Gas, Smokes Helping Casey's Drive New Initiatives

But analyst asks, can growing chain replicate its "small-market" success?

Greg Lindenberg, Editor, CSP

Robert Myers, Terry Handley Casey's (CSP Daily News / Conveniemce Stores)

Robert Myers (left), Terry Handley

ANKENY, Iowa -- Casey's General Stores Inc. remains on track with "robust potential for future growth" as the convenience store chain expands while bucking industry trends by growing cigarette and gasoline sales volumes, according to an industry analyst who attended the company's Analyst Day at its Ankeny, Iowa, headquarters earlier this week.

Opening the event, CEO Robert J. Myers said that Casey's has 29 new stores and 24 replacement stores under construction. It is also in the process of integrating the 24-store Stop-N-Go acquisition in North Dakota.

The company expects to open between 72 and 108 new and acquired stores by the end of its fiscal year, and "we are well on our way to achieving that goal," he said. "We also have several initiatives underway to get more out of our existing stores, including 24-hour conversions, major store remodels, pizza delivery and a fuel saver program."

More than half of the chain's more than 1,750 convenience stores have been affected by one or more of these initiatives, said Myers, "and certainly the sales lift has been impressive."

"We believe Casey’s is well positioned to deliver strong earnings growth over the next few years by virtue of the company's acquisition-based unit growth strategy, small-market focus and multiple profit-enhancing in-store initiatives," Wells Fargo Securities LLC analyst Bonnie Herzog, who "came away incrementally more impressed" from the event, said in a research note.

"We think its long-term 4% to 6% store unit growth target could become more challenging over time as the company needs to expand in more densely populated markets," she cautioned. "Bottom line--we believe Casey's has a very solid core franchise with growth initiatives that should drive solid merchandise sales growth for the next one to two years; however, following impressive strength in comparable sales growth in foodservice over the past few years, the bar is set high."

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Part of CSP's 2014 Convenience Top 101 retailers