region. January was very strong, then weather and other factors affected February and beyond. June was the softest month, but we started to see some bounce in July. When fuel goes above $4 per gallon, consumers feel more pressure. That's why Fueling America's Future and initiatives like 10-Cent Tuesdays are important to provide value. Loyal members are taking advantage of promotions, which supports gallon trends and in-store sales. Overall, our gross profit from inside sales was effectively flat on a same-store basis despite sales pressure.
The next question is coming from William Reuter of Bank of America.
I have two questions. First, there was a moderation in the pace of dealerization this quarter. Is there anything to note there, and can you remind us the target you ultimately hope to get to in terms of number of company-operated versus dealer-operated stores?
There is no deceleration in the program conceptually. When we began in August 2024, we had a large cohort to dealerize and have converted 471 stores to date. The remaining population under letter of intent, under contract, or in process is much smaller—about 70 locations. Early in the program, conversions occurred at a higher absolute pace because the initial pool was larger. We expect to get to a little over 500 conversions as those remaining stores close. We never provided a specific target beyond the pipeline at the time we initiated the program.
Second, you repurchased 5.18% notes in the open market this quarter. How are you thinking about additional repurchases over the next couple of quarters versus other uses of capital?
We are return-focused in capital allocation. Our primary growth uses are new stores, remodels and cardlocks. Opportunistically, when bonds trade at a discount, repurchasing them can be attractive. We actively manage the balance sheet to support growth and will opportunistically buy down bonds while maintaining flexibility to execute our strategy.
To add, we remain opportunistic while maintaining liquidity. After the repurchase, we increased our PNC credit capacity recently, so we want to ensure we keep balance sheet flexibility while taking advantage of attractive opportunities.
Does it make sense for high-yield bonds to remain in your capital structure going forward, or will you rely more on credit lines?
When we issued the bonds five years ago, interest rates were close to zero and the 5.18% coupon was attractive. Given today's rates, that remains an attractive cost of capital. Bonds are a part of our capital structure and provide attractive pricing, so they will likely remain part of our financing mix.
The next question is coming from Karru Martinson of Jefferies.
When you talk about June retail demand softening, as gas prices have come down, have you seen that rebound? How is the consumer handling the up-and-down in gas prices?
This has been a very volatile year. January was strong, February saw weather impacts, and the geopolitical situation pressured prices in April and May. June was the softest month, but we saw some bounce back in July. It's too early to call a sustained recovery given price volatility. When fuel is above $4, consumers feel more pressure. That's why promotions like Fueling America's Future and 10-Cent Tuesdays are important. Despite the softness, we lost only 0.9% on same-store sales excluding cigarettes while expanding merchandise margin by 110 basis points, and inside sales gross profit dollars were essentially flat on a same-store basis.
Regarding U.S. Petroleum Partners, are there other platforms of this scale you could pursue? Do you feel you now have the necessary scale?
This is an important, highly complementary transaction for APC and Arko. USPP adds fee-based and fixed-margin earnings with low working capital requirements, brings 280 million gallons, and includes more than 50% available terminal capacity, which is meaningful given our supplier relationships. Terminal capacity and throughput open opportunities to route APC volumes through our own facilities, expand participation across the fuel value chain, and provide margin expansion as well as logistics and storage benefits. The deal is accretive to adjusted EBITDA—about $30 million annually—and supports discretionary cash flow and dividend capacity. After the deal, we expect net debt to adjusted EBITDA to be between roughly 3x and 3.5x, leaving room for further growth. We have over $700 million of liquidity and are using $205 million of that to acquire a business that increases APC EBITDA by roughly 20% and gallons by about 14%. There are plenty of additional opportunities in the market, and we will pursue them as they meet our return and discipline thresholds.
Our final question is coming from Ian Zaffino of Oppenheimer.
On the consumer environment, what does the competitive landscape look like? What are you doing to counter competitors and how do you view competition generally in this environment?
Competition is active—industry gallons are down as reported by OPIS and many competitors are feeling pressure. Everyone is trying to attract gallons. We believe Fueling America's Future is unique in the market, offering up to $2.50 off with many qualifying in-store offers; no other competitor provides that breadth with stackable savings to the same extent. Competitors may try promotions like 10-Cent days, but our program combined with vendor-supported promotions and food value offerings gives us a differentiated value proposition. We'll continue to tweak and enhance promotions, expand food offerings, and deliver special value meals to support customers during this environment.
Regarding APC, you maintain a large stake. Will you continue to hold at these levels or might APC be used as a source of funds? How should we think about that holding?
We have significant liquidity at the consolidated level—about $1 billion. APC's cost of capital is attractive at roughly 6.75% today. Our plan is to continue growing APC through accretive acquisitions at attractive returns; we don't see a need to issue equity at APC's level given the cost of capital and the opportunity set. We expect APC to remain an important growth engine and we intend for current Arko and APC shareholders to capture the value created through continued disciplined growth.
I'd now like to turn the floor back over to Mr. Kotler for closing comments.
Thank you very much, and thank you again for joining us today. Enjoy your summer and we look forward to updating you on our progress next quarter. Have a great day and a great weekend.
Ladies and gentlemen, this concludes today's event. You may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.