Here's How Casey's (CASY) is Strengthening Position in Industry

Casey's General Stores, Inc.’s CASY business operating model, omnichannel capabilities, enhanced customer reach and private-label offerings reinforce its position in the industry.

Let’s Analyze

Casey's price and product optimization strategies, increased penetration of private brands, and digital engagements comprising mobile app and online ordering capabilities are commendable. This third-largest convenience retailer and fifth-largest pizza chain’s self-distribution model, strength in the Inside category and acquisition activities bode well. The same was reflected in first-quarter fiscal 2023 results, wherein the top and bottom lines grew year over year.

Total revenues of $4,454.6 million climbed 40% year over year. Revenues grew across all three categories — Fuel, Grocery & General Merchandise and Prepared Food & Dispensed Beverage. We note that Fuel sales surged 57.4% to $3,096.3 million in the quarter due to an increase of 52.4% in the average retail price per gallon and a jump in the number of gallons sold. Fuel gallons sold jumped 3.3% to 689.5 million due to an increase in the store count.

Inside sales comprising Grocery & General Merchandise and Prepared Food & Dispensed Beverage jumped 10.7% to $1,266.6 million in the quarter. Inside same-store sales increased 6.3% compared with an 8% rise registered in the year-ago period. The growth in the metric was driven by prepared food and dispensed beverages, most notably pizza slices, refreshed breakfast menu and cold dispensed beverages. While Grocery & General Merchandise sales advanced 10.5% to $923.1 million, Prepared Food & Dispensed Beverage sales increased 11.4% to $343.6 million in the quarter.

Casey's General Stores, Inc. Price, Consensus and EPS Surprise

Casey's General Stores, Inc. price-consensus-eps-surprise-chart | Casey's General Stores, Inc. Quote

Casey’s focus on technology advancements, merchandise ordering efficiency, inventory management and data analytics positions it well for future growth. The company has been strengthening pizza promotions for guests seeking meal solutions along with enhancing breakfast lineups. It has been increasing the penetration of private brands. It currently offers more than 250 items under its private brand.

CASY’s digital engagements help create a seamless shopping experience and facilitate same-store sales growth. The company’s mobile app now represents 65% of all digital revenues. Management remains optimistic about Casey's Rewards program, which exceeded 5.5 million members. CASY is enhancing delivery capabilities via DoorDash and Uber Eats.

The convenience store chain has been steadily expanding its store base to boost sales. Progressing along such lines, Casey's acquired Buchanan Energy, known for its Bucky’s Convenience Stores and 48 Circle-K stores, primarily in Oklahoma City. The Buchanan Energy transaction included 92 retail locations (24 stores in Nebraska, 56 in Illinois, five in Iowa, three in Missouri and four in Texas) and a dealer network of 81 stores. Casey's also closed the buyout of 40 stores from Pilot Corporation.

Wrapping Up

Casey’s business model, private-label offerings, expanding its footprint and digitization endeavors should support sales. This Zacks Rank #3 (Hold) company envisions fiscal 2023 same-store Inside sales to increase 4-6% and expects to maintain an Inside margin of about 40%. However, higher operating expenses remain a matter of concern. Management foresees operating expenses to increase approximately 9-10% in fiscal 2023.

3 Stocks Looking Red Hot

Here we have highlighted three better-ranked stocks, namely BJ's Wholesale Club BJ, Ulta Beauty ULTA and Kroger KR.

BJ's Wholesale Club, which operates membership warehouse clubs, currently sports a Zacks Rank #1 (Strong Buy). BJ has an expected EPS growth rate of 9.3% for three to five years. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for BJ's Wholesale Club’s current financial-year sales and EPS suggests growth of 14.3% and 10.5%, respectively, from the corresponding year-ago period’s levels. BJ has a trailing four-quarter earnings surprise of 16.5%, on average.

Ulta Beauty, which operates as a retailer of beauty products, sports a Zacks Rank #1. Ulta Beauty has a trailing four-quarter earnings surprise of 32.8%, on average. ULTA has an expected EPS growth rate of 13.9% for three to five years.

The Zacks Consensus Estimate for Ulta Beauty’s current financial-year sales suggests growth of 13.7% from the year-ago reported number.

Kroger, a renowned grocery retailer, carries a Zacks Rank #2 (Buy) at present. The company has an expected EPS growth rate of 11.7% for three to five years.

The Zacks Consensus Estimate for Kroger’s current financial-year sales and EPS suggests growth of 7.8% and 10.3%, respectively, from the year-ago reported number. KR has a trailing four-quarter earnings surprise of 15.7%, on average.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.