Casey's Profit Diminishes

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Casey's Profit Diminishes

ANKENY, Iowa -- Casey's General Stores reported weaker earnings for their second quarter in fiscal 2007, partially due to smaller gas margins.

"Second quarter total and same-store sales were up in all three of our business categories, but earnings were affected by tighter gasoline margins," said president and CEO Robert J. Myers.

Net sales for the company increased to more than $1 billion, over the $963 million in the same quarter of 2006. Net earnings for the second quarter of 2007 fell to $17.2 million, from $22.2 million in the second quarter of 2006.

Same-store gas sales for the company's second quarter increased 2.7 percent, surpassing its goal of 2 percent for fiscal 2007. Total gallons sold increased 9.4 percent for the second quarter.

"We benefited from increased demand as the retail price of gas came down, but we couldn't keep pace with the post-Katrina margin we reported a year ago," said Myers. Margins for the second quarter of 2007 were 9.4 cents, slightly under the margin goal of 10.8 cents. The dip in margins resulted in a 26.8 percent decrease in gas profit for the second quarter, to $28.6 million for the quarter.

"This is the eleventh straight quarter of positive same-store sales," Myer noted. Same store sales increased 3.5 percent for the second quarter, just shy of the company's goal of a 3.9 percent increase in same store sales. Total sales for the quarter increased 9.4 percent, with an average margin of 32.6 percent, exceeding the goal of 32.2 percent. Gross profit dollars in the grocery and other merchandise category totaled $70.9 million.

"We are encouraged by the steady progress we continue to make in this category," Myer added. Same-store sales in the prepared food and fountain category increased 13.7 percent, well above the 7.9 percent increase that was the company's goal. Margins in the category also beat out goals, averaging 63.4 percent. Total sales rose 19.4 percent for the second quarter of 2007. Gross profit increased 13.8 percent to $42.6 million for the second quarter.

"Despite difficult quarter-to-quarter comparisons, all areas of this category are performing exceptionally well," Myers said. Additional benefits will continue from an expanded fountain program, price increases and a favorable cheese price that has been locked in until the end of the year, the company stated.

Operating expenses rose for the company by 8.5 percent in the quarter. "Being off target was primarily due to the margin shortfall in a gasoline market over which we had little control," said Myers.

For fiscal 2007, the company expects that it will acquire 50 stores and build 10 new locations. The plans were bolstered by the acquisition of 33 HandiMart stores in early October.

"These sites are already performing very well for us," said Myers. "The acquisition environment continues to be favorable, and we have seven written agreements, giving me confidence we will meet the annual goal."