ANKENY, Iowa -- Following a purposeful break--and another three months to review the initiative--Casey's General Stores is rededicating itself to its major store-remodel program.
In December, Casey's said it would take a break in the remodel program to evaluate the results. Yesterday, the convenience-store chain announced it has selected another 25 stores to remodel over the next five months with plans for more in the next fiscal year.
"Initial study of the remodel program indicates that the higher-performing remodeled stores are located in slightly larger populations than our average store base," CFO Bill Walljasper said on a third-quarter 2012 earnings conference call with analysts yesterday. "These communities provide the opportunity to gain more market share. We anticipate that these will be completed by the end of the first quarter of next fiscal year."
Three month earlier, Walljasper had expressed concern about the program, noting, "In roughly the top half of those remodels, we're seeing returns on a double-digit … basis. For the bottom half, it's significantly below that. So we're going to evaluate that group of stores to pick out the criteria of what's separating the bottom half and the top half."
With population determined to be a major factor, Walljasper announced the reversal of the moratorium yesterday, saying, "We are encouraged about the future of this program and anticipate additional remodels to be completed later next fiscal year."
Casey's launched the remodel project in August 2010, with the remodeled stores getting larger coffee and fountain offerings, made-to-order sub sandwich programs and expanded cooler capacity.
During the third quarter, Casey's opened 10 new-store constructions. For the first nine months of the year, it acquired 33 stores and completed 18 new-store constructions, with more to be completed in the fourth quarter.
"Through the combination of new-store construction and acquisitions, we anticipate adding approximately 65 stores by the end of the fiscal year and replace 11 stores," Walljasper said.
He also hinted at additional growth for 2013.
"We do anticipate accelerating our new-store constructions next year and the following year," he said during the call. "That program has been very well received by our customer base, and we think there are opportunities in that regard."
In the earnings release, he said, "We are expanding our footprint in our current market as well as the development of new states."
Casey's reported 44 cents in basic earnings per share for third-quarter fiscal 2012 ending January 31, 2012, compared to 34 cents for the same period a year ago. Year to date, basic earnings per share are $2.46 versus $1.64 for the same period last year.
Gasoline: The company's annual goal is to increase same-store gasoline gallons sold by 1% with an average margin of 13.5 cents per gallon. For the third quarter, same-store gallons sold were down 2.4% with an average margin of 13.6 cents per gallon.
"Same-store gallons continue to be impacted by higher prices at the pump," said Myers. "However, we are encouraged by the 3.4% increase in our same-store customer count."
For the fiscal year, total gallons sold were up 5.4% to 1.1 billion with an average margin of 15.9 cents, while gross profit dollars rose 10.9%. Same-store gallons for the year were down 2.6%.
Grocery & Other Merchandise: Casey's annual goal is to increase same-store sales 5.8% with an average margin of 32.8%. For the quarter, same-store sales rose 6.3% with an average margin of 31.8%; up 90 basis points from the same period last year. For the sixth consecutive quarter, the company experienced a double-digit sales increase in this category with total sales up 12.7% over the prior third quarter.
"Favorable weather comparisons, as well as the increased contribution from our new store design and remodel program, helped drive sales in higher-margin items throughout the quarter," Myers said.
Gross profit dollars increased 16.1% for the quarter and 14.8% year to date. Same-store sales for the year were up 6% with an average margin of 32.3%. Total sales for the year were up 14.6% to slightly over $1 billion.
Prepared Food & Fountain: The goal for fiscal 2012 is to increase same-store sales 7.7% with an average margin of 61.8%. Same-store sales were up 12.6% for the quarter and 14% year to date. The average margin for the quarter was 61.2% down from the same period a year ago, primarily due to a rise in cheese cost.
"We are pleased with our ability to increase gross profit in this category nearly 17% for the quarter compared to the same period last year," said Myers. "We continue to benefit from our remodel program and the addition of kitchens to recent acquisitions. Also, based on the results of prior stores converted to 24 hours, we converted an additional 145 stores this quarter."
The company now has approximately 20% of the store base operating 24 hours a day.
Year to date, total sales were up 19.9% to $371.4 million compared to the first nine months last year, with an average margin of 60.6%.
Operating Expenses: Year to date, operating expenses increased 12.1% to $512.5 million. For the quarter, operating expenses were up 11.7%.
"The increase was primarily driven by a rise in expenses related to operating 68 more stores this quarter compared to last year, as well as other initiatives such as major remodels and expanded store hours," said Myers. "The rise in credit-card fees, while slower relative to previous quarters, was up 14% or $2.2 million."
Ankeny, Iowa-based Casey's General Stores Inc. operates 1,686 convenience stores in 11 states.
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