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Wal-Mart To Enter The Gas Station Business

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Wal-Mart To Enter The Gas Station Business

For years, Wal-Mart Stores, Inc. (NYSE: WMT) customers were able to fill their gas tanks on their way into the discount superstore courtesy of Murphy USA Inc (NYSE: MUSA), a gas station chain that operates many of its locations out of Wal-Mart parking lots. However, in an effort to create a new revenue stream, Wal-Mart planning to open up its own brand of gas stations from here on out, according to the Wall Street Journal.

A Cost To Murphy

Murphy will continue to operate its existing Wal-Mart locations, but the company won't be a part of any future gas station builds with Wal-Mart. The announcement delivered a blow to Murphy, as the company had hoped to expand its partnership with Wal-Mart this year. The firm has said it plans to continue expanding by building stand-alone stations in the vicinity of existing Wal-Marts.

Related Link: Dollar General Seen As Winner From Wal-Mart Store Closures

Wal-Mart Seeks Out Opportunity

Wal-Mart's plan to operate its own gas stations has been praised by analysts, who say that the new business is likely to generate higher margins for the company. Having a low-cost gas station in the parking often increases store traffic, as people stopping in to get gas may also do some shopping where they'll buy higher margin items.

Not only that, but gas stations themselves and their attached convenience stores sell high-margin goods like cigarettes and drinks. By operating the stations itself, Wal-Mart will be able to collect on customers' at-the-pump purchases.

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