Casey's Finds Success in New Markets

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Casey's Finds Success in New Markets


ANKENY, Iowa -- Casey's General Stores Inc. recently entered several new markets and the results thus far have been excellent, Chief Financial Officer Bill Walljasper said during the company's 2013 fiscal fourth-quarter earnings call today.

In the past fiscal year, Casey's opened 26 acquired stores and completed 31 new store constructions, primarily in new markets including Arkansas, Kentucky, Tennessee and North Dakota.

"Despite competition, these new markets are doing well," Walljasper said. "[In fact], we plan to open a second distribution center in two to four years."

Casey’s unit growth will continue as the retailer is currently under contract to acquire 20 more stores, with another 15 new stores and 16 replacement stores now under construction. Casey's has set a goal to build or acquire 70 to 105 stores and replace 20 existing locations during its fiscal year 2014, which will end April 30.

Also doing well for Casey's is its expansion to 24-hour locations and pizza delivery service, added Walljasper. The Ankeny, Iowa-based retailer now has 550 of its 1,749 stores operating 24 hours a day. Once a Casey's store switches to that format, it sees a 20 percent to 30 percent lift in same-store sales, according to the CFO.

Meanwhile, pizza delivery is responsible for lifting foodservice sales 25 percent to 30 percent once implemented at a store, he added. Casey's now offers pizza delivery at 274 locations, with plans to add 57 more locations in July and an additional 50 stores later this year.

"We are really excited about these growth opportunities in 2014," Walljasper said on the call.

On the fuel side, Casey's saw same-store gallons sold rise 1 percent in its latest quarter compared to the same time period last year, thanks to the Fuel Saver program it launched in December with Hy-Vee Inc. In May -- the first month of Casey's 2014 fiscal year -- same-store fuel gallons sold showed an even larger increase of 2.2 percent.

Approximately 1,000 Casey's stores participate in the Fuel Saver program. Despite the continued increase of fuel transactions at these locations, though, Walljasper acknowledged the program has not yet led to a significant in-store sales increase.

"But the opportunity is there," he said. "Once they get on our lot, there's a chance to convert those customers."

Like most every convenience store operator, Casey’s cigarette margins continued to decline in the latest quarter. Looking forward, electronic cigarettes could make up for at least some of the decline. When questioned by an analyst, Walljasper recalled that Casey's began selling e-cigarettes "three of four months ago," so it's too early to report how well that segment of the tobacco category is performing. But he noted that he is "excited about the category."

Companywide, Casey's earned a net profit of $23.27 million in its latest quarter vs. a gain of $23.06 million during the same quarter one year ago. Total revenue increased to $1.808 billion, compared to $1.752 billion last year.

Sales of Renewable Identification Numbers -- also known as ethanol blending credits -- were one of the top reasons Walljasper cited for the profit and revenue increase.