Key Points:
- Casey’s fuel business was largely in line with observed traffic (per Advan) for its fiscal Q1 period. Similarly, in-store results were stronger, reflective of a compelling convenience offering. Casey’s hasn’t experienced a swoon in traffic starting in the 2H of July that the industry has.
- As has been the case for some time, Casey’s is growing market share and driving strong profit growth. FQ1 earnings are up 3.2X from 2019’s level. In-side comp-sales have climbed 33% since then, and fuel profits, +84%. (These figures include the deep drop that happened during Covid.)
- That Casey’s has been able to grow inside comps by 33% in the face of the secular decline facing cigarettes and mainstream beer is remarkable.
Similar to what we reported on last week with Circle-K (ATD) results, Casey’s General Stores reported a moderation in comps, but very strong gross profits per gallon sold. Comp-gallons fell 0.3% (vs. LQ’s +1.5%), grocery & general merchandise comps slowed to +2.7% (vs. LQ’s +5.1%), and prepared food comps slowed to +4.8% (vs. +6.6%). However, fuel margin at 47.8 cents was up from last year’s 41.0 cents and FQ4’s 46.9 cents and that helped drive a 28% increase in EPS and EBITDA.
Casey’s results outperformed Circle-K and the broader C&G industry given its more economically / gas price resilient regional footprint (Iowa, Illinois, and Missouri). (Circle K comp-gallons fell 1.6%.) As shown in the following chart, traffic to its pumps has been largely consistent, save the March / April volatility. In addition to regional mix (no Texas or California, where things softened mid-July), Casey’s faces less in-market competition, especially by the club stores. (There are only 13 club stores in Iowa.) For example, in Q2, only 12% of Casey’s customers also visited a Costco or Sam’s Club, much less than Circle K’s club cross-visitation at 18%.
On in-store trends, CEO Darren Rebelez said, “The three areas where we had some softness is beer, snacks and cigarettes. And those categories have all been challenged for different reasons. Cigarettes, that's an industry-wide phenomenon. We're not immune to that. On the beer side, we were able to make up for a good part of that with our liquor business, ready-to-drink cocktails in particular were up over 30% in the quarter. So we saw some good strength there, not enough to overcome the drag from beer. Snacks, I think we talked about this before. We're seeing a lot of price action taken from the National brands, which has put some pressure on there, and 6 has been a multi-decade trend. On the other side, on grocery and general merchandise, real strength in nicotine alternatives, up 47% in the quarter. Energy continues to perform well at 12%...”
And on consumer behavior as it relates to gas prices, Rebelez said, “We're seeing exactly the type of behavior that we would expect to see fewer gallons per trip, but more trips made which ultimately accrues to our benefit if we had more people coming to the store. People are trading out of premium and mid-grade and opting for regular or higher ethanol blends of fuel higher ethanol blends of fuel carry a higher margin for us than clear gasoline. So while these trends kind of ebb and flow, it's very consistent with prior periods of higher gas prices and ultimately works out to our benefit.” To Rebelez point, in-store sales were $1.90 per gallon sold, up from $1.85 last year.
