"Two main [merchandise] areas...that are pulling margin down are beer and cigarettes," CFO Bill Walljasper said during [image-nocss] an earnings call with analysts yesterday. "These are two key areas within the stores that we believe we need to remain competitive on to drive traffic."
For a complete summary of Casey's third-quarter earnings, see related story in this issue of CSP Daily News.
For cigarettes, Casey's is closely watching competitors' pricing of single packs and reacting as needed. For beer, the chain continues "to be more competitive on certain packaging in response to our customers choosing the larger pack purchases."
So far, the strategy has been successful as "same-store customer count for the [third quarter ending Jan. 31] was up 5% with double-digit sales increases across all major areas within the grocery and other merchandise category," Walljasper said. Specific to cigarettes, he added, "Unit movement in the cigarette category is up in the high single digits. There's a national decline in the low double digits. So we believe we're taking market share by remaining competitive in some of these categories."
Meanwhile, Casey's has maintained "the strong gasoline-margin environment that we have been experiencing over the last three years," Walljasper said, "resulting in an average margin of 13.9 cents per gallon, compared to 12.4 cents per gallon in the same period a year ago. Year to date, the margin is 15.1 cents per gallon, well ahead of our annual goal."
The Ankeny, Iowa-based chain of 1,618 stores also is aiming to maintain its margin on foodservice--a category affected by commodity pricing increases on many ingredients--with sensible consumer-price increases that still maintain value.
"The average cost of coffee is up 49% compared to a year ago," Walljasper said. "Cheese is currently $2.25 a pound. For comparison, in the fourth quarter last year, it was $1.60 a pound."
As a result, Casey's bumped up its coffee prices in February and other food-price hikes are coming in April. While offering little detail, Walljasper summarized, "All of these combined represent an approximately 3% increase in same-store sales going forward."Casey'soperates stores in 10 Midwestern states: Illinois, Indiana, Iowa, Kansas, Minnesota, Missouri, Nebraska, Oklahoma, South Dakota and Wisconsin.
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