5 Updates From Casey’s Fiscal First-Quarter 2019

Samantha Oller, Senior Editor/Fuels, CSP

caseys general stores

ANKENY, Iowa -- Casey’s General Stores is making progress on the fuel-related goals of its value-creation plan, evident in the company reporting higher fuel margins for its fiscal first-quarter 2019.

Same-store gallons rose 0.5% for the fiscal first quarter ending July 31, 2018, for an average fuel margin of 20.5 cents per gallon (CPG). Same-store gallon growth fell below Casey’s annual guidance range, but execs said it still outpaced the chain’s peers. Meanwhile, total gallons were up 6.5% to reach 601.8 million gallons, with gross-profit dollars up 13.1% to hit $123.5 million for the quarter.

On the convenience-store retailer's latest earnings call, President and CEO Terry Handley credited Casey’s “more proactive” approach to managing retail fuel pricing and close collaboration between its fuel and store operations teams for the fuel-margin results. This is as the chain continues its search for a fuel procurement manager to round out its fuel team and as it makes headway on its value-creation plan, aimed at positioning Casey’s for long-term growth.

Here are five updates on Casey’s progress. ...

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gas pump

Casey’s has taken steps toward completing a few of the fuel-related elements of its value-creation plan. They include:

  • In June, Casey’s announced that Fleetcor Technologies would manage its fleet-card program, and it hired a new fleet-card manager, who will work with Fleetcor on creating a marketing plan to launch in the fiscal second quarter.
  • To boost fuel margins, the chain is continuing its fuel product optimization efforts, converting an additional 592 stores to sell biodiesel and adding diesel or premium-grade gasoline to 78. By the end of the second quarter, it plans to add one of these three higher-margin fuel products to 344 additional sites.
  • Casey’s has selected PriceAdvantage’s fuel price optimization platform, which it will begin testing at certain locations in September and then roll out to the entire chain later in the year.

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caseys general stores website

Casey’s recently hired a director of digital and is continuing its search for a vice president of digital to help lead the digital engagement element of its value-creation plan. It has hired Deloitte Digital as its e-commerce implementation partner to help it create a seamless customer experience both online and in the store. This will include an improved website, redesigned mobile app, a new loyalty program, in-store technology and enterprise infrastructure.

“This digital platform will allow us to gain a deep understanding of our customers and better serve them by providing the seamless convenience they value and target effective promotions that drive additional customer visits,” Handley said on the call.

Casey’s plans to pilot the e-commerce platform, app and loyalty program in the fiscal fourth quarter and begin a larger rollout in fiscal 2020.

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caseys general stores

Same-store sales for grocery and other merchandise rose 3.2% for the fiscal first quarter, with margins averaging 32.4%.

Casey’s saw better-than-expected sales for packaged beverages thanks to a strong performance in May, as well as the rollout of higher-margin liquor to more stores. Tobacco was also a strong performer, particularly other tobacco products. Combined, they helped drive a 7.9% increase in total grocery and other merchandise sales and a 10% increase in gross-profit dollars.

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breakfast pizza

In prepared food and fountain, same-store sales for the first fiscal quarter grew 1.7%. Stronger breakfast day-part sales—in part driven by a new breakfast bowl item and a price increase for breakfast pizza—helped alleviate “softness” in bakery sales. Executives are hoping that a promising new line of doughnut products that the company is testing will help address the bakery issues.

Total prepared-food and fountain sales increased 7.3% to reach $281 million for the quarter.

Margins averaged 62%—off 50 basis points from first-quarter fiscal 2018. When combined with other promotions centered around Casey’s 50th anniversary, prepared food and fountain margins still fell within the top end of the chain’s guidance for the quarter, Handley said. Total gross-profit dollars rose 6.4% to hit $174.2 million.

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New Stores and M&A

caseys general stores

Casey’s goal for fiscal-year 2019 is to build 60 new sites and acquire at least 20. In the first quarter, it opened 15 new-to-industry sites, bought one store and had 14 under agreement to buy. The chain has a land bank of 103 locations.

Casey’s has had “more conversations” related to acquisition opportunities, CFO Bill Walljasper said on the call. “We’re still a very prudent buyer, a very disciplined buyer, and we’re not going to necessarily go out and purchase budget stores to tell people we grew the units.”

That said, “People are willing to have conversations about selling their business,” he continued. “And so we’re encouraged by that, and certainly I think we’re in a good position to take advantage of those things.”

Ankeny, Iowa-based Casey’s General Stores has more than 2,000 c-stores in 15 mostly Midwestern states, located primarily in towns with populations of 5,000 or fewer people. The chain ranked No. 4 in a year-end update of CSP’s 2018 Top 202 list of the largest c-store chains in the United States.

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