How Casey’s is creating long-term value

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How Casey’s is creating long-term value

By Louisa Hallett - 09/11/2018
Casey’s Value Creation Plan is bearing fruit, as the company shows increases in its revenue and earnings in its first-quarter report.

A more proactive strategic pricing approach and investments in store count expansion are accelerating growth at Casey’s, which reported increases in profits in its first quarter.

Total sales during the 13-week first quarter ended July 31 increased 7.9 percent to $2.59 million compared to $2.09 million during the 13-week first quarter the prior year. Same-store grocery and merchandising sales in the U.S. were a positive 3.2 percent.  Earnings per share of $1.90 for the first quarter of fiscal 2019 ended July 31, 2018, compared to $1.46 per share for the same quarter a year ago.

"The combination of recent investments made in expanding our store count, a more proactive strategic pricing approach in all areas of the business, continued focus on reducing labor hours inside the stores, the favorable impacts of tax reform, and share repurchases contributed to strong diluted earnings per share growth," said Terry Handley, President and Chief Executive Officer of Casey’s. "We continue to invest in the Value Creation Plan that we believe will drive long-term shareholder value, and we remain on track to begin realizing benefits in the second half of fiscal 2019."

Casey’s announced its Value Creation Plan to investors in March 2018. The plan is meant to position the company for accelerated growth and improved profitability through key initiatives, such as:

  • Digital Engagement – same-store sales growth expected in FY 2020

  • Fleet Card – expected to drive increased in-store traffic and fuel sales within FY 2019

  • Price Optimization – profitability benefits expected within FY 2019

In its first-quarter report, Casey’s included its value creation plan update:

  • Finalizing marketing plan with our fleet card vendor to launch in fiscal 2nd quarter

  • Continued focus on product optimization in fuel program

  • Conducting a search for a Vice President of Digital and a Fuel Procurement Manager

  • Finalized contracts with separate vendors for fuel and inside price optimization

  • On schedule to begin a pilot program in fuel price optimization in fiscal 2nd quarter

  • Finalized several contracts as part of our E-commerce and customer-facing platforms

The company had 14 acquisition stores under an agreement to purchase and a land bank of 103 sites as of July 31. During the first quarter of fiscal 2019, the Company finished its repurchase on the initial $300 million repurchase program authorized in March 2017, repurchasing 352,592 shares for approximately $35.2 million, or an average price of $99.97 per share. The Company also has a second $300 million authorization that was approved by the Board in March 2018. There were no repurchases made against that authorization in the first quarter.

"The increased focus in store development over the last couple of years has allowed us to build a bank of land sites for future growth," said Handley. "It will allow us to have a more controlled and uniform rollout of our new stores each quarter. We also continue to be encouraged by the number of conversations we are having with potential sellers."