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NATIONAL CONVENIENCE STORES

NATIONAL CONVENIENCE STORES. National Convenience Stores, formerly known as the National Drive-In Grocery Corporation, with headquarters in Houston, operates Stop N Go retail convenience stores and gasoline stations in Texas. Among principal subsidiaries that reflect the company's diversified interests are Kempco Petroleum Company, National Money Orders, and NCS Realty Company; the company also produces a brand of fast foods known as Fresh Express. National Convenience Stores was incorporated in 1959 and entered the market just as convenience store competition began to rise. By the 1960s it was one of fourteen convenience stores headquartered in Texas. The company was founded by former U-Tote'M convenience store executive F. J. Dyke, Jr., who formed a partnership to run a U-Tote'M franchise with the purchase of five convenience stores in San Antonio from Sommers Drug Stores. Upon purchase, Dyke changed the name of the Sommers stores, which had been operating under the name Stop N Go, to U-Tote'M of San Antonio. In 1961 Dyke and his partners acquired all the U-Tote'M stores in California, and a year later the partnership changed its name to the National Drive-In Grocery Corporation. By 1965 the company operated 260 convenience stores in seven states and had moved its corporate headquarters from San Antonio to Houston. Anticipating a series of acquisitions nationwide, the company took the name National Convenience Stores in 1968. The company's rise and fall mirror general trends in the convenience store industry. Convenience stores offered many of the same products as major supermarket chains by the 1960s, but grew rapidly from the 1970s to the early 1980s because of an increasing number of working mothers, the growth of urban populations, and the predominance of automobiles as the nation's major form of transportation. In 1968 NCS purchased the Town and Country convenience stores based in Austin, and in 1969 it acquired Houston's thirty-five Handee Food Mart convenience stores, along with Sanitary Farm Dairies and Baskin-Robbins Ice Cream Stores, which it sold in 1971. In 1973 NCS also purchased twenty-three PDQ Food Stores.

In 1975 Dyke left the company and was replaced by V. H. "Pete" Van Horn, under whom NCS would enjoy its period of greatest growth. Van Horn, formerly with Phillips Petroleum Company and Tenneco, joined the company in 1966 as a management trainee and rose from district manager to Southwest division manager and vice president of stores before becoming chief executive officer. A planned merger between NCS and national convenience retailer Circle K Corporation failed in 1977, but expansion continued in 1979 with the acquisition of Texas Super Duper Markets stock and sixty-eight stores, nineteen Super Quick stores, and Jay's Washateria, a laundromat operator. In 1981, by which time NCS had 834 stores in eleven Sunbelt states, the company had purchased 116 Mr. M Food Stores in San Antonio and Houston from McCombs International, making it Houston's largest convenience store operator. At the same time, it divested itself of low-performing stores and in 1982 initiated a stock offering to finance future growth.

In 1983 National Convenience Stores purchased 125 Colonial Food Stores in West Texas, along with six Super Stops and fifteen Stop 'N Serve stores in Houston. Plans were finalized to open almost 250 new convenience stores between 1982 to 1984, with up to 400 new stores scheduled for 1986 alone. In 1983 Van Horn updated the company logo and renamed all company stores Stop N Gos. To increase profits, the company redesigned its store floorplans, placing higher margin, high volume products closer to the front, increased its advertising budget, and recruited executives from the drugstore industry to gain expertise in that market. To increase sales to a younger clientele with more discretionary income, it also opened Quik Stores, which featured audio records, tapes, and video games. By 1984, with 50,000 convenience stores in operation in the United States and the number still growing, the company earned over $18 million in profits. By 1986, however, the Texas recession, produced by falling oil prices, increased crime, and a real estate market collapse, caused the company severe hardship. Net profits plunged from $15 million in 1985 to under $3 million a year later. At a time when many stores relied on gas sales for 50 percent of revenues and 25 percent of profits, large oil companies also opened convenience stores in their gas stations and undercut convenience store gasoline prices. Realtors began to offer rent-free floor space in shopping centers in return for signing long-term leases, thereby lowering the barriers to entry in an already crowded convenience store industry. New convenience store competitors opened throughout Texas and glutted the market, particularly in Houston where over one-third of NCS stores were located, and grocery and general merchandise stores attracted convenience store customers by keeping longer hours and pricing convenience store staples lower.

Between 1985 and 1987, recognizing the need to consolidate, National Convenience Stores centralized its field and district divisions, reduced personnel by 20 percent, and sold 186 of its stores to Circle K and closed others, lowering its total from 1,130 to 960. Further consolidation came from several sales and acquisitions in which NCS sold its Midland-Odessa and Las Vegas stores to the Southland Corporation, owner of 7-Eleven convenience stores, and purchased 269 Southland stores in the Houston market. The acquisition doubled the number of NCS stores in Houston and eliminated a major competitor. In 1989 the company purchased seventy-five Southland stores in the San Antonio market, again eliminating a major competitor and increasing its number of stores to 208 in that market. By mid-1989 NCS had gone from operating 1,100 stores in twenty-one markets to the same number of stores in only ten markets. At the time the company had roughly 142 stores in the Dallas-Fort Worth area, 137 in California, and 101 in West Palm Beach, Florida, Atlanta, Georgia, and Nashville, Tennessee. The company tailored its merchandise to match neighborhoods where its stores were located-to provide Mexican cooking items and Spanish-language magazines in Hispanic areas, for example-and introduced scanning devices that revolutionized the check-out process. By the end of the 1980s the number of operating convenience stores nationwide peaked at 83,000 as industry profits dropped by 75 percent, and companies faced increasing price competition and expansion-related debt. NCS, the third largest convenience store operator, maintained profitability in early 1990 through a gain from the company's preferred stock-for-debt exchange offer, but by early 1991 its long-term debt had grown to $190 million, and it had redesigned and updated fewer than 150 of its 1,071 stores. Despite paring its debt at a significant rate, selling its Nashville, Tennessee, stores to MAPCO Petroleum Incorporated, its El Paso Stop N Gos to Diamond Shamrock, and its West Palm Beach stores to BP Oil Company for cash, and installing high margin Pizza Hut and Taco Bell franchises in some of its Houston-based stores, the company lost over one million dollars in 1990 and over $10.5 million on revenues of almost $1.1 billion in 1991.

In December 1991 National Convenience Stores filed for Chapter 11 bankruptcy protection. With the Texas recession, the fall of NCS was blamed on the Persian Gulf War of 1990–91 that kept many customers at home, reduced sales at stores surrounding military bases, and caused a gasoline price war among convenience stores and major oil companies that reduced profit margins. With zero industry profits before taxes in 1991, all three of the top convenience store operators, including Southland, Circle K, and NCS, had entered bankruptcy. In 1992, as the company negotiated with its creditors to exit bankruptcy, the New York Stock Exchange suspended trading of National Convenience Store shares. NCS introduced its first reorganization plan in 1992 and received court approval to emerge from bankruptcy protection in 1993 after reporting profits for the previous nine months. Under the agreement, old shareholders lost their interest, Stop N Go stores were reduced from 985 to 720, staff was reduced by 24 percent, and operating expenses lessened. Between 1991 and 1993 NCS closed 210 stores, sold twenty-one stores in northern California, and reduced its payroll by 1,000 employees. Debt forgiveness enabled the company to report profits through the first quarter of 1993. New company plans involved selling all interests outside of Texas, modernizing gasoline facilities, redecorating stores, and introducing its own soft drink brand, Simply Great. To reduce advertising costs and achieve market domination, NCS planned to limit its holdings to Houston, Dallas-Fort Worth, Austin, and San Antonio. In 1993, after a major restructuring, the Houston-based company employed 5,000 workers, owned 720 convenience stores, including 624 gasoline service stations, and had sales of $879 million. In May 1994 NCS and the Circle K Corporation completed a transaction in which Circle K acquired NCS's eighty stores in Southern California and the metropolitan area of Atlanta, Georgia, and NCS acquired eighty-eight Circle K stores in Houston and the Metroplex of Dallas-Fort Worth. NCS now operates 709 Stop N Go stores in Texas, employs 5,700 people, and is the leading convenience store operator in Houston and San Antonio.

BIBLIOGRAPHY: 

Houston Chronicle, December 10, 1991.

Jon Kutner, Jr.

Citation

The following, adapted from the Chicago Manual of Style, 15th edition, is the preferred citation for this article.

Jon Kutner, Jr., "NATIONAL CONVENIENCE STORES," Handbook of Texas Online (http://www.tshaonline.org/handbook/online/articles/dhn02), accessed December 19, 2014. Uploaded on June 15, 2010. Published by the Texas State Historical Association.