Casey's Deliberate & Measured Success

Retail initiatives keep convenience store chain growing

Steve Holtz, Editor in Chief, CSP Daily News

ANKENY, Iowa -- Industry leaders make their own success. That's what Casey's General Stores Inc.  has done with its new-build growth plans and retail initiatives, all of which have added to the company's bottom line over the past 12 months.

The Ankeny-Iowa-based convenience store chain has been building news stores, remodeling sites, extending hours and adding pizza-delivery service in a measured rollout that has grown cash flow, prepared-food sales and in-store sales to various degrees, according to CFO Bill Walljasper.

Rebuild Momentum

When the chain rebuilds a store, "we take it out of the same-store calculation, but it certainly has a significant economic benefit that has to be considered," Walljasper said during a fourth-quarter earnings call on Friday. (It released the earnings on Thursday.) "We see, on average, a lift in gallons of about 50% after we replace a store. We see a 50% lift in revenue in grocery and general merchandise when we replace a store, and roughly about an 80% to 100% lift in prepared-food sales.

"You roll all of that up, and you see roughly 50% to 60% lift in cash flow on a replacement store after we replace it."

During the 2013 fiscal year, which ended April 30, Casey's replaced 26 stores, remodeled 75 sites and built 31 new stores.

"We will build or acquire between 70 and 105 stores. … We plan to replace 20 stores and complete 25 major remodels" in fiscal year 2014, Walljasper said.

"We are encouraged by the continued improvement of these stores. When you exclude the stores that are adversely impacted by the cigarette tax increase in Illinois, the remodeled stores are generating a low double-digit after-tax return in their second year," he said. "We also have 20 stores under written agreement to acquire."

New Builds

Casey's also has 15 new stores under construction and 52 sites under contract to be built in one of two current store designs: a 4,200-square-foot facility or a 3,200-square-foot site.

"Typically, we would only have four pump islands out in front," Walljasper said, "where as the larger store footprint would usually have at least six and typically eight pump islands out in front, trying to gear for higher traffic volume."

Such activity is allowing the chain to grow in both new and existing markets.

"[We'll open] a significant piece of these stores [in new markets] in Arkansas, Tennessee, Kentucky and North Dakota, but also in-fill within the remaining states as well," he said.

The company will build a second distribution center within two to four years.

Other initiatives Casey's General Stores places to grow in fiscal 2014:

24-Hour Stores

Currently, about 550 of Casey's convenience stores are now open 24 hours. "In fiscal 2014, we plan to convert another 100 stores to a 24-hour format," Walljasper said. "We typically experience same-store customer count double that of our store base, resulting in a 20% to 30% lift in in-store sales for a store converted to this format."

Pizza Delivery

Early results of Casey's pizza-delivery initiative, which launched in early 2011, show stores "experiencing 25% to 30% increases in prepared food sales upon the roll out of pizza delivery to a store," Walljasper said. "We converted an additional 50 stores to the program in April, bringing our total to 274 stores delivering pizza. It is our intention to add another 57 stores to this program in July, and another 50 stores later this fiscal year."

Collectively, these retail initiatives are bringing healthy returns to Casey's.

"If you look at the 24-hours, the remodel stores and the pizza-delivery stores, those represent a little over half the same-store sales lift that we had in fiscal 2013," he said, "and collectively, we anticipate the same in 2014."

Steve Holtz, CSP/Winsight By Steve Holtz, Editor in Chief, CSP Daily News
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