Q4 2020 Caseys General Stores Inc Earnings Call
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Full year 2020, Casey's General stores earnings Conference call. At this time, all participants are in listen only mode. After the speakers presentation. There will be a question and answer session to ask a question. During this session you'll need to press star one on your telephone as a reminder, today's program is being recorded I would now like to introduce your host.
Today's program Bill Walljasper Chief Financial Officer. Please go ahead Sir.
Well good morning, and thank you for join Us to discuss Casey's results for the quarter ended April Thirtyth.
I'm Bill Walljasper executive advisor and former Chief Financial Officer.
Dan Rebellin, Chief Executive Officer, and Steve Bramlage, Steve Chief Financial Officer also here.
Before we begin I'll remind you that certain statements.
Made by US during this investor call May constitute.
Forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
These forward looking statements include any statements relating to expectations for future periods possible or assumed future results of operations.
Financial conditions liquidity needs the company's supply chain.
Business strategies growth opportunities performance at our stores and the potential effects of the Covidien 19 outbreak.
There are number of known and unknown risks uncertainties and other factors that may cause our actual results to differ materially from any future results expressed or implied by those forward looking statements.
Including but not limited to our ability to execute on the strategic plan the impacting duration of the cobot 19 outbreak and government unrelated governmental actions or to realize benefits from that strategic plan as well as other risks uncertainties and factors, which are described in our most most recent annual report on form 10-K and quarterly.
It's on form 10-Q as filed with the FCC and available on our website any forward looking statements made during this call reflect our current views as of today with respect to future events, and Casey's disclaims any intention or obligation to update or revise forward looking statements.
Whether as a result of new information future events or otherwise.
This morning, we'll take Bill first take a few minutes to update you on our response to the Corona buyers pandemic highlight a few trends that we experienced during the fourth quarter and then summarize the results of the quarter followed by question answer session.
I'd now like to turn the call over to Darren.
Thanks, Bill and good morning, everyone. We hope that you and all of your families are doing well under safe during this time.
Given the current environment before we discuss the results of our fourth quarter in recent trends I'd like to take a few minutes update all of you on a response to covert 19.
But first I'd like to say, how grateful I am to all of our team members and their efforts throughout this crisis. This is arguably one of the most challenging environments, our industry's ever phase I couldn't be more proud of the way our team has responded.
I would also be remiss in not recognizing the tremendous efforts of all of the everyday heroes across our country, especially the medical professionals were very grateful for everything they do for our communities.
As we begin to navigate through this pandemic our top priority has always been the health and wellbeing of our team members our guests in the communities that we serve.
As a result, we've implemented the following changes across our company.
We increased pay and provided free meals for all store in distribution center team members.
Provided additional operational bonuses for key field and support team members.
Provide additional paid leave for impacted team members provided personal protective equipment for team members and.
Insult plexiglass yields that are cash registers enhance cleaning and hygiene practices implement in health checks and all our distribution centers.
Designated exclusive shopping times for higher risk guests established six foot markings in our stores to encourage social distancing and implemented contact those delivery.
We've also recognized the increase need in our communities during this crisis.
Within our communities with Archimedes facing new challenges as result of accruing a virus, we identified two significant ways to make an immediate impact for our neighbors.
First we launched the slice of thanks program to recognize and show gratitude to essential workers during the crisis.
Since April Casey's team members and our partners that donated nearly 15000 slices of pizza for healthcare workers in first responders.
Second in May we announced a yearlong partnership with feeding America that will focus on having a local impacting our communities through food banks that serve the neighborhoods we call home.
Through this partnership we aim to make a positive impact on hunger needs for children families in rural communities.
I look forward to sharing more on these efforts as our partnership continues this year.
Moving forward cases will continue to engage our guests partners in team members to demonstrate that we are here for good in our communities.
Now before I provide a few comments on the fourth quarter results I want to take a moment to reflect on my first year with the company.
Let's start with Casey's I mentioned all of you how excited I was about the opportunity to be part of such as successful organization and how I admired the three distinct elements of our business model.
A few convenience and foodservice.
This diversity in our business puts us in the unique position of having multiple levers to pull to manage through challenging times such as the one we're currently experiencing and continue to drive shareholder value.
Even though we have near term uncertainty I feel even better about our long term outlook in our ability to execute on our strategic initiatives.
I'm confident that were on the right path forward and we will come out of this pandemic, an excellent financial position with better capabilities and be an even stronger company.
We will continue to be disciplined in our capital spending to drive long term value for our shareholders.
With that I'll now walk you through the results of the fourth quarter.
As you've seen in the press release diluted earnings per share for the fourth quarter were $1.67 compared to 68 cents a year ago.
The results were primarily impacted by significantly higher fuel margin versus the fourth quarter year ago, offset by the adverse impact and guest traffic related to cope with 19.
However, as with many companies our fourth quarter was a tale of two periods within the quarter.
We started the quarter with strong momentum as many of our strategic strategic initiatives, we are gaining traction.
This momentum continued and actually accelerated through the first two weeks in March with inside same store sales up in the mid single digits in same store gallons up in the low single digits, excluding the extra day for leap year.
However, as cobot 19 restrictions became more prevalent starting in the middle of March we began to experience a rapid decline in our guest traffic, resulting in compression of our same store sales.
This compression had the most impact in the month of April where we experienced the following results in same store sales.
Fuel gallons were down 34%, but were more than offset by an unprecedented average fuel margin of 63 cents per gallon.
Grocery another merchandise was down 9% and prepared food and found was down 30%.
In response to the adverse impact on our business, we made significant adjustments in our operations to mitigate the impact which will discuss later in our prepared remarks.
Since the middle of April we've seen a steady improvement in comps across our business as these adjustments gain traction whether improves and state and local restrictions ease.
Will provide additional detailed on the current trends were experiencing as we discuss each category.
Year to date diluted earnings per share were ups or were $7.10 up 29% from the same period a year ago.
As we navigate through this near term challenge, we've made numerous adjustments in our business to maintain flexibility to ensure our continued long term success.
Some of these actions include deferring some discretionary capital spending.
Adjusting store hours to meet guest demand optimize profitability, expanding third party delivery opportunities expanding delivery items beyond prepared foods.
Spending online assortment available for sale and modifying prepared food production to reduce food waste.
In parallel with these changes we continue to move forward and executing on key elements of our long term strategic plan, which will position us well for future growth.
I would now like to go over our results and some of the details in each of the categories.
During the quarter in the fuel category, we experienced an unprecedented environment in both fuel demand and margin.
As a result of the decrease in demand beginning in mid March due to various state and local restrictions same store gallons in the quarter were down 14.7%.
As indicated earlier, we experienced the largest impact in April with the trough being down between 35 and 40%.
Same store gallons stabilized during the middle of April it has been steadily moving upwards sense.
At the same time to pandemic began to impact our business the macro environment for fuel supply was disrupted creating a significant fuel margin benefit throughout the industry.
Our average fuel margin in the fourth quarter was 40.8 cents per gallon.
Fuel margins peaked around the first of April and moderated throughout the rest of the month.
The average retail price of fuel during the fourth quarter with $2.05, a gallon compared to $2.46 a gallon a year ago.
Total gallons sold for the quarter were down 10.7% to 488 million gallons, while gross profit dollars increased 96% due to the margin environment discussed previously.
For the fiscal year same store gallons were down 5.1%, while gross profit dollars in the fuel category were up 32% compared to the same period a year ago.
During the quarter, we completed the conversion of our stores to digital price signage. This signed conversion is the final step in our plan that will allow us increased flexibility and adjusting retail prices to react more quickly to the changing fuel environment.
We're also pleased with the progress we made a fuel procurement in fourth quarter, allowing us to finish the fiscal year with approximately 50% of our total fuel volume under contract.
Lastly in the fuel category, we continue to gain traction in our fleet card program.
Over the course of the fourth quarter, we continued to add new cardholders to date, we now have over 8100 accounts in 20000 cardholders, we remain optimistic about the potential of all of these initiatives going forward.
Same store gallons of improved sequentially throughout the first quarter and for the past 14 days are trending down in the mid teens, while the average fuel margin is trending in the low to mid 30 cents per gallon range.
We anticipate same store gallons, who continued to improve as we head into the summer months in the state of Illinois recently lifted their stay at home mandate in June.
For context, Illinois represents approximately 20% of our store base.
Moving to inside the store total sales in the grocery and other merchandise category were $568.1 million up slightly from a year ago in the fourth quarter.
Same store sales were down 2% during the quarter adversely impacted by stay at home restrictions related to cope with 19.
To put this in perspective.
For the first six weeks of the quarter same store sales in this category, excluding the extra day for leap year were up over 5% compared to the last six weeks, where we saw a decline in comps by approximately 9%.
There were several sub categories that were more resilient during this time, such as beer and alcohol as well as tobacco.
The average margin in the quarter was 30.4% down 110 basis points from a year ago in the same period due primarily to an adverse product mix shift to lower margin items related to cover 19.
As a result gross profit dollars for the quarter in the category were down slightly to $173 million.
For the fiscal year same store sales were up 1.9% with an average margin of 32%.
As you may recall the year to date margin was adversely impacted by 6.6 million dollar onetime adjustment that occurred in the first quarter.
Without that adjustment the margin was 32.3%.
Same store sales have improved sequentially throughout the first quarter and for the past 14 days are trending positive in the low single digits.
Given the current environment in recent regulatory changes in tobacco during the fourth quarter, we paused on the rollout of additional items to the price optimization platform inside our stores, we'll update you on this areas we continue to navigate through the current environment.
The prepared food and fountain category has been one of the areas most impacted by the effects of the Corona buyers pandemic.
Through the first six weeks of the quarter, excluding the extra day for leap year, we experienced same store sales of 5.5%.
The last six weeks, we saw a decline of approximately 30%, resulting in same store sales down 13.5% for the fourth quarter.
Historically whole pies make up about 25% of this category with the remainder coming from items that are primarily self serve offerings either in our food warmers or bakery cases or from our coffee and found.
Our whole Thai business as a destination item has been very resilient. During this time showing significant double digit same store sales gains.
In contrast remaining 75% in this category is more dependent upon everyday traffic that comes from people commuting to and from work or other activities.
As a result, this is where we have experienced the greatest adverse impact in prepared foods from the pandemic.
Also during this time several areas in our footprint restricted our ability for self serve as food items as well as our coffee and found offerings.
In addition to this to protect the well being of our guests we voluntarily suspended self service across our entire chain for a period of time.
We have since we opened our self service platform, we're allowed as restrictions begin to ease across our territory.
Subsequently, we have seen gradual improvement in self service items, while maintaining strong double digit sales for whole pies.
As a result of these events total sales for the quarter were down 9.5% to $230 million. The prepared food margin in the quarter was down 220 basis points to 60% due to an increase in promotional activity and higher commodity costs.
We were pleased with the acceleration in our comps prior to the impact of Coven 19 in the quarter as many of our initiatives were maturing and gaining momentum.
Despite the current environment, we're excited about the traction we're gaining with our digital platform and how our guests are responding to our rewards program.
We currently have over 2.2 million active members enrolled compared to just under 1 million members five months ago. When we launched the program and this number continues to climb.
Also approximately 50% of all pizza orders are conducted digitally now and over 20% of all of our transactions have a rewards participant.
We look forward to the opportunity to learn more about our guest preferences, which will allow us to serve and even better we believed that our new suite a digital platforms will continue to drive additional traffic.
Year to date same store sales were down 1.5% with an average margin of 60.9%.
The margin was down from a year ago, primarily due to higher cheese costs in the adverse impact from a special promotion. We ran in November to launch our new coffee program.
The average cost of cheese for the fourth quarter was $2 per pound compared to $1.73 in the same quarter last year.
With cheese cost currently trending down we're successful unlocking at a portion of our cheese costs through the end of the calendar year.
We'll continue to monitor monitor the market closely looking for additional buying opportunities.
Same store sales have improved sequentially throughout the first quarter and for the past 14 days are trending down in the low teens.
We anticipate same store sales to continue to improve as additional areas in our territory ease self service food restrictions, we head into the summer months in the state of Illinois recently lifted their stay at home mandate in June.
Currently we still have approximately 25% of our store base adversely impacted by self service restrictions again, Illinois represents approximately 20% of our store base.
We continue to move forward with our culinary innovation initiative as part of our long term strategic plan. We completed the initial phases as planned with the hiring of our new Vice President of Foodservice Michelle with them.
Michelle's, a 30 year veteran of the foodservice industry, we look forward to her energy and passion to end to enhance our already successful foodservice business.
I'd now like to turn the call over to build to discuss operating expenses and the financial statements Bill. Thanks Darren.
In response to Cobot 19, we may numerous adjustments in our business operations outlined previously intended to help protect our team members and gas and navigating through this crisis.
As a result of these changes and operating 61 more stores this period compared to a year ago total operating expenses in the quarter up 6.2% to $367 million.
This includes additional cobot related expenses of approximately 12 and a half million dollars.
Despite these added expenses, we were able to drive same store operating expenses down 2% for the quarter driven by refinements made a sore hours and labor scheduling to better align with the changes in consumer demand caused by the pandemic.
Same store labor hours were down 10.3% during the quarter, we will continue to monitor the environment closely and make a necessary adjustments as appropriate.
Year to date, our operating expenses were up 7.7%.
On the income statement total revenue in quarter was down 16.8% to 1.8 billion, primarily due to lower retail fuel prices from a year ago and the adverse impact from cobot 19, depreciation in the quarter was up 3.7%.
The effective tax rate for the quarter was 21% up from a year ago, primarily due to a lower benefit from federal tax credits in this period.
We expect our effective tax rate for fiscal 2021 to be between 24 and 26%.
Our balance sheet continues to be strong our net debt to EBITDA at the end of year was 2.1 times, while our cash and cash equivalents at April thirtyth or 78.3 million.
Long term debt net of current maturities was down to $715 million as our $569 million bullet payment. Due this august moved to the current liability earlier in the year.
Over the past quarter, we have been finalized and then ill purchase agreement for the refinancing of our 569 bullet payment due this August as mentioned in our last call. The blended interest rate for this refinancing was 2.9%.
With this refinancing the average pre tax costs of our long term debt will decrease from 4.4% to approximately 3.3%.
For the fiscal year, we generated $504 million in cash flow from operations and had capital expenditures of 472 million compared to 463 million a year ago in the same period.
EBITDA increased 48.4% to 158 million in the quarter compared to the same period, a year ago, primarily due to the higher contribution from fuel discussed previously.
For the year EBITDA increased nearly 15% to 647 million.
I'd now like to turn the call back over to Darren to update you on our unit growth there.
Thanks, Bill for fiscal 2020, we completed 60, new store constructions acquired 18 stores and had two additional stores under agreement to purchase.
Thus far in the first quarter, we've opened six new stores and have eight stores under construction.
Given the current environment as we head into fiscal 2021 will be focused on liquidity and maintaining a strong balance sheet.
With that in mind, we will continue to be prudent in our capital spending in order to maintain flexibility until we have more certainty around what the new normal may look like.
Because of this uncertainty caused by these unprecedented times, we will not be providing guidance at this time for the fiscal year ending April Thirtyth 2021.
This will be reevaluated as conditions warrant.
Before I close an open for questions I'd like to briefly outline some of the recent changes we've made within the executive leadership team.
The additions include Ina Williams, as Chief operating Officer, Steve Bramlage, as Chief Financial Officer to fill the role vacated by the retirement of Bill Law, Jasper, which was announced earlier this year and Adrian Butler as Chief Information Officer, which is a newly created role.
We're excited to assets talented leaders joined our team to strengthen our efforts and executing on our strategic plan.
In conjunction with these changes Brian Johnson, a 17 year veteran of the company will take on the responsibility of leading Investor Relations. In addition to the new mergers and acquisitions team.
Many of you are already familiar with Brian is the help lead Investor Relations previously in his former role as Vice President Finance.
In closing despite uncertainty around the near term impact of Coven 19, we believe given our strong liquidity and balance sheet, we're well positioned for positioned extremely well to successfully navigate through this crisis continue to execute our strategic plan and take the appropriate actions that will allow us to emerge even stronger.
We'll now open it up for questions.
Certainly ladies and gentlemen, who have a question at this time. Please press Star then one and you touched on telephone. If your question has been answered and you'd like to move yourself from the Q. Please press the pound key our first question comes from the line of Chris Mandeville from Jefferies. Your question. Please.
Hey, good morning, guys.
Dan I appreciate all the color.
Dan I appreciate that color this morning.
I'm, hoping maybe if theres an ability for you to do so to help us China better understand the impact of self serve restrictions is there any way as parsing out or splitting performance maybe throughout the back half a quarter or even quarter to date for those stores that are now fully reopened didn't have all of their offerings.
It's accessible to the consumer versus those that might still have some restrictions.
Yes, Chris.
We've done a fair amount of analysis on that and that and I'd say it. It is somewhat of a moving target because theres a lot of different types of restrictions and these things have come on and off but what I would say generally speaking between the two groups. We saw same store comps drag kind of in the mid or rather the high.
Hi single digits between the two so when we go to full service that hits us in the high single digits versus being.
Self serve.
Okay. That's very helpful and then.
We now got a few weeks worth of thought asked under your belts I was hoping you could maybe offer up some color on performance that you've seen thus far how we should maybe thinking about the impact of the TNL near term and then.
I'll answer maybe thinking about product expansion through that platform as well. Thank you have maybe close to north of 100 skews available now.
Yes, that's right and.
Yeah. We've we've added 600 stores that platform, we're going to say end of April believes that there was.
Is that end to end of April and.
We've we've seen some nice growth there and.
A good portion of that as Incrementals not all incremental.
In some stores, we were not delivering before so is 100% incremental and others. We had delivery and this is complemented it so.
You'll give or take on a.
Given day, we're getting about 2000 orders across those stores. So it's it's been a nice uplift and.
We're seeing we're starting to see some good traction with the the additional items outside of.
Outside of the pizza business as well.
Perfect and then the last one from me before I hop back in two years just on your comments around having contracted out some portion of your teeth costs can you just put a finer point on that means in terms of.
Percentage that had been contract as now what price.
Yes, yes, Chris this is bill roughly 70% of our cheese and contracted out at a price just just south of $2 per pound currently cheese is trending for from all in basis for us just slightly over $2 a pound. So we'll start seeing a tailwind here as we head into the back half of this quarter and into the second quarter.
So at that they'll be nice plus for us.
Alright. Thank you guys you bet. Thanks, Chris.
Thank you. Our next question comes in the line of Karen short from Barclays. Your question. Please.
Hi, Thanks, very much Alex I wanted to check is this last time, we'll be talking you.
Well you might have another call with me in and a couple of days here, but as we my officially my last earnings call Yes.
So I'm going to Miss the Donnie Karen.
It's been great.
Great question have you been great support.
So I just wanted to talk about fuel a little bit.
Maybe.
You gave the updated person on contact sets up a little bit sequentially from the end of Threeq.
Finally, a little bit does.
Higher percent or just on contract does that help or hurt you and the volatile environment, meaning.
Our margins actually had been even higher.
On spot entirely I, just wanted to talk to that generally because it seems like we can be volatile environment going forward for awhile.
Yes. This is Derek Karen.
Yes.
We definitely anticipate being in a volatile environment for awhile, but actually.
So the way the contracts are structured there they are indexed off of.
I'll have a benchmark price and so is as costs come down it tends to be.
That index price minus.
Certain cents per gallon, depending on the contract and where we ourselves.
If it goes up were below that index. If it goes down were below that index. So the volatility is still there were moving with that index. Both will always be at a favorable price versus what we would have been otherwise if we were just buying off the rack.
Okay. That's helpful.
Then in terms of that you walk through August many many changes you've had from an operations nx, mostly it sounds like Opex perspective.
Can you talk a little bit about what the actual dollar pockets where for expenses related to all these investments whether it be.
This is the offset and reduced hours because presumably those expenses go away as we go into 2021.
And then I'm not sure.
Darren.
Good luck.
Yes, I'll give you some buckets and then bill can given the details I think there's there's probably two big buckets. It's.
Although the one is around increased pay for our team members working in.
In our field operations in our distribution centers.
So that's one bucket and that's probably the bigger bucket and then theres another bucket around or call. It safety precautions and Thats everything from TV two things we're doing more recently in the store support center.
As we start to plan for people to come back into this facility. So.
Those are probably the two bucks zone below Q1, Yeah, just maybe yes, maybe just a little more granular with that so of that first bucket that that that special pay that down was referring to that represents about 10 million of that 12, and a half million and then the remaining piece of that ran the gamut from plexiglas two per personal protective equipment. We did have a handful of.
Of stores that had cobot outbreak is we had to clean the stores and some cleaning around that.
And so right now our special pay is intended to at this point to go through Middle of June.
We will evaluate as on ongoing basis.
With respect to the hours.
Oh the hours reduction so the out production in the quarter. It came down on a same store batesville over 10%, but at certain points within the quarter.
We were down upwards of 25% on store labor hours and really for US It was really a matter of.
The more flexible to align our labor scheduling to meet that consumer demand and so.
As Dan mentioned on the onset of his call obviously very proud of the team. So the team the operational team did an outstanding job of reacting very quickly to ebb and flow the schedules accordingly, and so as our businesses.
Picking back up due to number of things we mentioned in the call. We're readjusting those hours accordingly.
Okay and then just last question for me as year Reintroducing self serve I am actually just curious what your observation is in terms of.
The customers coming in and their willingness to engage in self serve.
I think anyone to then the Tri state area.
Thanks that that will never be coming that anyone will engage and again, but I don't know that.
The whole countries thinking about that I'm wondering if you could just give any color on how quick that was kind of recover when some of your introduced.
Yes, I care, that's an interesting one and I've been out into a lot of our stores around our footprint and I can tell you when we made the shift to full service.
Our guest did not like that and.
Although we had people with masks and gloves on heading in their food. They just they didnt like.
Having to wait they were accustomed to doing it themselves and.
So part of being a convenience stores being able to get in and out really quickly in kind of do things for yourself and that was something that our guest and alike and we started to see.
See that come around when we started to loosen up those restrictions and our guest.
I have enjoyed that again, so I don't have a.
Any.
Empirical data to share with you in terms of a percentage unlike in or don't like at all I can tell you is.
People were complaining when we made the change people were happy when we changed back and our sales and started to improve so I would I'd say at least in this part of the world people in our preferring the self service model I agree with that Karen Darren mentioned, you know, it's as we move from a full service to a self service model dependent on a category.
The self service, we see an uptick anywhere from 10% to 15% improvement on on a category and again it depends on a localized basis, but so definitely that seems to be an overwhelming desire to have that self service impact leasing our market area.
Great. Thanks, I'll go back and again.
Yet.
Thank you. Our next question comes from them.
Be grissom from.
James Your question please.
Good morning and body.
Well you're panels are stance safe appreciate you taking my questions I.
I guess first I wanted to circle back on your comments about the lock into cheese prices for prepared food with that now lot Dan is that pretty much the big driver to reverse the trajectory of the margins that have been going on there are there. Some other factor that we should keep in mind as we model that business segment out going forward.
Well, there's a couple of things to think about their bodies that definitely wants and we think about the the fourth quarter. We had about the average cost of cheese was a little over $2, a compared to a year ago. It at $1.73. So just by way of context, there, but every 10 cents per pounds about 35 basis points. The overall prepared food margin and so thats the majority of that but.
Also promotional activity, obviously as we head into a kobin related environment.
Discretionary income becomes constrained as you might imagine and so with that we're always looking for value proposition with our guest and so with that we certainly looking to be more promotional and trying to drive business, especially in environment. We have right now so those would be that two of the to the factors that I would say what would be causing us there I would also keep in mind.
Didnt really touch on that but from a comp perspective as you know we had a little utility award for and get seven fully operational there was a drag on that rewards of about 90 basis points to the comp in the fourth quarter.
So I just wanted to point that out as well.
But cheese cost traditionally have been probably the biggest drag on the margin side.
Okay. That's very helpful and I guess don't need to pivot I mean, just curious on like a high level are you seeing how the business kind of reacted to this environment, that's very challenging any of the big initiatives that we talked about in January Investor day that maybe you saw it could be accelerated or need to be accelerated that on you kind of learned from us environment or anything.
Interesting to point out there.
Yes, there's a couple things that we pulled forward, particularly in the into digital space, we well. The first one was the door dash, but delivery, we had a small pilot going on in.
At a plan to to do.
Larger rollout later in the year and we pull that forward and within a couple of weeks we were live it.
600 stores.
Expanding the online assortment.
Outside of prepared foods with something that was on our roadmap, but we didnt habit cued up earlier in the year and we pull that forward and have expanded that.
We're in the process of piloting curbside delivery, which was something we didnt have on our roadmap actually but identified that as a guess need in the current environment pull that forward. So theres a few of those things like that that that we accelerated but.
Bobby what I feel really good about is that plan that we laid out in January for everybody.
When we took a look through all those initiatives and everything that we plan to do all of that stuff is still holds true today and in some cases, even more important. So we're very committed to continuing to execute on that strategic plan in spite of the current environment.
That's very helpful and I guess, if I could sneak one modeling question here real quick on when we when setting up our models for gallons here and the first quarter should we think about may at basically in between the April being down 34 in the last two weeks and down mid teens, where we kind of true up to current trends.
Yes, I think I'd be a safe range to put it in.
As we mentioned every week it continues to improve and not just fuel gallons, but.
Every category continues to improve stated all know as Darren mentioned, we're not there is still yet.
Restrictions June one roughly and so we just have really one week of that east restriction.
For visibility at this point, but if that follow suit from the other states. They will continue to improve obviously the summer months and driving season is another factor that helps as well.
Okay, perfect and go I think we are talking maybe one more time it if not a best of luck in retirement and it's been good getting to know year over this yes, there Bob battery foundry, great chatting with you over the years.
Yes.
Thank you. Our next question comes from the line FNB Avenue from Stephens, Inc. Your question. Please.
Hi, Thanks, good morning, everybody.
Good morning event.
I'll Echo my assessment, Phil it's going to pleasurable much yet and we wish you the back.
Thank you very much of it.
I wanted to ask Darren you mentioned comments on kind of the deferral of capital spend but I'm curious in the broader context of the industry. You guys are still in a really strong position financially you've got a flexible balance sheet.
We've talked in the past about how incremental investment in stores for independent operators could drive more operators out of the industry and accelerate your opportunity for M&A.
Im curious in the co that environment, particularly a civil margins normalizing gallons are still.
No down a bit though recovering.
Has that accelerated the opportunity for M&A for you all on would you be willing to accelerate that activity. Despite some of the deferrals you've made on the capital investment side of things.
Yes, Bob Thanks for that question, then yes, absolutely Lou we expect that we'll be able to accelerate M&A in this environment.
I kind of look at this fuel margin as maybe a little bit of a short respite for some of these operators that.
There were kind of on the cost and so you got a little bit of breathing room with some margins, but I wouldn't anticipate to these types of margins last forever and I will create that opportunity and Thats why did that was something we outlined in our Investor day was standing up a dedicate M&A team, we have done that and as I mentioned in my remarks.
Weve put Brian Johnson, who was our head of overall store development, you'll be handling investor race relations, but a big part of his job is going to be fully focused on M&A and so his team has already building out a pipeline of potential opportunities and we're talking to a lot of folks right now well have to see how that.
Plays out in the near term but.
Equally bullish in the long term the we have a great opportunity there and now we have a dedicated team focused on executing against that.
Alright, great I want to ask about the prepared students out in margins and then also just the mix of the business. You noted that you had an uptick in whole pies I'm curious what impact that add on the margin for the defense and then as you reopened has that percentage up hole pie.
Going back down and Youve shifted back more towards slices and what impact has that had on the mark.
Yes, So hey, Ben. This is this is bill I'll go and feel that Gary much it to add to it he can jump in here, but so there is there's several things going on prepared food category and first of all whole pies have accelerated as Darren mentioned in his opening remarks.
Approximately 25% of the paired food businesses whole pie that has accelerated here in the fourth quarter were probably just slightly north of 30% as contribution in the fourth quarter because of the activities that we have done with respect to door dash with respect to.
Increased promotional activity and whole pie would be a an item thats a higher margin the categories hole, but one of the things that offsets that is actually the probably even a larger decline in the bakery case, and we talked about the self service restrictions and so the dynamic is we're also having a decline at unit larger Dick.
Klein in a and the bakery cases as well so it's kind of an offsetting phenomenon and quite frankly.
And so if things can continue to move in the direction that we are going I think that will be a positive impact at once we get the other categories back into more of a normal and we can can can maintain the the momentum into the pizza category I think there is opportunity.
To to elevate that margin, especially in a positive cheese environment since we've locked in yes.
Bob is the only thing I had are banned rather I'm sorry, the only thing I'd add to that is that we've had great momentum with the whole Thai business. We think we can continue to grow that momentum.
While we're still starting to recapture that that slice business because those are really different occasions, you think about how our slice business works. It's a lot of commuter traffic going to and from work in the morning or at lunchtime and then that whole Pi business is primarily a dinner daypart business. So they really don't compete with each other.
Third Theyre really complimentary. So we were optimistic that will hold onto that whole high business and get our slice business back.
Okay Perfect and then last question just a quick housekeeping Bill credit card fees for the quarter you could disclosed that'd be helpful. Yes, there were $33.5 million.
Okay. Thanks Best of luck you.
You bet. Thanks. Thanks.
The Q aren't next question comes on the line of Chuck Cerankosky from North Coast Research. Your question. Please.
Good morning, everyone I'd like to.
I'd like to get into the deferred capital spending a little bit whether exactly how much of slowdown new store openings.
And M&A would you just flat out plan out be opportunistic on M&A shouldn't.
Should opportunities present themselves.
Yes Chuck.
We're not we're not really slowing down on M&A as you know.
Getting a deal done is.
As a challenge just in the base case under normal circumstances, and then you layer on things like kroner buyers that just it's it's a little more challenging in the near term just getting people's attention and being able to now or through these deals. So we have not slow down from our perspective.
But it just takes a little bit longer on the organic growth side.
Some of that some of that pause is.
It's really kind of occurred naturally when when you think about how we approach development. When we go out the by real estate, we don't actually close on a deal until we have permits in hand now in the last couple of months a lot municipalities were shutdown, so permitting wasn't taking place and so we've kind of add a natural lag.
Which.
Ed.
<unk> point in time, a month or so ago, when things were very volatile and very unpredictable.
We were happy to see that pause and just give ourselves a little bit.
Flexibility and Optionality as we work through things and now that things have stabilized a bit more.
Still unpredictable about the future, but stabilize in the point where.
We're continuing on but we will have a little bit of a delay on some properties or would have otherwise have closed on because of the antenna.