10-K: ARKO Corp. Navigates Market Shifts with Strategic Transformation

ARKO Corp. reports mixed 2025 results, with declining revenues but increased operating income, driven by strategic retail conversions and a focus on higher-margin offerings, alongside the successful IPO of its wholesale subsidiary, ARKO Petroleum Corp.

Summary

• ARKO Corp. reported total revenues of $7,643.471 million for the year ended December 31, 2025, a decrease from $8,731.962 million in 2024.
• Operating income increased to $102.302 million in 2025 from $94.026 million in 2024.
• Net income attributable to ARKO Corp. was $22.744 million in 2025, up from $20.845 million in 2024.
• Adjusted EBITDA slightly decreased to $248.653 million in 2025 from $248.860 million in 2024.
• Fuel gallons sold decreased to 2,063.736 million in 2025 from 2,189.245 million in 2024, attributed to a challenging macroeconomic environment and severe weather.
• Fuel margin per gallon increased to 27.1 cents in 2025 from 26.8 cents in 2024.
• Merchandise revenue decreased by $284.9 million (16.1%) in 2025, primarily due to store conversions and lower same-store sales, but merchandise margin improved to 33.7% from 32.8%.
• The company converted 256 retail stores to dealer locations in 2025, totaling 409 since mid-2024, generating approximately $11.8 million in incremental operating income (before G&A) for 2025.
• The 'One Big Beautiful Bill Act' (OBBB) signed July 4, 2025, resulted in a favorable impact on the timing of cash paid for taxes of $26.9 million for 2025, with no material impact on the effective tax rate.
• ARKO Corp. completed the initial public offering (IPO) of its subsidiary, ARKO Petroleum Corp. (APC), on February 13, 2026, raising approximately $183.2 million in net proceeds, which were used to repay $184.0 million of indebtedness under the Capital One Line of Credit.
• ARKO Corp. retains 75.9% economic interest and 94.0% voting power in APC post-IPO.
• The company's liquidity position was strong at $888 million as of December 31, 2025, including $305 million in cash and $583 million in credit availability.
• Capital expenditures for 2025 were $127.3 million, including investments in 23 fee properties, new-to-industry (NTI) retail stores, remodels, and EV chargers.

Sentiment

Score: 7

Explanation: StockSavvy.ai views this filing as moderately positive. While revenues declined due to external factors, the company's strategic transformation, including 'dealerization' and the successful APC IPO, demonstrates proactive management and a focus on long-term profitability and capital optimization, despite ongoing market challenges.

Positives

• Operating income increased to $102.302 million in 2025 from $94.026 million in 2024, driven by strategic initiatives.
• Net income attributable to ARKO Corp. grew to $22.744 million in 2025 from $20.845 million in 2024.
• Fuel margin per gallon increased to 27.1 cents in 2025 from 26.8 cents in 2024, indicating improved profitability per gallon.
• Merchandise margin improved to 33.7% in 2025 from 32.8% in 2024, reflecting effective pricing and procurement strategies.
• The 'dealerization' strategy, converting 256 retail stores to dealer locations in 2025, generated $11.8 million in incremental operating income, demonstrating successful leveraging of the wholesale platform.
• The successful IPO of ARKO Petroleum Corp. (APC) on February 13, 2026, raised $183.2 million in net proceeds, significantly improving liquidity and reducing debt.
• The 'fas REWARDS' loyalty program grew to approximately 2.4 million enrolled members, a 6% year-over-year increase, enhancing customer relationships.
• The 'fas craves' flagship location and planned remodels emphasize a strategic priority to offer relevant, delicious, and affordable food, aiming to increase traffic and profitability.
• The 'One Big Beautiful Bill Act' (OBBB) provided a favorable $26.9 million impact on the timing of cash paid for taxes in 2025.
• The company maintains a strong liquidity position of $888 million as of December 31, 2025, providing financial flexibility.

Negatives

• Total revenues decreased by $1,088.491 million (12.5%) in 2025 compared to 2024, primarily due to lower fuel and merchandise revenues.
• Fuel revenue decreased by $820.0 million (12.0%) in 2025, driven by a decrease in the average price of fuel and fewer gallons sold due to a challenging macroeconomic environment and severe weather conditions.
• Merchandise revenue decreased by $284.9 million (16.1%) in 2025, impacted by reduced customer transactions and the conversion of retail stores to dealer locations.
• Consolidated Adjusted EBITDA slightly decreased to $248.653 million in 2025 from $248.860 million in 2024.
• Net income attributable to common shareholders decreased to $16.994 million in 2025 from $28.619 million in 2023, despite a slight increase from 2024.
• The share repurchase program, which authorized up to $125 million, was exhausted during the quarter ended December 31, 2025, with no remaining availability.

Risks

• Changes in economic conditions, trade policies, and consumer confidence in the U.S. could materially adversely affect the business.
• The success of the company's multi-year transformation plan, including the conversion of retail stores to dealer locations ('dealerization'), is not assured.
• The ability to successfully achieve the anticipated benefits of the planned conversion of certain retail stores to dealer locations is uncertain.
• The ability to successfully implement growth strategies, including upgrading and remodeling convenience stores and constructing new-to-industry (NTI) stores, faces risks such as material shortages, labor issues, and cost increases.
• The ability to promptly and effectively realize the strategic and financial benefits expected as a result of the initial public offering of a minority interest in ARKO Petroleum Corp. is not guaranteed.
• Significant changes in the current consumption of, and related regulations and litigation related to, cigarettes and other tobacco products could materially adversely affect the business, as these products accounted for approximately 38% of total merchandise revenues in 2025.
• Changes in the wholesale prices of motor fuel can materially adversely impact sales, operations, customer financial condition, and trade credit availability, as fuel sales were approximately 79% of total revenues in 2025.
• Significant changes in demand for fuel-based modes of transportation and for trucking services (e.g., due to electric vehicles, fuel efficiency standards) could materially adversely affect the business.
• The highly competitive and fragmented industry, characterized by many similar competing products and services, poses a risk to the company's ability to successfully compete.
• The ability to make acquisitions and divestitures on economically acceptable terms, and to successfully integrate acquired operations or realize expected benefits from acquisitions, is uncertain.
• Negative events or developments associated with branded motor fuel suppliers could have a material adverse impact on revenues.
• Dependence on several principal suppliers for fuel purchases, third-party transportation providers for motor fuel, and one principal supplier for merchandise creates supply chain risks.
• A significant portion of revenue is generated under fuel supply agreements with dealers that must be renegotiated or replaced periodically, with no assurance of favorable terms.
• The retail sale, distribution, transportation, and storage of motor fuels are subject to environmental protection and operational safety laws and regulations that may expose the company or its customers to significant costs and liabilities.
• Failure to comply with applicable laws and regulations (e.g., food, alcohol, tobacco, lottery, data privacy) could result in liabilities, penalties, costs, or license suspension/revocation.
• The loss of key senior management personnel or the failure to recruit or retain qualified personnel could materially adversely affect the business.
• Unfavorable weather conditions can adversely affect sales and operations, particularly in the warmer second and third quarters.
• The ability to effectively manage the workforce, including rising labor costs and high turnover rates for entry-level positions, could adversely affect results.
• Payment-related risks, including evolving regulations, compliance requirements (e.g., EMV), and potential data breaches, may result in higher operating costs or inability to process payments.
• Significant disruptions of information technology systems, breaches of data security, or other cybersecurity incidents (potentially enhanced by AI) could materially adversely affect the business.
• Evolving laws, regulations, standards, and contractual obligations related to data privacy and security regulations, and actual or perceived failure to comply, could harm reputation and result in fines/liability.
• Failure to adequately secure, maintain, and enforce intellectual property rights, and third-party claims of infringement, could harm the business.
• Operations present risks (e.g., business interruptions, asset age) which may not be fully covered by insurance, potentially leading to significant uninsured losses.
• Variable rate debt (approximately 50% of debt as of December 31, 2025) exposes the company to fluctuations in interest rates, potentially increasing debt service requirements.
• Agreements governing indebtedness contain various restrictions and financial covenants that may restrict business and financing activities.
• The corporate structure includes Israeli entities that may expose the company to additional tax liabilities.
• The market price and trading volume of common stock may be volatile and could decline significantly, influenced by the market price of ARKO Petroleum Corp.'s Class A common stock.
• Sales of a substantial number of shares of common stock in the public market could cause the price to decline.
• The company may not continue to declare cash dividends or may reduce the amount of cash dividends in the future.
• As the controlling shareholder of ARKO Petroleum Corp., ARKO Corp. faces potential liability and conflicts arising from that relationship, as related party agreements were not approved by a disinterested board.

Future Outlook

ARKO Corp. anticipates continued growth through its Transformation Plan, including further conversion of retail stores to dealer locations in 2026, and expansion of its 'fas craves' food and beverage offerings through remodels and new store formats. The company plans to open additional new-to-industry (NTI) retail and Dunkin stores, and targets 20 NTI fleet fueling locations in 2026, expecting a positive impact on results due to the attractive cash flow profile of the fleet fueling business. The company also expects to leverage its experienced management team for inorganic growth opportunities through acquisitions in the fragmented fuel distribution and retail convenience store industries. Environmental capital expenditures are not expected to be material for the year ending December 31, 2026.

Management Comments

• Our Transformation Plan is built around strategically targeted retail stores with a goal of increasing traffic, sales and improving profitability through a higher margin mix of sales, and we believe our new fas craves format stores will help us reach that goal.
• We believe that the ongoing implementation of our Transformation Plan, together with the new organizational operating structure following the APC IPO creates a significant opportunity to increase our sales and profitability by executing on our organic and inorganic strategies.
• Conversions of certain retail stores benefit both our retail and wholesale segments. In such cases, we realize higher profit from ongoing fuel supply agreements and rental income than from continued operation of these stores in our retail segment. These conversions also allow us to focus on, and better prioritize, future investments in our remaining retail stores.

Industry Context

StockSavvy.ai notes that ARKO Corp.'s strategic 'dealerization' and focus on foodservice through 'fas craves' remodels align with broader convenience store industry trends emphasizing higher-margin in-store sales and enhanced customer experience to offset potential declines in fuel demand. The successful IPO of ARKO Petroleum Corp. also reflects a growing trend of companies optimizing capital structures and segmenting operations to unlock value and attract specialized investors in distinct business lines (retail vs. wholesale/fleet fueling). The company's aggressive acquisition strategy in a fragmented market is a common industry consolidation play, aiming for economies of scale and market presence against larger competitors like 7-Eleven/Speedway and Circle K.

Comparison to Industry Standards

• ARKO Corp.'s merchandise margin of 33.7% in 2025 is competitive within the convenience store industry, where strong in-store offerings are crucial for profitability. For example, Casey's General Stores, a peer, consistently reports merchandise margins in the low to mid-30s, indicating ARKO's performance is in line with successful operators focusing on in-store sales.
• The 'dealerization' strategy, converting 256 retail stores to dealer locations in 2025, is a unique approach to optimize asset utilization and leverage wholesale distribution strengths. This contrasts with some larger chains like 7-Eleven/Speedway, which primarily focus on company-operated retail growth, or Murphy USA, which emphasizes a low-cost, high-volume fuel model with smaller in-store footprints.
• The investment in 'fas craves' flagship locations and remodels, focusing on food and dispensed beverages, mirrors industry leaders like Wawa and Sheetz, which have successfully differentiated themselves through robust foodservice programs. ARKO's expansion of Dunkin and Subway co-locations also aligns with this trend, aiming to capture higher-margin food traffic.
• The company's growth from 320 sites in 2011 to 3,512 sites by December 31, 2025, through 26 acquisitions, demonstrates a strong inorganic growth track record, comparable to the aggressive expansion seen from companies like Circle K (Alimentation Couche-Tard) and EG Group in recent years, capitalizing on industry fragmentation.

Management Changes

Corporate Governance

Legal Proceedings

• In March 2025, the company entered into a term sheet to settle a wage and hour collective action, alleging violations of the Fair Labor Standards Act and state laws regarding overtime classification of store managers.
• Approximately $2.5 million was accrued for settlement fees, attorneys' fees, employer taxes, and administrative costs related to the wage and hour claim for the year ended December 31, 2025.
• The court approved the proposed settlement agreement and collective action treatment in June 2025.
• The ultimate resolution of the wage and hour matter is expected in the third quarter of 2026.
• The company is a party to various other legal actions in the ordinary course of business, which management believes are routine and not reasonably probable to have a material adverse impact.

Related Party Transactions

• ARKO Corp. and ARKO Petroleum Corp. (APC) entered into a Management Services Agreement, where ARKO provides a broad range of services to APC, with fees generally based on cost allocations, usage, or direct expense reimbursement.
• An Omnibus Agreement was established between ARKO Parent, ARKO Petroleum, the Borrower, the General Partner, GPM Opco, GPM Empire, and GPM Investments, providing for a long-term, exclusive fuel supply relationship and allocation of acquisition opportunities (convenience stores to GPM, wholesale/fleet/supply to APC).
• An Employee and Intercompany Matters Agreement governs the allocation of employee benefit and compensation plans, shared obligations, and grants a non-transferable, non-exclusive, royalty-free license to use the 'GPM' name and related marks to ARKO's subsidiaries.
• GPM entered into a Fuel Distribution Agreement with certain subsidiaries of APC, regulating the exclusive distribution of branded and unbranded gasoline, diesel fuel, ethanol, biodiesel, and kerosene for convenience stores and gasoline facilities operated by ARKO's subsidiaries, with pricing based on rack price plus a fixed adder (5.0 cents per gallon through December 31, 2025; 6.0 cents per gallon thereafter).
• A Tax Matters Agreement was entered into between ARKO Corp. and APC, governing their respective rights, responsibilities, and obligations with respect to certain tax matters.
• Various real estate agreements exist between ARKO Corp. and its subsidiaries, pursuant to which properties used in business operations are leased, subleased, or co-tenanted.
• The agreements with APC were prepared when APC was a wholly-owned subsidiary and were not approved by a separate or disinterested board of directors, potentially leading to terms that do not reflect arms-length negotiations.
• Conflicts of interest may arise due to individuals serving as directors, officers, or managers of both ARKO Corp. and APC, particularly in resource allocation and transaction pricing.

Stakeholder Impact

• **Shareholders:** The successful IPO of ARKO Petroleum Corp. and the subsequent debt reduction could enhance shareholder value by optimizing capital structure and potentially improving financial stability. However, the decline in overall revenues and Adjusted EBITDA presents a mixed picture. The dividend program continues, but future declarations are at the Board's discretion.
• **Employees:** The company employs 9,748 individuals and emphasizes training, development, and competitive benefits, which should positively impact employee retention and morale. The wage and hour settlement addresses potential past grievances, improving employee relations.
• **Customers:** The 'fas REWARDS' loyalty program's growth and the 'fas craves' remodels aim to enhance customer experience and value, potentially increasing customer traffic and satisfaction. However, the decrease in same-store merchandise sales suggests ongoing challenges in customer transactions.
• **Suppliers:** The company's dependence on a few principal fuel and merchandise suppliers, and the renegotiation of fuel supply agreements, could impact supplier relationships and terms.
• **Creditors:** The significant debt repayment post-APC IPO and strong liquidity position improve the company's credit profile, reducing risk for creditors. However, the variable rate debt exposes the company to interest rate fluctuations.

Next Steps

• Convert a meaningful number of additional retail stores to dealer locations throughout 2026 as part of the Transformation Plan.
• Relaunch the 'fas REWARDS' loyalty program app in the first quarter of 2026 with personalized features.
• Open one more new-to-industry (NTI) retail store and three Dunkin stores in 2026.
• Target 20 NTI fleet fueling locations with target openings during 2026, with 10 currently advancing.
• Plan approximately 25 remodels featuring 'fas craves' food and beverage elements in 2026.
• Expand components of 'fas craves' food and beverage to certain non-remodel stores where space permits.
• Continue to monitor future guidance and developments related to the 'One Big Beautiful Bill Act' (OBBB) and update income tax disclosures as appropriate.
• Ultimate resolution of the wage and hour collective action settlement is expected to occur in the third quarter of 2026.

Key Dates

Recommendation

ARKO Corp. is undergoing a significant strategic transformation, including the 'dealerization' of retail stores and the successful IPO of its wholesale segment (APC). While these initiatives show promise for long-term profitability and capital optimization, the immediate financial results for 2025 reflect declining revenues and a slight dip in Adjusted EBITDA, influenced by macroeconomic headwinds and severe weather. The company's strong liquidity and proactive management are positives, but the execution risks associated with the transformation plan and ongoing competitive pressures warrant a cautious 'hold' stance. Investors should monitor the realization of anticipated benefits from the APC IPO and the 'dealerization' strategy, as well as the company's ability to drive organic growth in its retail segment.

Keywords

Convenience Stores, Fuel Wholesale, Fleet Fueling, SEC Filing, 10-K, ARKO Corp, ARKO Petroleum Corp, Retail, Wholesale, Financial Results, Transformation Plan, Dealerization, Acquisitions, Fuel Sales, Merchandise Sales, Adjusted EBITDA, Liquidity, Debt, Corporate Governance, Risk Factors, Cybersecurity, ESG, Loyalty Program, EV Chargers