Casey's Foodservice Business Continues to Feel the Heat

ANKENY, Iowa — Casey's General Stores Inc. rang up an increase of 5.1 percent in total inside sales for its latest reported quarter, compared to the same time period a year ago, but its foodservice category is still struggling.

Total prepared food and fountain sales at Casey's convenience stores were down 3 percent to $289 million during the second quarter of its 2021 fiscal year. Same-store sales in the category were down 3.6 percent.

There was some good news, however. President and CEO Darren Rebelez noted that Casey's saw sequential sales improve by 620 basis points vs. the first quarter of its fiscal year. Margins also improved sequentially.

"That being said, this area of our business continues to be the one most impacted by lower guest counts from the pandemic, especially in the morning daypart for many of our guests continue to work from home or deal with virtual schooling arrangements," Rebelez explained during Casey's Q2 earnings call on Dec. 8.

Bakery and dispensed beverages, especially coffee, are the segments being most adversely impacted, although both showed volume improvements vs. the first quarter.

Another piece of good news is that Casey's pizza program is seeing sales tick up. According to the chief executive, whole pie units were up 17 percent in Q2 compared to the same quarter in fiscal 2020, driven in part by Casey's digital push.

"Digital sales were up 127 percent and make up over 50 percent of total whole pie orders," Rebelez said.

Looking at the third quarter's numbers to date, prepared food remains pressured and is trending down by mid single-digits.

"We finished the quarter with food restrictions in place at 120 stores and, given the recent surge in cases, it is possible restrictions may increase," Rebelez said.

Casey's foodservice program could get a boost when the retailer closes on its acquisition of Buchanan Energy. The Omaha, Neb.-based parent company of Bucky's Convenience Stores operates 94 locations across the Midwest, and Casey's plans to bring aspects of its fresh food strategy to the acquired sites.

"The Bucky’s team has done an outstanding job, locating the stores on busy corners, and they do many things well operationally. Their stores are high-volume sites, averaging more than double our fuel volume, while their inside sales are in line with an average Casey's," Rebelez explained.

"We believe our pizza will thrive at their stores. Prepared foods is currently only 7 percent of their inside sales, compared to our mix of 31 percent," he continued. "There's tremendous opportunity here to grow that portion of their business. We believe our scale and distribution capabilities can also bring significant margin synergies to the business."

Ankeny-based Casey's currently operates more than 2,200 c-stores in 16 states. It is positioned to add the 94 c-stores and 79 dealer locations across the Midwest through its pending acquisition of Buchanan Energy.