Fuel Margins Drive Casey’s to Lower Q3 Profit
ANKENY, Iowa — Casey’s General Stores Inc. saw its net income drop by more than $1 million in its 2016 fiscal third quarter to $38.1 million, compared to the same period in 2015. For the quarter ended Jan. 31, total revenues also dropped to $1.566 billion, vs. $1.672 billion in the year-ago period.
Fuel margins were the main reason for the overall earnings decrease, falling 3.9 cents per gallon year over year to 18.1 cents per gallon in Casey’s 2016 fiscal third quarter.
“Our fuel margin per gallon was above our annual goal, but still below [the] prior year’s strong results, which impacted diluted earnings by approximately 30 cents compared to [the] prior year’s third quarter,” said Robert J. Myers, chairman and CEO of Casey’s.
In addition, same-store gallon sales growth slipped below Casey’s goal of 2 percent, coming in at 1.6 percent for the 2016 third quarter.
BETTER ON THE INSIDE
Inside Casey's convenience stores, the news was much better, led by total inside gross profits that rose more than 13 percent year over year.
Improved prepared food margins were the primary driver for the strong results. Prepared food and fountain margins came in at a robust 62 percent in 2016’s third quarter, a rise of 3.3 percentage points year over year. Same-store prepared food and fountain sales increased by 6 percent year over year, although this figure fell short of Casey’s 10.4-percent same-store sales increase goal.
“Challenging weather and strong prior-year sales comparisons resulted in same-store sales falling below goal in the quarter,” said Myers. “However, gross profits were up over 16 percent for the category. We remain optimistic about future growth in this category, as we plan to implement pizza delivery in an additional 45 stores and complete 40 major remodels in the fourth quarter.”
Grocery and other merchandise sales exceeded the retailer’s goal, increasing 7.1 percent year over, with an average margin of 31.2 percent.
“Cigarette sales continue to benefit from lower retail fuel prices, and sales in the entire category performed well in the third quarter,” reported Myers. “Margin has been slightly impacted by the increased contribution of cigarettes, and performed in line with [the] prior year’s third quarter.”
Regarding company growth, Casey’s completed 31 new store constructions and acquired three stores in its 2016 fiscal third quarter. It also completed 11 store replacements and 60 major remodels. Casey’s currently has 22 new stores under construction and another 59 sites under contract for future new builds.
“We continue to remain patient with acquisitions, and are excited about our future expansion opportunities as our second distribution center in Terre Haute, Ind., is now operational,” concluded Myers.
Ankeny-based Casey’s will discuss its earnings results in more detail during a conference call at 10:30 a.m. Eastern time on March 8.