ANKENY, Iowa --Casey's General Stores reported weaker-than-expected increases in same-store sales for the first quarter of its fiscal 2017 largely on the back of cigarettes. But struggles in some beverage categories—primarily beer—also took a toll.
“Same-store sales for the grocery and other merchandise category fell below goal due in part to a deceleration of cigarette sales from prior year,” president and CEO Terry Handley said this week. Total grocery and other merchandise sales were up 7.5% to $566.2 million while total gross profit dollars increased 4.4% to $179.1 million.
Casey's annual goal for fiscal 2017 is to increase same-store sales 6.2% with an average margin of 32%. For the quarter, which ended July 31, same-store sales were up 4.7% with an average margin of 31.6%.
Beverage Bearings
"We see a little bit of deflation going on in the beer category. We also see a little deflation in the milk category for us, too," CFO Bill Walljasper said during an earnings conference call Sept. 7. "The beer category units were up nearly double digits, but most of our items were retailing simply below where they were a year ago, so that’s the kind of the dynamic that we have seen here developed over the last three to four months."
Meanwhile, energy drinks, shown to be struggling in syndicated data, remain a bright spot for Casey's General Stores, according to Walljasper.
"Energy drinks are continuing to perform pretty well for us," he said. "Total sales are going to be ... close to double-digit right now, the high single-digit [or] low double-digit area."
Pizza Pans Out
The Ankeny, Iowa-based retailer with 1,931 convenience stores also saw foodservice results struggle during the quarter even as margins improved.
In prepared food and fountain, the goal for fiscal 2017 is to increase same-store sales 10.2% with an average margin of 62.5%. Same-store sales for the quarter were up 5.1% with an average margin of 62.8%.
"Although many retailers in the foodservice industry have reported a recent softening in traffic, we continue to see strong sales lifts from stores that recently implemented one or more of our growth programs," Handley said, referring to the company's pizza-delivery program, extended store hours and mobile-app ordering. "We will continue our disciplined rollout of these programs. The first quarter margin was above goal primarily due to lower commodity costs driven by the favorable cheese price locked in through December 2016."
During the quarter, Casey's converted 85 locations to a 24-hour format and 50 more stores to pizza delivery.
"We plan on adding approximately 100 stores to the pizza-delivery program by the end of the fiscal year," Walljasper said.
The chain currently has 1,012 stores that are 24-hour format and 494 stores that deliver pizza.
About online ordering, Walljasper said, "Subsequent to the rollout in January, total downloads of our mobile app have exceeded 530,000 and continues to grow. And our pizza orders done online have risen approximately 7.5%.
"In conjunction with this, the basket [size] of online orders has increased and is now nearly 13% higher compared to a telephonic order. We believe the contribution will continue to grow as a number of downloads of our mobile app increases."
Total prepared food and fountain sales were up 9.1% to $243.7 million, and total gross profit dollars were up 9.6% to $153.1 million.
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