Tobacco Makes Comeback at Casey's General Stores

ANKENY, Iowa — For the past couple of years, convenience store chains have touted strength in all in-store merchandise categories other than cigarettes. In fact, some even report results ex-cigarettes.

But perhaps, this trend is reversing. Casey's General Stores Inc. reported that during its 2015 fiscal third quarter that ended Jan. 31, same-store cigarette sales increased by a double-digit percentage.

"With lower fuel prices, consumers have more money and are 'trading up' to more premium brands," Chief Financial Officer Bill Walljasper said during Tuesday's third-quarter conference call.

Tobacco sales weren't the only strong point for Casey's. Nearly all segments of in-store merchandise saw double-digit sales increases in its most recent quarter, with same-store sales increasing a total of 7.7 percent year over year with an average margin of 31.2 percent.

Prepared food and fountain sales were also strong, increasing 20.3 percent overall with a 14.1-percent increase on a same-store basis. The average prepared food margin decreased slightly to 58.7 percent, which the company attributed to higher input costs and increased spoilage.


Companywide, Casey's achieved record profits of $39.3 million, more than triple what it earned during the same fiscal quarter in 2014.

Fuel sales were a major component, with average margins rising 8.4 cents per gallon to 22 cents per gallon. Same-store fuel sales increased by 2.2 percent.

Total revenues in Casey's fiscal third quarter dipped from $1.79 billion to $1.67 billion, however.


Ankeny-based Casey's confirmed its second distribution center will open in February, 2016, in Terra Haute, Ind., which will serve many of the new states the retailer has entered. The new distribution center will provide many opportunities for both operating efficiencies and new acquisitions, Walljasper revealed.

"The company is well positioned to take advantage of any acquisition opportunity that may become available," added Chairman and CEO Robert Myers.

As for recent areas the c-store retailer entered, Walljasper said there is a "marked improvement" in Casey's brand recognition in states such as Kentucky, Arkansas and Tennessee. The CFO specifically highlighted Arkansas during the conference call.

"We're encouraged by [Arkansas]," he said. "… We have been very pleased in the last several months."

In its most recent quarter, Casey's opened 12 new stores. For the first three quarters of its 2015 fiscal year, Casey's opened 33 new stores, acquired 32 stores and completed 25 replacements.

Currently, the company has 26 new and 11 replacement stores under construction. According to Walljasper, 10 stores are currently under contract on an acquisition basis.

In its latest quarter, Casey's converted 110 stores to its 24-hour format and added 12 locations to its pizza delivery business. Casey's now has approximately 825 stores operating on a 24-hour basis, with an opportunity to convert many more, Walljasper stated.

Casey's had 1,865 company-operated convenience stores as of December.


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