ANKENY, Iowa — Casey’s General Stores Inc. has made progress on or completed several aspects of its multiyear value creation plan, said Terry Handley, the convenience-store chain’s president and CEO, on the company’s second-quarter fiscal 2019 earnings call Dec. 11.
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.
- Click here for coverage of Casey's second-quarter fiscal 2019 earnings.
In March, company executives announced several key initiatives to increase profitability, improve operational performance, control operating expenses and enhance shareholder value, in part to satisfy activist investors who called on the company to explore strategic alternatives, including a possible sale.
“We are on schedule with our value creation plan and very pleased with the continued progress” on the plan, Handley said, offering the following updates …
1. Fuel product optimization
Casey’s has been executing on its fuel product optimization plan.
“Year to date, we have converted 592 stores to biodiesel and 144 stores to premium or diesel,” Handley said. “At the end of the third quarter, we plan to add premium or diesel to 172 additional stores. Diesel, biodiesel and premium fuel all carry a higher margin than other fuel products. We believe these will have a positive impact on our fuel margins going forward.”
2. Fuel price optimization
Casey’s is piloting fuel price optimization software October through December using software from PriceAdvantage, a division of Colorado Springs, Colo.-based Skyline Products.
“This will allow us to leverage the sales data generated by our broad network of stores combined with the market data to make centralized rules-based decisions at the pump and in the store, which we anticipate will improve sales and margins across all categories throughout our network,” said Handley.
When the pilot ends, Casey’s will begin a phased rollout of the program to all stores, to be completed by the end of fiscal 2019.
Casey’s has hired a director of fuel procurement to help with these initiatives. The company declined to name the executive because he or she has not started yet.
“We continued to build out our retail fuel team in preparation for the launch of the formal price optimization program following the conclusion of the current 100-store pilot already underway,” he said. “The fuels team is working closely with store operations to assume a proactive and balanced approach to our retail fuel pricing strategy."
3. In-store price optimization
Casey’s is using London-based dunnhumby’s platform for price optimization and merchandise promotions inside the store.
“We have recently hired a retail pricing and analytics manager and will continue to build out that team,” Handley said. The company told CSP Daily News that the retail pricing and analytics manager is Keith Day.
“In the third quarter, we will begin a test-and-learn phase to help identify and finalize the categories that will be used for the pilot, which is currently scheduled to begin in the fourth quarter,” he said.
Price optimization inside the store will most likely happen on a wider scale in first-quarter fiscal 2020, he said, depending on the outcome of the pilot.
“This program represents a fundamental shift in our marketing processes for both fuel and in-store purchases, supported by an increased visibility into our pricing and promotions strategy,” he said.
4. Digital engagement
Casey’s has hired a vice president of digital customer experience and a director of digital marketing. The vice president of digital customer experience is Art Sebastian. And Mike Templeton joined Casey’s as director of digital marketing in September 2018 from Kum & Go LC, West Des Moines, Iowa, where he had been senior marketing and digital marketing manager since 2012.
On the digital front, the company has gone live with the Salesforce marketing cloud, increasing its addressable customer base more than 400% to 2.2 million, Handley said. It has already begun an automated marketing campaign to customers and will pilot and roll out a new digital ordering platform. And it will launch a redesigned mobile app in first-quarter fiscal 2020 to coincide with the pilot and rollout of the Casey's loyalty program.
“Upon integration of the digital engagement program, including a new e-commerce platform, we intend to create a seamless customer experience both online and in-store that enhances our digital capabilities and facilitates personalized marketing and rewards,” he said. “This digital platform will allow us to gain a better understanding of our consumers and better serve them by providing value and target-effective promotions that will drive additional customer visits.”
Casey’s also evaluated its distribution system “in anticipation of the increased sales volume generated by the value creation plan and new-store growth,” said Handley.
“We believe our business model serving small rural communities and suburbs is a strategic advantage,” he said. “Our role as both wholesaler and distributor has the financial advantage that cannot be replicated with the move to a third-party distributor. We remain confident that self-distribution as our core supply chain strategy creates the optimal level of efficiency.”
6. Fleet-card program
Casey’s launched a fleet-card program in late October.
“Although still early in the process, the preliminary results show that we are on target with over 300 new account and 3,000 cardholders,” said Handley. Those numbers are “on track” with expectations, said Bill Walljasper, senior vice president and CFO, on the call.
“We expect to begin to see the benefits of this program in the third quarter of fiscal 2019.” said Handley.