ANKENY, Iowa -- Beating several of its own growth goals for everything from same-store sales to fuel margins, Casey's General Stores Inc. is starting off its fiscal-year 2015 in excellent shape after strong performance in the first fiscal quarter.
"We're off to a good start toward achieving our goals in fiscal 2015," said Bill Walljasper, CFO for the Ankeny, Iowa-based convenience store chain during the company's earnings call. Examples of better-than-expected performance include:
- Same-store sales were up 7.7% for the first quarter of fiscal 2015, ending July 31, 2014, with an average margin of 32.5%. The chain's annual goal is a 5.3% increase to increase same-store sales 5.3% with an average margin of 32.1%.
- Same-store prepared food and fountain sales were up 11.1% with a 59.9% average margin, vs. an annual goal of 9.5% with a 60% average margin. Commodity cost pressures from cheese and meat weighed on margin compared to first-quarter 2014, but a price increase Casey's implemented at the start of the 2015 fiscal year in May has helped with sales growth. Gross profit rose 13.4% to $116.5 million, with total foodservice sales up 17.1%.
Casey's is anticipating another price increase this November to keep up with cost increases, it said. It has not seen any pushback from consumers on previous price increases, said Walljasper, whether in terms of lower sales or downsizing orders.
The chain also plans to test online pizza ordering this October at some sites; Casey's currently offers pizza delivery at approximately 365 stores, adding a dozen locations during the quarter.
- Same-store fuel gallons up 3% with a 19.6-cent-per-gallon (CPG) average margin. This compares to an annual goal to grow same-store gallons by 1% with an average 15.3-CPG margin. Casey's credits its Fuel Savers program, a fuel-loyalty program for which it partners with supermarket operator Hy-Vee, for the lift in gallons, and it plans to expand it into new markets. Casey's sites in new markets have greatly outperformed the chain volume average. Margins were better than expected despite a decrease in the value of renewable identification number credits (RINs).
RIN values totaled $5.7 million in first-quarter 2015 vs. $12.9 million in first-quarter 2014. Total gallons rose 8.8% to hit 464.2 million gallons. The 12.5 million RINs it sold in first-quarter 2015 came in at 46 CPG, representing 1.2 CPG toward fuel margins.
The $7.2 million drop in RIN values compared to first-quarter 2014 hit Casey's diluted earnings per share by nearly 12 cents, to fall to $1.34.
- Operating expenses rose to $244.3 million vs. $216 million for first-quarter 2014, or up 13.1%, the bulk of the increase related to new and replaced stores, recent acquisitions and various initiatives. Casey's continues to expand all-day operating hours at sites, with now 825 stores open 24 hours.
The chain came closer to its annual goal to build or acquire 72 to 108 stores and replace 25 existing stores in the first quarter, opening seven new stores and acquiring 25. Casey's closed on its acquisition of Stop-N-Go in May and continues to integrate those assets.
Casey's plans to stay focused yet disciplined with future acquisitions. "We have the ability to continue to integrate acquisitions, and certainly the financial capacity," said Walljasper, noting that Casey's debt-to-EBITDA ratio is relatively low, "and we have sizeable capacity on the balance sheet, if the right opportunity presents itself."
He also acknowledged the recent big transactions rocking the industry, and the higher multiples associated with them, ranging from the upper single to low double digits.
"That's something we're keeping our eye on, especially with some of the larger chains. We are seeing a few higher expectations from a multiples standpoint," said Walljasper. "But from the smaller acquisitions we traditionally do, multiples are still keeping in line with 5X-to-7X [EBITDA] trailing."
"Certainly we're diligent about process; we won't grow for growth's sake," he added. "We want to make sure it has some thought process behind it."
Casey's rounded out the quarter with 1,835 stores in 14 Midwestern states.
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