Three Key Factors to Casey’s Growth
By Greg Lindenberg on Dec. 12, 2016ANKENY, Iowa --Casey’s General Stores Inc.’s second distribution center, which the convenience-store retailer opened in February in Terra Haute, Ind., is key to the chain’s growth strategy and “is performing extremely well,” CFO Bill Walljasper said during the company’s fiscal second-quarter 2017 earnings call.
“This quarter, we opened 11 new-store constructions, completed nine replacement stores and acquired three stores. We also have 15 additional acquisition stores under contract to purchase,” Walljasper said. “We also completed 16 major remodels in the quarter. In addition to all of this activity, we currently have 39 new stores, 22 replacement stores and 37 major remodels under construction.
“We currently have 84 sites under contract for future new builds, the majority of which will be completed in fiscal 2018,” he continued. “Our store count at the end of this quarter was 1,941. We believe, given our strong balance sheet and expanded geography, we are positioned very well for future growth.”
But the momentum of that growth is not without its speed bumps. Click through for the details on what’s helping—and hindering—that growth …
1. Distribution center
One of the benefits of the second distribution center “is that it opens up new geography for us to efficiently expand our footprint," Walljasper said. "This, along with increased resources in our store development department, has put us in a better position to accelerate our unit growth.
“Penetration into the newer markets will definitely increase so we can leverage that second distribution center,” he said. “If you look at the sites that we have under contract … throw Indiana into that mix and then Tennessee, Kentucky, Arkansas--roughly half the stores we have under contract are going to be in some of these newer markets.”
2. Online ordering
The company has one big challenge, however, that is putting a damper on its growth: brand awareness for its iconic pizza and other prepared foodservice.
“What we find typically is that gallons and groceries and other merchandise ramp up consistently in existing states; it’s just that we’re not quite known as well for prepared foods in other states,” Walljasper said.
Casey’s is attempting to solve this problem, he said, through increased advertising, promotional activity and digital involvement, including expanding online ordering.
“Our online ordering continues to gain traction,” Walljasper said.
Following the January rollout, total downloads for Casey's mobile pizza-ordering app exceeded 616,000 and continue to grow, he said. The number of online pizza orders has risen more than 10%, and the basket size of an online order has increased more than 20% higher compared to a telephone order.
“[We] have a higher volume of repeat users with respect to the mobile app,” Walljasper said. “Use … seems to be more prevalent in some of our more populated areas, and so we’re trying to do what we can to drive that higher and the rural environment higher as well.”
The company is considering adding complementary items such as breadsticks and more.
“We have had some conversation internally about expanding that from a test perspective into other areas of prepared food, possibly, and some grocery,” he said. “That’s still kind of being kind of kicked around.”
3. Pizza delivery
Casey's also continues to expand pizza delivery.
“Through the first six months [of fiscal 2017], we’ve converted … 70 stores to the pizza delivery format,” Walljasper said. “Due to the performance of our pizza delivery program, and additional opportunities in smaller communities, we will be accelerating the rollout of this program. We plan on converting an additional 90 locations to the pizza delivery format over the remainder of the fiscal year. This will bring our total pizza delivery stores converted this year to 160.”
The company will open most of the new pizza delivery locations in its fiscal third quarter.
“As we look at the success of the pizza delivery program, the primary success that we’ve had has been in larger communities,” he said. “We’ve recently just started putting pizza delivery into some smaller communities and have seen some relatively good success in that regard. So to move forward, we thought we had an opportunity to roll out additional pizza delivery stores in some of the smaller communities that we had otherwise not contemplated. … It’s an operational change. If we find that in certain stores it’s not working as expected, we can certainly pull that back. But we definitely think we have an opportunity there, so we felt we’d take that opportunity this fiscal year.”
Casey’s has approximately 552 stores that offer pizza delivery.
“To put it in baseball terms," Walljasper said, "being a Cubs fan, we’re probably in the fifth inning on pizza delivery.”