Casey’s Reports First Quarter Results

The publicly traded convenience chain, based in Ankeny, Iowa, reports its value creation plan is on track.

Casey’s General Stores Inc. reported diluted earnings per share of $1.90 for the first quarter of fiscal 2019 ended July 31, 2018, compared to $1.46 per share for the same quarter a year ago.

“The combination of recent investments made in expanding our store count, a more proactive strategic pricing approach in all areas of the business, continued focus on reducing labor hours inside the stores, the favorable impacts of tax reform, and share repurchases contributed to strong diluted earnings per share growth,” said Terry Handley, president and CEO. “We continue to invest in the Value Creation Plan that we believe will drive long-term shareholder value, and we remain on track to begin realizing benefits in the second half of fiscal 2019.”

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Value Creation Plan Update – Casey’s highlighted the following value creation plan activities:

-Finalizing marketing plan with our fleet card vendor to launch in fiscal 2nd quarter

-Continued focus on product optimization in fuel program

-Conducting a search for a vice president of digital and a fuel procurement manager

-Finalized contracts with separate vendors for fuel and inside price optimization.

-On schedule to begin pilot program in fuel price optimization in fiscal 2nd quarter.

-Finalized several contracts as part of our E-commerce and customer facing platforms.

The company reported how it performed in various categories.

Fuel – For the quarter, same-store gallons sold were up 0.5% with an average margin of 20.5 cents per gallon.

“As we build our fuel team, we have been more proactively managing retail fuel pricing,” said Handley. “We believe this drove a more timely response to changes in market conditions, which helped realize a stronger quarterly fuel margin. This approach, combined with rising retail fuel prices, led to an overall softer demand for fuel. While same-store gallon movement was under our annual guidance range, we continued to outpace our peers in same-store gallons, and overall we are very pleased with the gross profit dollar growth.” Total gallons sold for the quarter were up 6.5% to 601.8 million gallons while gross profit dollars increased 13.1% to $123.5 million.

Grocery and Other Merchandise – For the quarter, same-store sales were up 3.2% with an average margin of 32.4%.

“We are pleased about the overall direction of our grocery and other merchandise category,” said Handley. “Our focus continues to be on managing the promotional environment to drive profitable growth. Some of our faster growing and higher margin product lines, such as packaged beverages, produced strong quarterly results, particularly in May.” For the first quarter, total grocery and other merchandise revenue increased 7.9% to $644.8 million, and gross profit dollars were up nearly 10% to $208.9 million.

Prepared Food and Fountain – Same-store sales for the quarter were up 1.7% with an average margin of 62.0%.

“Our prepared food category showed significant improvement from fourth quarter and moderate growth overall, including particularly strong results in the breakfast daypart.” said Handley. “These results helped offset some softness in our bakery category. Overall, our increased investment in pizza promotions did not significantly affect our margin. Combining those promotions with other pricing strategies produced a margin at the top end of our guidance for the quarter.” Total prepared food and fountain revenue increased 7.3% to $281.0 million in the first quarter while gross profit dollars grew 6.4% to $174.2 million.

Operating Expenses – For the first quarter, total operating expenses increased 11.9% to $359.4 million. Same-store operating expenses excluding credit card fees were up 1.6% for the quarter. The increase in total operating expenses was primarily attributable to operating 105 more stores than the same quarter in the prior year. The company incurred increases of approximately $8 million in credit card fees and fleet fuel expense, and $3.6 million in health care costs. “The focus on reducing hours worked in our stores and changes to 24-hour and pizza delivery locations allowed us to manage store level operating expenses effectively,” added Handley. “However, we were challenged by higher fuel prices, which caused a significant increase in credit card fees and fleet fuel expenses compared to the same quarter last year.”

Expansion – The following table represents the roll forward of store growth in the first quarter of fiscal 2019:

 

Store Count

Stores at 4/30/18                                2,073

New Store Construction                          15

Acquisitions                                             1

Acquisitions not opened                          (1)

Prior Acquisitions opened                         1

Closed                                                  (4)

Stores at 7/31/18                                2,085