Casey's Foodservice Performance Offsets Cigarette Challenges

Will maintain "disciplined approach" to tobacco price adjustments

Published in CSP Daily News

ANKENY, Iowa -- Casey's General Stores Inc. has reported 85 cents in diluted earnings per share for the second quarter of fiscal 2013 ended Oct. 31, 2012, compared to 98 cents for the same period a year ago. Year to date, diluted earnings per share were $1.86 versus $2.01 for the same period last year. Lower gasoline margins affected both quarterly and year-to-date earnings when compared to the all-time high gasoline margins from the same periods a year ago.

"Our prepared food program is doing exceptionally well, but the cigarette environment remains very challenging for retailers," said chairman and CEO Robert J. Myers. "We are diligently evaluating the competitive landscape and will maintain a disciplined approach when making cigarette price adjustments."

  • Gasoline: The company's annual goal is to increase same-store gallons sold 1% with an average margin of 14 cents per gallon. For the second quarter, same-store gallons sold were down 0.4% with an average margin of 14.9 cents per gallon. "We believe higher retail prices had an adverse impact to sales, however the gas margin environment has been favorable when compared to our annual goal." said Myers. Total gallons sold for the year were up 3.2% with an average margin of 14.9 cents per gallon. Year-to-date same store gallons sold were down 0.3%.
  • Grocery & Other Merchandise: Casey's annual goal is to increase same-store sales 6.2% with an average margin of 32.7%. For the second quarter, same-store sales were down 0.7% with an average margin of 33.4%. "Cigarettes have been adversely impacted by competitive pricing as well as an Illinois state excise tax increase," Myers said. "However, the grocery and other merchandise margin is above goal primarily due to a more favorable product mix within the category." For the six months ended Oct. 31, 2012, same-store sales were up 0.7% with an average margin of 33.4%. Total sales for the year were up 3.6% and gross profit increased 6.4% to $250 million.
  • Prepared Food & Fountain: The goal for fiscal 2013 is to increase same-store sales 11% with an average margin of 61.1%. For the quarter, same-store sales were up 10.1% with an average margin of 62.5%. "This category continues to benefit from three primary operating initiatives: expanded hours, pizza delivery, and major store remodels," said Myers. "The margin continues to exceed our annual goal primarily due to an increase in pizza sales." Year to date, total sales were up 14.5% and gross profit rose 19.4% to $182.1 million.
  • Operating Expenses: Year to date, operating expenses increased 10.5% to $379.4 million. For the second quarter, operating expenses were up 10.6%. Expenses were impacted by the operating initiatives mentioned above, operating 27 more stores than a year ago, and the completion of 20 replacement stores in the last 12 months. "So far this fiscal year we have converted 150 stores to 24-hour operation, added pizza delivery to 103 stores, and completed 51 major remodels," said Myers. "We will continue to implement these initiatives where we believe we can drive cash flow." Store-level operating expenses for locations not impacted by the initiatives were up approximately 3.5% for the quarter.
  • Expansion: The annual goal is to increase the total number of stores 4% to 6%. At the midyear point, the company opened eight new-store constructions and completed the acquisition of three stores. The company has also replaced 13 stores. "In November we completed the acquisition of 22 Kum and Go locations and opened our first stores in Tennessee and North Dakota," Myers said. "We are on pace to build 30 new stores this fiscal year and continue to be optimistic with the acquisition environment." Casey's currently has 13 stores under construction and has eight stores under written agreement to acquire.

Casey's, based in Ankeny, Iowa, operates more than 1,700 corporate owned stores in 12 Midwestern states.

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