Casey's Updates Distribution Center Plans

ANKENY, Iowa -- Casey's General Stores Inc. is finalizing details for the construction of its second distribution center and also announced it will expand its primary distribution center in Ankeny at the same time.

The retailer intends to publicly announce the selected location for its new distribution center within 30 days, Senior Vice President and Chief Financial Officer Bill Walljasper stated today during the company's 2014 fiscal third-quarter earnings call. The opening of a second distribution outlet is critical as Casey's expands its convenience store business into Tennessee, Kentucky and even further south via both acquisitions and new store builds.

While Walljasper said he could not provide details about the new distribution center, including when the groundbreaking would take place, he did report that the construction will take 12 to 18 months from the date of the groundbreaking.

"We will also be expanding our primary distribution center to meet our growth needs," Walljasper said during the call. "Both projects will be done simultaneously, with one to be completed before the other."

Acquisition Front

Switching gears, Walljasper stated that Casey's is "excited" by its recently announced acquisition of 24 Stop-n-Go stores in North Dakota and Minnesota. The Ankeny-based convenience store retailer expects the deal to close in May.

Looking at already completed acquisitions, Casey's added two stores in its 2014 fiscal third quarter ended Jan. 31. The company also built 12 new stores during the quarter. The chain currently has 25 new stores and 15 replacement stores under construction, as well as 32 stores under contract to acquire, including the Stop-n-Go sites.

Casey's also remained busy during the first nine months of its 2014 fiscal year by converting 80 stores to its pizza delivery program, as well as 114 stores to a 24-hour format. Approximately 700 of its 1,783 stores now operate 24/7 and 350 offer pizza delivery.

The Weather Factor

Difficult weather conditions and the costs associated with a store destroyed by a fire caused Casey's year-over-year earnings to decline slightly in the third quarter. Net profits totaled $14.67 million, compared to $15.46 million during the year-ago period. Total revenues rose $128 million to $1.79 billion for the quarter.

Weather primarily caused same-store fuel gallons to drop with an average margin of 14.4 cents, shy of company goals. Despite the fuel sales shortfall, most other metrics were positive. Prepared food and fountain sales continued to be Casey's shining star, with same-store sales rising 10.7 percent at an average margin of 60.8 percent. Grocery and other merchandise also had a solid quarter, with same-store sales increasing 6.5 percent year over year at an average margin of 31.1 percent.

Unlike other c-store retailers, Casey's tobacco category also showed growth. "We saw double-digit growth from reduced prices [we offered]," said Walljasper. "Also, the margins are starting to come back."

During the call, the CFO added that there was little to update about its Pizza Express store, a pizza-only store operating in Des Moines. "Pizza Express revenues are very good," he said. "But operating expenses are high."