Is Walmart to Go a Threat to Casey's?
Regional c-store chain exec reacts to new competitor, talks MLP strategy, more
ANKENY, Iowa -- Speaking about a wide array of potential challenges and opportunities from the price of cheese to the new Walmart to Go convenience store concept, officials with Casey's General Stores Inc., one of the nation's largest publicly traded c-store chains, addressed a number of issues that may affect its projected growth plans.
In a fiscal year-end earnings call on Tuesday, executives with the 1,808-store chain based in Ankeny, Iowa, addressed the "headwinds" it faces on numerous fronts:
- Walmart to Go. An analyst noted that the new convenience store concept that the retail giant opened recently in its home base of Bentonville, Ark., was near a Casey's location. Casey's CFO Bill Walljasper said most of their Casey's locations are in smaller towns, many with fewer than 5,000 residents. He doubted that Wal-Mart would pursue those markets.
"The Walmart concept is a relatively new concept," he said. "So it's probably a little bit too early to tell whether there is going to be a potential impact from that type of movement from other big-box retailers. So we are going to have to … wait and see at this point."
- MLPs. Questions came up regarding the master limited partnership structure and if Casey's would ever adopt it in light of the success chains like Corpus Christi, Texas-based Susser Holdings have had with its recent purchase by Energy Transfer Partners, Dallas. Walljasper said they have looked into the MLP structure, but would have to take numerous steps to qualify under it, including the purchase of a fuel wholesaler and the building of a trucking fleet. In addition, such a move may require the sale of land that could affect current tax breaks they already enjoy. Ultimately, he said the chain "continues to evaluate" the potential of the MLP.
- Rising cheese and meat costs. Walljasper said the rising costs of cheese and meat are having an effect on margins, but in recent weeks, the company opted to raise retail prices to offset that headwind. While just a short time into the new price change, he said initial indications were positive, adding that they softened the blow by offering customers a larger slice of pizza. He said the perceived value helped people accept the price hike.
Walljasper also answered questions about growth, especially with the building of its second distribution center, located in Terre Haute, Ind. He said the site would be completed within 12 to 16 months after breaking ground and would eliminate three-day hauls, allowing for more efficient deliveries and the potential for growth further east.
Walljasper spoke positively overall about the company's earnings figures, encouraged by both the economy in its markets as well as the numbers they have seen with their new and remodeled stores.
For the fiscal year, Casey's built 44 new c-stores, acquired 28, replaced 20 and completed 25 major remodels. They converted another 100 c-stores to 24-hour locations, which brought between a 20% and 30% lifts in sales, he said. The addition of pizza delivery brought 25% to 30% increases in pizza sales, with 80 stores converted in 2014 and an equal number planned for 2015.
"We continue to execute our prudent growth strategy of blending new-store growth with acquisitions, and reached a milestone in the fourth quarter as we now operate over 1,800 stores," said Robert Myers, chairman and CEO for Casey's.
"We're pleased with our performance and excited about growth," concluded Walljasper.
Officials did not offer additional details about the company's announcement on Monday naming Terry Handley, its current COO, as its new president.
Handley, who will retain his COO role, has been with the company for more than 33 years and has served in various capacities including director of marketing, vice president of foodservice and senior vice president of store operations.