Back to top

Image: Bigstock

Casey's (CASY) Q1 Earnings Surpass Estimates, Revenues Up Y/Y

Read MoreHide Full Article

In spite of a tough retail environment, Casey's General Stores, Inc. (CASY - Free Report) reported better-than-expected first-quarter fiscal 2022 results. While the top line improved year over year, the bottom line declined from the year-ago period. Markedly, this was the fourth straight quarter of positive sales and earnings surprises. Strategic sourcing initiatives implemented earlier this year, increased penetration of private label products and improved guest traffic contributed to the company’s performance.

Meanwhile, Casey's concluded the acquisitions of Buchanan Energy and the Oklahoma Circle K stores in the quarter, thus adding 137 new units.

A Closer Look at Results

Casey's posted quarterly earnings of $3.19 per share that comfortably surpassed the Zacks Consensus Estimate of $2.83 but declined from $3.24 reported in the prior-year period. This year-over-year decrease in the bottom line was due to higher depreciation expense from operating 166 additional outlets than the year-ago period.

Total revenues of $3,182 million surged 51.2% year over year and outpaced the Zacks Consensus Estimate of $3,081 million. Revenues grew across all the three categories, Fuel, Grocery & General Merchandise and Prepared Food & Dispensed Beverage.

Inside sales jumped 14.1% to $1,143.9 million during the quarter under review. Inside same-store sales increased 8% against 0.4% decline witnessed in the year-ago period. The metric improved on account of sturdy performance in packaged beverages, grocery items such as salty snacks and meat snacks, and a resurgence in pizza slices, driven in part by increased guest traffic.

Shares of this Zacks Rank #3 (Hold) company have advanced 14.1% so far in the year compared with the industry’s growth of 15%.

Caseys General Stores, Inc. Price, Consensus and EPS Surprise

Caseys General Stores, Inc. Price, Consensus and EPS Surprise

Caseys General Stores, Inc. price-consensus-eps-surprise-chart | Caseys General Stores, Inc. Quote

Margins & Expenses

Gross profit increased 16.1% year over year to $723.9 million, courtesy of higher revenues. However, gross margin contracted 690 basis points to 22.7%. Inside gross profit grew 16.7% to $463.5 million. Meanwhile, Inside margin improved 90 basis points to 40.5% favorably impacted by mix shift, both within and across categories, and procurement initiatives.

We note that Casey's registered an increase of 24% in operating expenses of $478.9 million due to restoring store operating hours to pre-pandemic levels. The metric increased on account of operating 166 more stores compared with the same period last year, 39% jump in credit card fees due to the rising retail price of fuel and increased sales volume, and one-time transaction and integration costs related to buyout of the Buchanan Energy and Circle K. Same store operating expenses, excluding credit card fees, were up 17.6% in the quarter under review.

Performance by Categories

We note that Fuel sales surged 81.1% year over year to $1,967.2 million during the quarter. Well, Fuel gallons sold jumped 21.5% to 667.5 million. Same-store gallons sold were favorably impacted by improved guest traffic from lapping coronavirus-induced restrictions that were in place a year ago. Fuel gallons same-store sales rose 9% during the quarter against 14.6% decline in the year-ago period. Fuel gross profit rose 11.6% to $234.5 million driven by increased volume. However, it was offset by a lower fuel margin environment. Fuel margin declined to 35.1 cents per gallon from 38.2 cents per gallon in the prior-year period.

Grocery & General Merchandise sales rose 14.2% to $835.5 million. Same-store sales increased 7% compared with 3.6% growth in the year-ago quarter. Grocery & General Merchandise margin expanded 80 basis points to 33%. Again, gross profit increased 16.9% to $275.4 million during the quarter.

Prepared Food & Dispensed Beverage sales rose 13.9% to $308.4 million. Same-store sales increased 10.8% against a decline of 9.8% in the year-ago quarter. Prepared Food & Dispensed Beverage margin improved by 130 basis points to 61%. We note that gross profit jumped 16.4% year over year to $188.1 million.

Store Update

During the first quarter of fiscal 2022, the company constructed three new stores, acquired 139 stores and closed five. As of Jul 31, 2021, the company operated 2,380 stores.

Other Financial Aspects

Casey's ended the quarter with cash and cash equivalents of $198.9 million, long-term debt and finance lease obligations (net of current maturities) of $1,682.2 million and shareholders’ equity of $2,030.7 million. During the quarter, the company did not make any share repurchases and still has $300 million under authorization, which expires in April 2022.

FY22 Outlook

Casey's continues to envision same-store fuel and inside sales to rise by mid-single digit percentages during fiscal 2022. Management estimates mid-teen percentage increase in total operating expenses driven primarily by adding about 200 units during fiscal 2022, expenses related to adding back operating hours to the stores and likely wage pressures. The company expects to make an investment of roughly $500 million in property and equipment in the fiscal year.

3 Picks You Can’t Miss Out On

The TJX Companies, Inc. (TJX - Free Report) , a Zacks Rank #1 stock (Strong Buy), has a long-term earnings growth rate of 10.5%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Walmart (WMT - Free Report) has a trailing four-quarter earnings surprise of 14.3%, on average. The stock carries a Zacks Rank #2 (Buy).

Costco (COST - Free Report) has a trailing four-quarter earnings surprise of 7.7%, on average. The stock carries a Zacks Rank #2.

Published in