ANKENY, Iowa —Driven by increased control of operating expenses, margin gains at the pump and inside the store and operating 94 more convenience stores than last year, Casey’s General Stores Inc. reported net earnings of $66.6 million for second-quarter fiscal 2019, compared to $48.9 million for the same quarter a year ago.
"We're moving the company forward on multiple fronts," said Terry Handley, president and CEO. "The ongoing efforts around operating expense control, combined with a continued focus on strategic pricing, new-store openings and the favorable impact of tax reform, produced strong diluted earnings per share growth."
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For the quarter, Casey’s same-store gallons sold were down 1.1%, with an average margin of 20 cents per gallon (CPG).
Total gallons sold for the quarter were up 5.7% to 593.8 million gallons while gross profit dollars increased 7.2% to $118.7 million. Year to date, same-store gallons sold were down 0.3%, with an average margin of 20.3 cents per gallon; gross-profit dollars increased 10.1% to $242.1 million.
"We have become more proactive at managing retail fuel pricing," Handley said. "Gross-profit dollar growth was strong despite same-store gallon movement being under our annual guidance range for the second quarter, due mainly to softer consumer demand."
2. Grocery and other merchandise
For the quarter, Casey’s same-store sales were up 2.7%, with an average margin of 32.4%. Total grocery and other merchandise revenue increased 8.1% to $618.3 million, and gross-profit dollars were up 9.3% to $200.2 million. Total revenue for the first six months was up 8% to $1.3 billion. Same-store sales year to date were up 2.9%, with an average margin of 32.4%.
"The grocery and other merchandise category continues to perform well," Handley said. "For the second straight quarter, we realized stronger margins at the high end of our guidance range, which drove gross-profit dollar growth. The packaged-beverage and other tobacco subcategories led the way in contributing to that growth."
3. Prepared food and fountain
Casey’s same-store sales for the quarter were up 2.2% with an average margin of 62.4%.
Total prepared food and fountain revenue increased 8.0% to $283.1 million in the second quarter, while gross-profit dollars grew 10.1% to $176.7 million. For the first six months, total revenue increased 7.7% to $564.1 million. Year to date, same-store sales were up 2.0% with an average margin of 62.2%.
“Strategic price increases helped expand margin in the quarter in a competitive environment," Handley said. "Our breakfast daypart continues to be a strong contributor to overall results."
4. Operating expenses
For the second quarter, Casey’s total operating expenses increased 6.6% to $344.2 million. Year to date, operating expenses are up 9.2%. Same-store operating expenses excluding credit card fees were down 0.1% for the quarter. The increase in total operating expenses was primarily attributable to operating 94 more stores than the same quarter in the prior year.
"Our second-quarter results demonstrated our commitment to effectively controlling operating expenses," Handley said. "Despite higher credit-card fees and fleet-fuel expenses, our team was able to continue to drive same-store operating expenses down in the second quarter as compared to the prior year. The largest contributor to that success was the continued efforts around managing the hours worked at our stores."
Casey’s total store count as of April 20, 2018, was 2,073 locations. As of Oct. 31, 2018, it had 2,097 stores.
“Our store growth target this year is to build 60 stores and acquire at least 20 additional stores. At the six-month mark, we had opened 25 new stores, acquired three stores and had 23 additional stores under agreement to purchase. Currently, we have 36 stores under construction, with an additional 95 sites in our land bank,” Handley said. “We are on track to achieve our unit growth target and believe we are positioned well for future growth.”
Regarding mergers and acquisitions, he said, "We are pleased with our current growth opportunities. We remain encouraged with the acquisition environment and will continue to be a disciplined buyer. Combining acquisitions with our organic growth pipeline gives us the agility to pull multiple levers to drive further expansion."
As of Oct. 31, 2018, Ankeny, Iowa-based Casey’s had 2,097 c-stores in 16 mostly Midwestern states. It is No. 4 in CSP’s 2018 Top 202 ranking of c-store chains by number of company-owned retail outlets.