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Casey's (CASY) Q2 Earnings Miss Estimates, Revenues Up Y/Y

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Casey's General Stores, Inc. (CASY - Free Report) reported second-quarter fiscal 2022 results, wherein the top line not only surpassed the Zacks Consensus Estimate but also improved year over year. This was the fifth straight quarter of positive sales surprise. On the contrary, the bottom line missed the consensus mark and declined from the year-ago tally.

A Closer Look at Results

Casey's posted quarterly earnings of $2.59 per share that lagged the Zacks Consensus Estimate of $2.92 and declined from $3.00 in the prior-year period. This year-over-year decrease in the bottom line was due to higher operating expenses and increased depreciation expenses from operating additional outlets than the year-ago period.

Total revenues of $3,262.9 million surged 47.3% year over year and outpaced the Zacks Consensus Estimate of $3,154 million. Revenues grew across all the three categories, Fuel, Grocery & General Merchandise, and Prepared Food & Dispensed Beverage.

Inside sales jumped 13.1% to $1,139 million during the quarter under review. Inside same-store sales increased 6% compared with 3.5% rise registered 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, as well as continued momentum in pizza slices, driven in part by increased guest traffic.

Shares of this Zacks Rank #2 (Buy) company have appreciated 13.5% so far in the year compared with the industry’s growth of 16.9%.


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Margins & Expenses

Gross profit increased 13.6% year over year to $717.6 million, courtesy of higher revenues. However, gross margin contracted 650 basis points to 22%. Inside gross profit grew 12.3% to $463.4 million. Management informed that Inside gross profit rose significantly despite product availability pressures, especially in Prepared Food & Dispensed Beverage segment, and an inflationary supply chain environment. Meanwhile, Inside margin shrunk 30 basis points to 40.7%.

Adjusted EBITDA declined 2.8% year over year to $217 million as higher gross profit from inside the store and fuel was offset by increase in operating expenses on account of rise in wage rates and credit card fees as well as operating 161 additional stores.

Casey's witnessed an increase of 22% in operating expenses of $500.6 million. The metric increased on account of operating 161 more stores compared with the same period last year, jump in same-store employee and store operating expenses, and rise in same-store credit card fees due to higher retail fuel prices and increased sales volume.

Performance by Categories

We note that Fuel sales surged 71.7% year over year to $2,048.8 million during the quarter. Well, Fuel gallons sold jumped 15.8% to 668.8 million. Same-store gallons sold were favorably impacted by improved guest traffic despite lapping a challenging comparison from the previous second quarter. Fuel gallons same-store sales rose 2.5% during the quarter under discussion against a decline of 8.6% in the year-ago period. Fuel gross profit rose 13.6% to $231.9 million. Fuel margin declined to 34.7 cents per gallon from 35.3 cents per gallon in the prior-year period.

Grocery & General Merchandise sales rose 15.5% to $829.5 million. Same-store sales increased 6.8% compared with 6.6% growth in the year-ago quarter. Grocery & General Merchandise margin remained flat at 33.3%. Again, gross profit increased 15.5% to $275.9 million during the quarter.

Prepared Food & Dispensed Beverage sales rose 7.2% to $309.5 million. Same-store sales increased 4.1% against a decline of 3.6% in the year-ago quarter. Casey’s informed that the metric was adversely impacted by supply chain bottlenecks, primarily in bakery and dispensed beverages. Prepared Food & Dispensed Beverage margin expanded 50 basis points to 60.6%. We note that gross profit jumped 8% year over year to $187.5 million.

Store Update

During six-month period ended Oct 31, 2021, Casey's constructed seven new stores, acquired 144 stores and closed 12. As of Oct 31, 2021, the company operated 2,380 stores. The company now plans to add roughly 225 units during fiscal 2022, up from the earlier expectation of 200 units, owing to the recently announced acquisition of 40 stores from Pilot Corporation.

Other Financial Aspects

Casey's ended the quarter with cash and cash equivalents of $311.7 million, long-term debt and finance lease obligations (net of current maturities) of $1,677.4 million and shareholders’ equity of $2,123.1 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 in mid-single digit percentages during fiscal 2022. Management now foresees operating expenses to increase in the high-teen percentages versus the prior view of mid-teens percentages due to the additional units as well as elevated credit card fees stemming from higher retail fuel prices.

The company expects to make an investment of roughly $400 million in property and equipment in the fiscal year down from the prior projection of $500 million owing to the lower new store construction because of increase in acquisition activity.

3 Picks You Can’t Miss Out On

Some better-ranked stocks include, Boot Barn Holdings (BOOT - Free Report) , Tapestry (TPR - Free Report) and Target (TGT - Free Report) .

Boot Barn Holdings, the lifestyle retailer of western and work-related footwear, apparel and accessories, sports a Zacks Rank #1 (Strong Buy). BOOT has a trailing four-quarter earnings surprise of 35.3%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Boot Barn Holdings’ current financial year sales and earnings per share (EPS) suggests growth of 54.6% and 188%, respectively, from the year-ago period.

Tapestry, which provides luxury accessories and branded lifestyle products, carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 29%, on average.

The Zacks Consensus Estimate for Tapestry’s current financial year sales and EPS suggests growth of 14.8% and 17.9%, respectively, from the year-ago period. TPR has an expected EPS growth rate of 12.3% for three-five years.

Target, a general merchandise retailer, carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 19.7%, on average.

The Zacks Consensus Estimate for Target’s current financial year sales and EPS suggests growth of 13.9% and 40.1%, respectively, from the year-ago period. TGT has an expected EPS growth rate of 14.4% for three-five years.