ANKENY, Iowa -- Convenience-store retailer Casey’s General Stores Inc. will likely fall short of its unit-growth goal for fiscal year 2016.
“Coming into the fiscal year, we certainly had hopes to acquire more locations, but multiples and seller expectations certainly have increased over the course of the year,” CFO Bill Walljasper said during the company’s third-quarter earnings call.
- Click here for more details on Casey's financial results.
Thus far, the Akeny, Iowa-based chain has acquired three c-stores and completed 31 new-store constructions, and it is on pace to complete a total of 50 new-store constructions by the end of the fiscal year.
The company’s goal was to build or acquire 75 to 113 convenience stores. Recent reports, however, suggest the multiples of EBITDA (earnings before interest, taxes, depreciation and amortization) being paid for c-store acquisitions is in the double digits and often mid- to high double digits.
“We’re going to remain very patient with [acquisitions],” Walljasper said. “We’re not going to overpay so we can tell Wall Street that we increased the number of units.”
Casey’s annual goal also included replacing 10 existing locations and performing 100 major remodels. Eleven stores have been replaced and 60 remodels have been completed, with 40 more to be completed during the fourth quarter, Walljasper said.
During the earnings call, Casey’s gave an update on its new distribution center, as well as its mobile app and pizza delivery programs.
Distribution Center
Casey’s second distribution center, located in Terre Haute, Ind., opened in February.
During its first year of operation, Casey’s plans to transition 30% to 40% of its truck routes to the facility and eliminate all three-day routes and a majority of two-day routes.
“It is, knock on wood, running very smoothly at this point and is certainly on pace, if not ahead of pace, to transition truck routes over to that,” Walljasper said. The second distribution center "will provide new geographies for us to look at.”
That could bring in new states such as Michigan and Ohio, as well as the opportunity to expand further east in Tennessee and Kentucky and further south into Arkansas, he said during a previous earnings call.
And as Casey’s expands, will that mean another distribution center?
“One of the reasons that our current distribution center started reaching capacity quicker than we anticipated is the boom in prepared foods. A lot will depend on that growth,” Walljasper said. “Maybe a better way to look at it: When we're having this call in about four or five years, we'll probably be talking about a third distribution center."
Mobile App
While it’s still early, Casey’s is encouraged by its new
mobile app, which allows customers to
order pizza and other fare from their cellphone and other mobile devices.
“In the first several weeks following the rollout, the total downloads of our app have exceeded 200,000 and continues to grow,” Walljasper said. The app became available Jan. 4.
Whether the app will boost same-store sales, however, is still to be determined.
“I think there was an expectation of an immediate push in the same-store sales, and that’s just not quite the case. You need to have your customers get accustomed to this new service, download the app, start utilizing the app,” he said. “We’re certainly optimistic about the mobile app rollout. … But you probably won’t see benefits from that until probably later in the fourth quarter, if not next fiscal year.”
Pizza-Delivery Service
Pizza delivery plays a large role in the success of Casey’s prepared-food and fountain category. Year to date, same-store sales for the category were up 8.5%, with an average margin of 62.7%.
Pizza delivery is now available in more than 400 locations, and the chain plans to implement pizza delivery at 45 stores during the fourth quarter.
“We remain optimistic about future sales growth of [the prepared-food and fountain] category as we bring on-line additional pizza delivery stores,” Walljasper said.
Casey's, based in Ankeny, Iowa, operates more than 1,900 convenience stores in 14 states throughout the Midwest.
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Kristina Hurtig is senior editor of Winsight Grocery Business. Kristina has been an editor in the retail trade industry for the past five years, with experience covering both the grocery an...