Casey’s Solid Earnings Offset Lower Fuel Prices

C1Robust pipeline of projects with 21 stores under construction

Source: Company's Website
Source: Company’s Website

Convenience-store and gas-station operator Casey’s General Stores Inc. (NASDAQ: CASY) announced its Q4 FY16 and full year FY2016 results ended April 30th, 2016, on June 7th, 2016. The Company operates convenience stores in 14 Midwestern states, mainly Iowa, Missouri, and Illinois. It offers a selection of short eats; beverage and tobacco products; health and beauty aids; automotive products; and other non-food items. Founded in 1959, its stores also offer gasoline or diesel for sale on a self-service basis. In addition, the company operates a store primarily selling tobacco products. As of April 30th, 2015, it operated 1,878 stores. Read more about its financial performance based on its last earnings release below.

C3The Company operates under three segments: Fuel, Grocery and Other Merchandise, and Prepared Food and Fountain.

Fuel – Casey’s same-store gallons sold were up 3% with an average margin of 19.6 cents per gallon in FY16. For Q4 FY16, same-store gallons sold rose 4.6% with an average margin of 17.8 cents per gallon. The Company sold 12.7 million renewable fuel credits for $9.1 million in the fourth quarter. Same-store gallons benefited from lower retail fuel prices, while fuel margins remained strong owing to favorable renewable fuel credit values. For FY16, total gallons sold were up 7.4% to two billion, as a result of which gross profit rose 8.7% to $381.7 million.

Grocery and Other Merchandise – For FY16, same-store sales were up 7.1% with an average margin of 31.9%. For Q4 FY16, same-store sales grew 7.4% with an average margin of 32.1%, mainly because of sale of premium cigarette premium brands. Gross profit dollars rose 9.3% to $629.2 million, while total sales grew 10% to $2 billion for FY16.

Prepared Food and Fountain – For FY16, same-store sales rose 8.4% with an average margin of 62.5%. For Q4 FY16, same-store sales were up 8.2% with an average margin of 61.9%. Margins for FY16 were up 280 basis points from FY15 owing to lower commodity costs. Same-store sales are expected to increase going forward since the Company has implemented online ordering in all its stores. Casey’s also continues to roll out major remodels, 24-hour conversions, and pizza delivery. For FY16, total sales grew 12.8% to $880.7 million, and gross profit dollars were up 18.1% to $550.3 million. Revenue as a whole decreased 4.3% to $1.58 billion for FY16.

Earnings breakdown

For FY16, the Company’s operating expenses increased 9.7% to $1.1 billion. For Q4 FY16, operating expenses were up 12.9% since the Company was operating more number of stores as compared to Q4 FY15. For the full year FY16, gross margins rose to 24.5% from 21%.

As a result of higher margins, Casey’s reported a profit of $47 million for Q4 FY16, or $1.19 a share, up from $41.3 million, or $1.05 a share, a year earlier. For FY16, diluted earnings per share grew by a record 24% to $5.73 versus $4.62 for the same period last year.

Store expansion

For FY16, Casey’s completed 51 new store constructions and acquired five stores. The Company also completed 11 replacement stores and 102 major remodels. Casey’s currently has a robust pipeline of projects with 21 stores under construction and an additional 75 sites under contract for future new store constructions.

Guidance for FY17

For FY17, Casey’s expects to increase same-store fuel gallons sold by 2% with an average margin of 18.4 cents per gallon. Same-store grocery and other merchandise sales are projected to grow 6.2% with an average margin of 32%. Same-store prepared food and fountain sales are expected to grow 10.2% with an average margin of 62.5%. Also, the Company aims to build or acquire 77 to 116 stores, replace 35 existing locations, and complete 100 major remodels throughout the year.

Following the Trend

Casey’s General has indeed managed to buck the trend of the slump in the retail sector at large, where same-store sales were battered either by poor product mix, choppy weather, and soft buying sentiment among consumers for certain categories of non-durable and food items. Supermarket chains in general witnessed low demand for their products owing to competition from online merchants despite store expansions and increase of product categories during the Easter season. During FY16, Casey’s successfully opened its second distribution center in Terre Haute, Indiana, launched its mobile app, and rolled out online ordering across all its stores, helping the Company rake in better margins and earnings.

Source: Yahoo Finance
Source: Yahoo Finance

Casey’s General’s stock closed at $114.98 on Monday, having opened the day at $115.36. The stock touched a low of $114.61 and a high of $117.91 during the day. The stock’s average trading volume was at 353.3k. The Company’s market cap was at $4.64 billion as of Monday, June 13th, 2016.

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