ANKENY, Iowa — In his farewell appearance on an earnings call, the retiring Terry Handley, president and CEO of Casey’s General Stores Inc., said he remains “optimistic about the opportunities in the upcoming fiscal year” for the convenience-store retailer.
Darren Rebelez, former president of the IHOP restaurant chain and a former executive at 7-Eleven and other c-store companies, will succeed Handley on June 24.
Casey’s has reported net income of $25.2 million for its fiscal fourth-quarter ending April 30, 2019, compared to net income of $19.3 million for its fiscal fourth-quarter 2018. For the fiscal year, the convenience-store retailer reported net income of $203.9 million vs. net income of $317.9 million for fiscal 2018. The company reported total revenues of $2.18 billion for the quarter, compared to $2.09 billion for the same period in the previous year. It reported revenues of $9.35 billion for the year vs. $8.39 billion a year ago.
“The results were primarily driven by effective control on operating expenses and margin expansion across all of our categories compared to the last fiscal year,” Handley said on the company’s quarterly earnings call. “We continue to make excellent progress toward the execution of the various components and the value creation plan and remain optimistic about the opportunities in the upcoming fiscal year.”
Here are some of the highlights of the call …
On his last call as Casey’s president and CEO, Handley said, “As I reflect on my nearly four decades with Casey’s, I'm incredibly proud of what our team has accomplished, and I’m confident that the business is well-positioned for continued success. This is the right time for me to retire, and I have absolute confidence in my successor, Darren Rebelez. I know Darren personally, and I'm familiar with his tremendous leadership experience in the convenience-store, fuel and restaurant industries, most recently as the president of IHOP. I look forward to seeing where he takes this great company in the years ahead.”
Value creation plan
Casey’s has completed or made progress on the following value creation plan activities:
- It successfully launched the new Caseys.com e-commerce website.
“The recent launch of the new Caseys.com e-commerce website marked a key milestone in our digital transformation journey,” said Handley. “We are confident these digital capabilities, combined with our new price optimization platform, will improve our competitive position and increase gross-profit dollars to the category.”
- It launched fuel price optimization platform in all stores.
“The successful inside price optimization store test and eminent rollout will provide our diverse store base dynamic pricing capabilities to meet today’s ever-changing competitive landscape, and will further support ongoing growth in gross-profit dollars to the category,” Handley said.
- At fiscal year end, the new fleet card program has more than 2,000 active cards and 500 new accounts.
For the quarter, the average fuel margin was 18.6 cents per gallon, compared to 16.3 cents per gallon for the same quarter a year ago. Same-store gallons sold in the quarter decreased 2.8%.
“The company experienced a challenging wholesale cost environment throughout the quarter,” said Handley. “However, our balanced approach to retail fuel pricing resulted in a considerable increase in gross profit when compared to the fourth quarter a year ago.”
Total gross-profit dollars for the quarter increased more than 17% to $101.4 million, while total gallons sold for the quarter increased 2.6% to 546 million. For fiscal 2019, total gross-profit dollars were up 14.6% to $466.1 million, while total gallons sold were up 4.4% to 2.3 billion. For the year, same-store gallons sold were down 1.7%, with an average margin of 20.3 cents per gallon.
“Moving forward, we remain confident the newly implemented capabilities in retail fuel pricing and fuel procurement will further enhance fuel profitability,” Handley said.
Grocery, merchandise sales improvements
For the fourth quarter, same-store sales of grocery and other merchandise were up 5.7%, with an average margin of 31.5%. Same-store sales for the fiscal year were up 3.6%, with an average margin of 32.1%.
“Refinements in product offerings and promotional strategies in higher margin items contributed to increased same-store sales growth and margin expansion comparatively for the fourth quarter and fiscal year,” said Handley.
Total sales for the quarter were up nearly 10% to $562.7 million, while total gross-profit dollars increased 10.8% to $177.2 million. For the year, total sales were up 8.5% to $2.4 billion, and gross-profit dollars increased 9.6% to $759.8 million.
Prepared food, fountain sales rise
For the fourth quarter, same-store sales of prepared food and fountain were up 2% with an average margin of 62.2%.
“Continued benefits from strategic price increases, favorable commodity costs and changes in promotional campaigns resulted in considerable margin expansion in the fourth quarter compared to the same time period a year ago,” said Handley.
Total gross-profit dollars for the quarter were up nearly 10% to $158.1 million, while total sales increased 5.4% to $254.1 million. For fiscal 2019, total gross-profit dollars rose 8.9% to $668.6 million, and total sales increased 6.8% to $1.1 billion. Same-store sales for fiscal 2019 were up 1.9%, with an average margin of 62.2%.
More stores, more operating expenses
For the fourth quarter, operating expenses were up 9.6% to $346.2 million. For the fiscal year, operating expenses increased 8.4% to $1.4 billion.
“Both the quarter and full-year increase in operating expenses was primarily due to operating more stores than the same time a year ago offset by a reduction in employee costs at same-stores,” said Handley.
Fourth-quarter operating expenses were also affected by the reduction in the number of 24-hour and pizza-delivery formats from the prior year, along with increases in technology expenses and credit-card fees. Same-store operating expenses excluding credit-card fees were down 1.1% and 0.6% for the quarter and full year, respectively.
“A focus on aligning labor with customer trends throughout the fiscal year contributed to the company’s strong earnings growth,” Handley said. “Process improvements and new capabilities are underway across the business focused on driving efficiencies and enhancing future earnings growth.”
As of April 30, 2019, Casey’s store count reached 2,146, compared to 2,073 at the end of April 2018. It is No. 4 in the Top 40 update to CSP’s2018 Top 202 ranking of c-store chains by number of retail outlets. The company operates c-stores in 16 Midwest states.
“For this fiscal year, we opened 56 new stores and acquired 24 additional stores,” Handley said. “In addition, we replaced eight stores and have eight acquisition stores under agreement to purchase. Currently, we have 81 stores in our pipeline, including 41 under construction.”
The company also closed 10 stores.