ANKENY, Iowa — Following the upward trajectory begun earlier in the year, customer traffic has continued to rebound for Casey’s General Stores Inc., leading to strong same-store sales inside and at the pump, Darren Rebelez, president and CEO of the regional convenience-store retailer, said in announcing the chain’s financial results for the three and six months ended Oct. 31, 2021.
Quarterly net income of $96.8 million was down, however, from $112 million from the previous-year period. Half-year net income of $216 million was down from $232.6 million.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) was down compared to the same period a year ago as higher gross profit from inside the store and fuel—due to both strong same-store volumes and new units—was offset by higher operating expenses due to higher wage rates and credit card fees as well as operating 161 additional stores. Adjusted EBITDA for second fiscal quarter 2021 was $217 million, versus $223.2 million for second fiscal quarter 2020, and $460.2 million versus $461 million for the six-month periods.
“Inside sales and fuel gallons sold were up in the second quarter as guest traffic continues to improve,” said Rebelez. “I am very proud of how the Casey’s team responded during a difficult retail environment this quarter. Inside gross profit was up sharply despite product availability pressures, especially in our prepared food and dispensed beverage business, and an inflationary supply chain environment. Our fuel team achieved strong margins in a challenging rising-cost market while also growing fuel gallons sold.”
Inside
As a result of improved customer traffic, strong performance in packaged beverages, grocery items such as salty snacks and meat snacks, as well as continued momentum in pizza slices, drove inside same-store sales. Inside same-store sales were up 6% for the second quarter with an average margin of 40.7%. Same-store grocery and general merchandise sales were up 6.8% and the average margin was 33.3%, in line with the same period a year ago, and up 14% on a two-year stacked basis, due in part to the effective store resets completed last year.
Non-alcoholic beverages were up more than 24% on a two-year stacked basis. Alcohol same-store sales were up low single digits despite challenging comparisons and remained up more than 22% on a two-year stacked basis.
Same-store prepared food and dispensed beverages were up 4.1%. The average margin for the quarter was 60.6%, up 50 basis points from a year ago. Pizza slices continue to perform well, up 21% in the quarter.
“Inside the store, sales volumes were positive and grew stronger throughout the quarter, partially aided by our new breakfast menu launch in October, which is proving to be a big hit with our guests and exceeding our early expectations,” Rebelez said.
“While our self-distribution model helped mitigate some supply chain challenges, we most acutely felt product availability challenges in the prepared foods category during the quarter. At various times during the quarter and sometimes for nearly the entire quarter, we were out of stock with key items such as doughnuts, fountain beverage cups and chicken,” he said.
The retailer’s private-label program, as well as procurement initiatives, boosted inside margin. Supply chain challenges adversely affected prepared food and dispensed beverage same-store sales, most notably in bakery and dispensed beverages. Casey’s implemented selective price increases to offset inflationary pressures throughout the business.
Fuel
Higher customer traffic also positively affected same-store gallons despite lapping a challenging comparison from the previous second quarter. Total fuel gross profit was up 13.6% versus the prior second quarter, and margin decreased slightly.
During the quarter, same-store fuel gallons sold were up 2.5% with a fuel margin of 34.7 cents per gallon, down slightly but still largely comparable to the same period last year. “We nearly matched the prior year’s margin of 35 cents per gallon despite the retail price of fuel increasing nearly $1 per gallon,” said Rebelez.
Operating Expenses
Operating expenses increased 22% during the second quarter. Approximately 9% of the increase was due to operating 161 more stores than prior year, the company said. Additionally, approximately 7% of the increase was due to same-store employee and store operating expenses. Finally, approximately 2% of the change was due to an increase in same-store credit card fees from higher retail fuel prices and higher sales volume.
Expansion
As of April 30, 2021, Ankeny, Iowa-based Casey’s had 2,243 convenience stores. It built seven new stores, acquired 144, with six not yet opened and with four prior acquisitions opened. It closed 12 stores. So as of Oct. 31, it had 2,380 retail fuel outlets and convenience stores in 16 Midwestern states, primarily Iowa, Missouri and Illinois.
“The second quarter was also the first full quarter operating the Bucky’s and Circle K acquisitions, which are on track to realize expected synergies,” Rebelez said. “We are making excellent progress integrating the Buchanan Energy and Circle K acquisitions and look forward to doing the same with the pending Pilot acquisition.”
Casey’s completed the acquisition of 94 Bucky’s c-stores and 79 dealer locations from Omaha, Neb.-based Buchanan in May 2021, which increased Casey’s footprint of owned and operated stores by 4%. In June, it closed on the purchase of 48 c-stores from Circle K-owner Alimentation Couche-Tard Inc., Laval, Quebec.
With the recent acquisition of 40 c-stores from Pilot Corp., Knoxville, Tenn., Casey’s will add approximately 225 stores during its fiscal 2022, up from the previously disclosed 200 locations. Casey’s is No. 4 on CSP’s 2021 Top 202 ranking of U.S. c-store chains by store count.
Casey’s expects interest expense to be approximately $55 million versus the previously disclosed $50 million, depreciation and amortization to be approximately $310 million compared to the previously disclosed $300 million and the purchase of property and equipment to be approximately $400 million versus the $500 million previously disclosed because of an increase in acquisition activity that led to reduced new-store construction.
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