ANKENY, Iowa -- As Casey's General Store's closing on the purchase of 33 HandiMarts from Nordstrom Oil nears, the Ankeny, Iowa-based chain, finds itself in an interesting position. Rather than having to bring the stores in the Cedar Rapids, Iowa, market up to Casey's standards, the sites, in fact, have a history of out-performing the average Casey's store.
These stores...have double the sales volume of our average stores, said Bill Walljasper, senior vice president and CFO of Casey's, yesterday during the company's first-quarter 2007 earnings conference [image-nocss] call.
Thus the company finds itself with a new precedent to meet. That doesn't mean the company won't make some changes to the HandiMart sites once the deal closes late this month.
They do have (eight or nine) quick-serve restaurants, so we are going to put our kitchens in with those quick-serve restaurants, Walljasper said. We think those can coexist and complement the prepared food offer for those locations.
Similarly, Walljasper said the new sites should benefit from Casey's self-distribution process. Because of that, [we] simply can buy products more efficiently than most of our competitors who go through a third party to acquire those products, he said.
While not in any hurry to rebrand the HandiMart sites to Casey's, Walljasper said that will happen over time. They're a very well-known brand in the state of Iowa. but eventually more than likely, we will rebrand those over to Casey's.
Meanwhile, company president and CEO Robert J. Myers said, Our recent agreement to acquire up to 33 HandiMart stores will raise our earnings potential over time.
Regarding general results for the quarter, which ended July 31, Myers said, Though a challenging gasoline environment resulted in earnings per share from continuing operations of $0.34 vs. a record $0.44 for the previous first quarter, our same-store customer count grew and total sales were up in all three of our business categories. Our recent agreement to acquire up to 33 HandiMart stores will raise our earnings potential over time.
Other results:
Gasoline: The company's fiscal 2007 goal is to increase same-store gasoline gallons sold 2% with an average margin of 10.8 cents per gallon. Same-store gallons sold were down 2.9% compared with a 7.7% increase for the same quarter a year ago. The average margin was 9.8 cents per gallon vs. 11.8 cents. Total gallons sold rose to 291.8 million from 286.5 million; gross profit was $28.5 million compared with $33.9 million. We were up against difficult quarter-to-quarter comparisons, and high retail prices affected customer demand, said Myers. We'll continue to mitigate market pressures by pricing with the local competition and taking advantage of purchasing and delivery efficiencies. Prepared Food & Fountain: The annual goal is to increase same-store sales 7.9% with an average margin of 63.4%. Same-store sales were up 9.5% following a 7.2% increase for the previous first quarter. The average margin was 62.9%. Total sales rose 14.5% to $65.8 million, and gross profit improved 12.5% to $41.4 million. Myers stated, In the first quarter, we benefited especially from our expanded fountain program, but it did affect the category's average margin. The $4.6 million gross profit increase is a sure sign we matched customer preferences and gained from it. Grocery & Other Merchandise: The goal is to increase same-store sales 3.9% with an average margin of 32.2%. Same-store sales were up 2.3% vs. a 7.4% increase for the first three months of fiscal 2006, and the average margin was up 10 basis points to 32.2%. Total sales rose 6.7% to $226.1 million; gross profit grew 6.8% to $72.9 million. Inside our stores, said Myers, we are using POS data and making operational decisions to drive gross profit dollars. Total inside gross profit, including commissions, rose nearly 10%. Operating Expenses: An ongoing corporate goal is to hold the percentage increase in operating expenses to less than the percentage increase in gross profit. In the first quarter, operating expenses rose 12.7% as gross profit increased 3.9%. The gasoline market was a challenge for the entire convenience store industry, Myers said. For us, higher retail prices constrained gallons sold and raised bank charges related to credit-card use 46.9% while record wholesale prices dampened the margin. Expansion: The goal is to acquire 50 stores and build 10 new stores in this fiscal year. Myers said, We got a jump-start on the goal by signing a definitive agreement to purchase from Nordstrom Oil Co. up to 33 convenience stores operating in Iowa under the HandiMart name. The transaction should close in the second quarter. The company is in the process of obtaining $100 million of debt to help fund this transaction, to finance additional expansion, and to use for general corporate purposes. As of July 31, Casey's had acquired six other stores and completed three new constructions.Casey's General Stores Inc. owns and operates more than 1,400 convenience stores in nine Midwestern states: Iowa, Illinois, Indiana, Kansas, Minnesota, Missouri, Nebraska, South Dakota and Wisconsin.
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