Casey's Tweaking Pizza Delivery

Reworking hours, testing online ordering while reporting higher traffic, sales growth overall

ANKENY, Iowa -- While reporting double-digit growth in premium cigarette and beverage sales, officials with Casey's General Stores Inc. also elaborated on its evolving pizza delivery business, saying it's cutting hours and service at some convenience stores but ready to roll it out to a number of other locations going forward.

Casey's General Stores pizza foodservice (CSP Daily News / Convenience Stores / Gas Stations)

Speaking at the company's quarterly earnings call, Robert Myers, chairman and CEO, and Bill Walljasper, senior vice president and CFO, were upbeat about the quarter in general, having surpassed goals and margins in fuel and general merchandise.

"Total sales in every subcategory was up in the double digits or in the high single digits, including cigarettes," Walljasper said. "That was mostly unit growth. Particularly the premium cigarette category--Marlboros, Camels. And we've seen increases in chewing tobacco, and salty snacks are doing well."

In a statement released prior to the call, Myers said Casey's annual goal is to increase same-store grocery and other merchandise sales 5.3% with an average margin of 32.1%. For the quarter, same-store sales were up 6.6% with an average margin of 32.3%.

"The entire category continued to perform well through the second quarter," said Myers. "Packaged beverages are performing especially well, due in large part to our expanded cooler set [going to 14 cooler doors versus nine] in new, remodeled and replaced stores."

Year to date, total sales for the category were $945.5 million and total gross profit was up 12.3% to $306.7 million. Same-store sales for the six months ended were up 7.2%.

Indications are showing that lower retail prices for gasoline have boosted traffic counts and overall sales, Walljasper said. With lower retail prices, they have seen increases in gallons sold per transaction on a same-store basis and a rise in customer count--4% in October, the highest since last year.

"People are coming out, traveling more," he said. "That's always a benefit for us."

Regarding prepared food and fountain categories, the goal for fiscal 2015 is to increase same-store sales 9.5% with an average margin of 60%. For the second quarter, same-store sales were up 11.1% with an average margin of 59.3%.

"Our operational initiatives continue to drive sales in the category, and we were able to implement strategic price adjustments at the beginning of the fiscal year," said Myers. "While the margin has been impacted by high commodity costs, we have experienced a reduction in cheese costs since the end of the quarter."

Total sales for the category were up 17.1% to $395.8 million year-to-date while gross profit rose 12.9% to $235.8 million. Year to date, same store sales are up 11.1%.

Offering details on the chain's pizza program, Walljasper said that back in May, the company raised its retail pizza prices 2% due to rising commodity costs and then by another 1% in November. Those increases were relative to local competition, he said, noting that consumer reaction has not been an issue and that falling commodity costs probably will not affect the way retail prices stand today.

Elaborating on the development of its pizza delivery program, Walljasper said the company will continue to tweak the model as more data comes in. He said in some cases, sales fail to justify the labor, leading them to stop service or to shorten that window of delivery, limiting hours or days of delivery.

"But there's tremendous opportunity for some our stores," Walljasper said, "[Particularly in] higher-populated stores rather than [our average] store base to take market share from somebody."

Elaborating on its development of an online pizza-ordering program, Walljasper said that during the past month and a half, the chain has used its own employees to conduct a test in the Des Moines, Iowa, area, working through the technology and processes involved.

"It has gone very well," he said. "We're excited about that program."

Ankeny, Iowa-based Casey's currently has 1,856 convenience stores in 14 states.

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