Casey's to Acquire 27 C-stores by November
ANKENY, Iowa -- Casey's General Stores Inc. is under contract to purchase 27 convenience stores, 22 of which are being acquired from fellow Midwest convenience retailer Kum & Go LC. The Kum & Go stores are located in Iowa, Missouri and North Dakota, with the transaction expected to close in November.
"These stores are an excellent fit to our existing store base and will allow us an opportunity to operate in a new state," said Robert J. Myers, president and CEO of Casey's. "We expect this acquisition to be accretive in the first year of operation and enhance future earnings as we integrate our prepared food operations."
Kyle J. Krause, Kum & Go's president and CEO, added that the sale of the 22 stores also fits in with its corporate strategy. "Our company is committed to carefully planned, strategic growth. That's evidenced by the fact that we'll open 40 new stores this year alone," he stated. "It's our continued desire to consolidate and strengthen our asset base and offer a consistent brand to our customers in Kum & Go's core markets. The sale of these properties, in addition to our new store growth, brings us one step closer to carrying out that strategy."
In addition to the Kum & Go sites, Casey's is under contract to purchase an additional five single c-stores (the locations of which were not released) and plans to be aggressive regarding acquisitions in the future, Bill Walljasper, its chief financial officer, stated during the company's 2013 fiscal first-quarter conference call this morning.
"We could [make] $400 million to $500 million in purchases and still have very good leverage," Walljasper said. "That would buy a lot of stores."
Further acquisitions are in tune with Casey's efforts to grow its business by increasing its store count 4 percent to 6 percent annually.
During today's conference call, Walljasper also reported that Casey's entry into the Arkansas market within the past year has been very successful and the c-store chain will open its first Tennessee store in the coming months.
As for its latest quarter ending July 31, although the company did not close on any acquisitions, it opened one new store and three replacement stores. In its latest quarter, Casey's focused on remodeling 26 stores, adding pizza delivery to 50 more locations and converting 26 stores to 24-hour formats.
According to Walljasper, all the aforementioned efforts went well. For example, at the 50 stores adding pizza delivery, pizza sales increased by more than 45 percent, he said.
Pizza is not the only thing selling well at Casey's stores. Overall foodservice sales were clearly Casey's shining star in its latest quarter. In its 2013 fiscal first quarter, prepared food and fountain sales rose by 10.6 percent with an average margin of 63.5 percent.
However, on the negative side of the ledger, same-store customer visits increased by just 1.2 percent in Casey's latest quarter, its smallest gain in more than three years. Walljasper attributed the slowdown to the Midwest having one of its hottest Julys on record.
The CFO added that as temperatures normalized in August, in-store traffic rose along with it.
Also a negative for Casey's was tobacco sales. A large cigarette tax hike in Illinois, where Casey's operates many stores, was a large reason for carton sales declines during its most recent quarter, according to Walljasper.
"We're addressing the issue. It is imperative for us to remain competitive in cigarettes," he said during the earnings call, noting that tobacco is one of top reasons customers visit c-stores.
Companywide, Casey's reported a net profit of $39.031 million vs. a gain of $39.391 in the same timeframe a year ago. Despite a slight profit decline, the net profit was well ahead of Wall Street analysts' expectations.
As of July 31, Casey's operated 1,698 stores. The chain has another 18 new stores currently under construction, noted Walljasper.