Casey’s Sees 41% Growth in Diluted Earnings Per Share in Q2

Evaluates progress of Value Creation Plan.

Casey’s General Stores Inc. reported its Q2 financial results and looked at the progress of its Value Creation Plan through which it launched a Fleet Card program and introduced a fuel price optimization software pilot, among other initiatives.

Casey’s reported diluted earnings per share of $1.80 for the second quarter of fiscal 2019 ended Oct. 31, 2018, compared to $1.28 per share for the same quarter a year ago.

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“We’re moving the Company forward on multiple fronts,” said Terry Handley, president and CEO. “The ongoing efforts around operating expense control, combined with a continued focus on strategic pricing, new store openings, and the favorable impact of tax reform produced strong diluted earnings per share growth.”

Value Creation Plan Update – The Company has completed or made progress on the following value creation plan activities:

  • Launched the Fleet Card program in late October
  • Continued emphasis on product optimization in fuel program
  • Finalized search for a Director of Fuel Procurement
  • Piloting the fuel price optimization software October through December
  • Optimized merchandise promotions to improve inside margins
  • Onboarded both a Vice President of Digital Customer Experience and a Director of Digital Marketing

Fuel – For the quarter, same-store gallons sold were down 1.1% with an average margin of 20 cents per gallon.

“With the expanded resources in our fuel team, we have become more proactive at managing retail fuel pricing,” said Handley. “Gross profit dollar growth was strong despite same-store gallon movement being under our annual guidance range for the second quarter, due mainly to softer consumer demand. We remain excited about this category moving forward, with product and price optimization, procurement opportunities, and the fleet card program expected to drive future benefits.”

Total gallons sold for the quarter were up 5.7% to 593.8 million gallons while gross profit dollars increased 7.2% to $118.7 million. Year to date, same-store gallons sold were down 0.3% with an average margin of 20.3 cents per gallon. Year to date, gross profit dollars increased 10.1% to $242.1 million.

Grocery and Other Merchandise – For the quarter, same-store sales were up 2.7% with an average margin of 32.4%.

“The grocery and other merchandise category continues to perform well,” said Handley. “For the second straight quarter, we realized stronger margins at the high end of our guidance range, which drove gross profit dollar growth. The packaged beverage and other tobacco subcategories led the way in contributing to that growth.”

For the second quarter, total grocery and other merchandise revenue increased 8.1% to $618.3 million, and gross profit dollars were up 9.3% to $200.2 million. Total revenue for the first six months was up 8.0% to $1.3 billion. Same-store sales year to date were up 2.9% with an average margin of 32.4%.

Prepared Food and Fountain – Same-store sales for the quarter were up 2.2% with an average margin of 62.4%.

“Strategic price increases helped expand margin in the quarter in a competitive environment,” said Handley. “Our breakfast daypart continues to be a strong contributor to overall results.”

Total prepared food and fountain revenue increased 8.0% to $283.1 million in the second quarter while gross profit dollars grew 10.1% to $176.7 million. For the first six months, total revenue increased 7.7% to $564.1 million. Year to date, same-store sales were up 2.0% with an average margin of 62.2%.

Operating Expenses – For the second quarter, total operating expenses increased 6.6% to $344.2 million. Year to date, operating expenses are up 9.2%. Same-store operating expenses excluding credit card fees were down 0.1% for the quarter. The increase in total operating expenses was primarily attributable to operating 94 more stores than the same quarter in the prior year.

“Our second quarter results demonstrated our commitment to effectively controlling operating expenses,” noted Handley. “Despite higher credit card fees and fleet fuel expenses, our team was able to continue to drive same-store operating expenses down in the second quarter as compared to prior year. The largest contributor to that success was the continued efforts around managing the hours worked at our stores.”

The Company had 23 acquisition stores under agreement to purchase and a land bank of 95 sites (in addition to 36 that were under construction) as of Oct. 31, 2018.

“We are pleased with our current growth opportunities,” said Handley. “We remain encouraged with the acquisition environment and will continue to be a disciplined buyer. Combining acquisitions with our organic growth pipeline gives us the agility to pull multiple levers to drive further expansion.”