Higher profitability inside the store buoyed Casey’s General Stores Inc.’s performance in its fiscal third-quarter 2024. The convenience-store retailer has reported net income of $86.9 million for its third quarter ended Jan. 31, down 13% compared to $100.1 million in third-quarter 2023, and earnings before interest, taxes, depreciation and amortization (EBITDA) of $217.6 million, down 2% from $221.7 million in the same period a year ago.
- Casey's General Stores is No. 3 on CSP’s 2023 Top 202 ranking of convenience-store chains by store count.
For the quarter, net income and EBITDA were down mostly due to a stronger fuel margin in the prior year, the company said, and higher operating expenses due to Casey’s operating 167 additional convenience stores. This was partially offset by higher profitability inside the store, it said.
“Casey’s delivered another solid quarter highlighted by inside gross profit growth,” said Darren Rebelez, chairman, president and CEO in announcing the financial results ahead of Tuesday's earnings call. “Inside same-store sales were driven by prepared food and dispensed beverage, with whole pies and hot sandwiches performing exceptionally well,” he said.
- CSP has named Casey’s CEO and President Rebelez its 2024 Retail Leader of the Year.
Inside Sales
Total inside sales of $1.2 million were up 9.5% for the quarter, compared to $1.1 million for third-quarter 2023, driven by strong performance in the prepared food and dispensed beverage category, including whole pizzas, hot sandwiches and dispensed beverages, as well as non-alcohol and alcohol beverages in the grocery and general merchandise category. Inside margin was up 70 basis points compared to the same quarter a year ago, primarily due to softening of prepared food and dispensed beverage ingredient costs as well as “modest” retail price adjustments, said the company.
Inside same-store sales increased 4.1% compared to the prior year, and 9.9% on a two-year stack basis, with an inside margin of 41.3%. Total inside gross profit increased 11.3% to $501.5 million compared to the prior year.
Fuel
For the quarter, total fuel gallons sold increased 6.9% compared to the prior year primarily due to the store count increase, while same-store gallons were nearly flat versus the prior year. The company’s total fuel gross profit was down 2% versus the prior year. The company sold $3.4 million in renewable identification numbers (RINs) fuel credits in the third quarter, an increase of $500,000 from the same quarter in the prior year.
“Our fuel team navigated a rising cost environment and delivered nearly flat gallon volume and a 37.3 cents-per-gallon fuel margin,” said Rebelez. Same-store fuel gallons were down 0.4% compared to the prior year. Total fuel gross profit decreased 2% to $257.2 million compared to the prior year.
Operating Expenses
Operating expenses increased approximately 10% during the third quarter. Approximately 3% of the increase is due to lapping a $15 million one-time benefit to operating expenses last year from the resolution of a legal matter, said the company. Operating 167 more stores than the prior year accounted for approximately 6% of the increase. Total same-store employee expense contributed to approximately 1% of the increase, as the increases in labor rates were partially offset by a reduction in same-store labor hours, Casey’s said.
Higher profitability inside the store partially offset the higher operating expenses, the company said.
Same-store operating expenses excluding credit card fees were up 2.5%, favorably affected by a 1% reduction in same-store labor hours.
“The operations team performed exceptionally well this quarter integrating multiple acquisitions, reducing same-store labor hours while growing sales and driving positive guest satisfaction scores,” Rebelez said.
C-Store Expansion
Ankeny, Iowa-based Casey’s owns convenience stores in 17 greater Midwestern states and Texas, creating a wide footprint through the middle of the country from northern border to southern border. The company is the third-largest convenience-store retailer, the fourth-largest holder of liquor licenses and the fifth-largest pizza chain in the United States.
As of April 30, 2023, the chain had 2,251 c-stores. As of Jan. 31, its store count was 2,639. The increase included 23 newly built, new-to-industry (NTI) locations, 105 added through acquisitions (not including one not opened) and six added from previous acquisitions.
Outlook
Casey’s is reaffirming its annual outlook. The company expects same-store inside to increase 3.5% to 5%. It expects inside margin improvement of approximately 40% to 41%. The company expects same-store fuel gallons sold to be between negative 1% to positive 1%. The company expects total operating expenses to increase approximately 6% to 8%, although it expects same-store operating expenses excluding credit card fees to only increase approximately 3% for the year. It expects fiscal 2024 EBITDA growth to be in-line with its long-term strategic plan’s goal of 8% to 10%. Also, Casey’s expects net interest expense to be approximately $53 million, with depreciation and amortization at approximately $350 million for the year. And it expects the tax rate to be approximately 23% to 25% for the year.
The chain expects to add at least 150 c-stores in fiscal 2024 and expects the purchase of property and equipment to be between $500 to $550 million.
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