Q4 2024 Casey's General Stores Inc Earnings Call
Okay.
Yeah.
Good day and thank you for standing by welcome to the Q4 fiscal year 2020 for Casey's General stores, earning conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one one of your Telecom you will then hear an automated message advising that your hand.
Raised to withdraw your question. Please press star one again, please be advised that today's conference is being recorded I would now like to hand, the conference over to your Speaker Bryan Johnson Senior Vice President of Investor Relations and business development. Please go ahead.
Good morning, and thank you for joining us to discuss the results for our fourth quarter and fiscal year ended April 32024.
Brian Johnson, Senior Vice President Investor Relations and business development.
Me today are Dan Rebalanced, or chair, President and Chief Executive Officer, and Steve Bramlage, Chief Financial Officer.
Again, 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 related.
Sources are names like.
Company supply chain business and integration strategies plans and synergies.
I'm curious.
Of course, there are a 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 the integration of recent acquisitions, our ability to execute on our strategic plan or to realize benefits from the strategic plan the impact.
<unk> and duration of the conflict in Ukraine and related governmental actions as well as other risks uncertainties and factors, which are described in our most recent annual report on Form 10-K and quarterly reports on 10.
Q as filed with the SEC 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 disclaims any intention or obligation to update or revise forward looking statements, whether as a result of new information future events or otherwise.
Conciliation of the non-GAAP to GAAP financial measures referenced on this call as well as a detailed breakdown of the operating expense increase for the fourth quarter can be found on our website at www Dot dot com under the Investor Relations link.
But that said I would now like to turn the call over to Darren to discuss our fourth quarter and fiscal year results.
Thanks, Brian and good morning, everyone.
We are excited to share our outstanding results I'd like to first begin by thanking our 45000 team members for their commitment and effort in achieving another record fiscal year.
As we look back on the first year of a three year strategic plan are set out in June of 2020, it's Greg.
I've never been more confident in our team and their ability to actually plan to do.
Over on our commitments, we made to our shareholders.
Jesus is here to make life better for our guests and communities every day that's.
That's our purpose and it shows in a positive guest feedback we received.
Delicious food, we make and the impact we have on our communities.
Fiscal year <unk>, along with its generous guests partners and team members were able to donate over $5 $7 million to make a positive impact in our communities.
In addition, thanks to the strong performance. This year the company was able to direct $6 million in additional funding to charitable fund formulations in future years.
Our community, giving programs provide improvements for schools and sports fields meals for those in need disaster recovery support and services, helping veterans and their families.
Thank you to our team members, our guests and our nonprofit and supplier partners to make all this possible.
We were proud to do so much good across what we call <unk> country.
Now, let's discuss the results of this past fiscal year.
Fiscal 'twenty four it was another record year for diluted earnings per share, finishing at $13.43, a 13% increase from the prior year.
The company also generated a record $502 million and net income and $1 1 billion in EBITDA and <unk>.
Kris or 11% from the prior year.
Inside same store sales were up four 4% or 11, 2% on two year stack basis with exceptionally strong results in the prepared food and dispense beverage category up six 8% or 14, 4% on a two year stack.
We had good performance in grocery and general merchandise as well.
With same store sales up three 5% or 10% on two year stack basis.
<unk> margin expanded 110 basis points year over year from 41%.
A testament to our approach of handling commodity volatility, while still maintaining a strong value proposition for our guests.
We saw excellent results in Pip spices, as well as both alcoholic and non alcoholic beverages.
Our food innovation team did a great job with thin crust pizza and a refreshed sandwich menu, both performing exceptionally well.
Okay.
Fuel gross profit was up 4% with total fuel gallons sold up 6% and a fuel margin averaging $39.05 per gallon over the course of the year.
Our fuel team continues to take market share, while maximizing gross profit dollars with a balance of fuel volume and margin.
Our focus on operational efficiency continues to pay dividends.
Same store operating expenses, excluding credit card fees were up only two 7% for the year impacted favorably by reduction of same store labor hours of one 6%.
The fourth quarter marked the eighth consecutive quarter of same store sales or same store labor hour reductions.
This was done while guest satisfaction scores improve and team member engagement scores hitting an all time high showing that our store simplification efforts and operational excellence teams are driving efficiency the right way.
Store growth was also a high priority for the company because we built 42, new stores and acquired 112 or more in fiscal 'twenty four.
22 of those acquired stores were in Texas, because we were able to expand our footprint into our 17 states. We're in.
Excited to bring all of our cases.
Capabilities to that market.
We believe our two pronged approach of both building and acquiring stores is a great way to Ratably brother basis every year.
Well on our way to meet or exceed our three year goal of at least 350 new stores.
With strong results in fiscal 'twenty four during a time, where the broader retail industry has been challenged illustrates uniqueness durability and strategic advantage of the Casey's business model.
I would now like to turn the call over to Steve to discuss the fourth quarter and our outlook for fiscal 'twenty five Steve.
Thank you Darren and good morning, before I get to the financials I would also like to take a moment and recognize the entire casey's team.
Outstanding financial results for the quarter and the full year, a remarkable accomplishment for the whole organization and a phenomenal team members that we have made it possible due to their hard work and their dedication.
As a reminder, during the fourth quarter <unk> had one additional operating day due to leap year.
This impacted same store and total results for the quarter by approximately 100 basis points.
For the full year was therefore, approximately 25 basis points.
Our fourth quarter financial results were outstanding as diluted EPS was $2.34.
57% increase from the prior year round I'll dive further into those results.
It'll enzyme sales rose 11, 9% from the prior year to nearly $1 3 billion.
With an average margin of 41, 2%, which resulted in total inside gross profit dollars.
$72 $1 million or 16% from the prior year.
Total prepared foods and dispense beverage sales rose by $42 7 million to $357 million or an increase of 14%.
In total grocery and general merchandise sales increased by $91 million to.
To $900 million.
Increase of 11%.
Same store prepared foods and dispense beverage sales were up eight 8% per quarter.
Average margin for the quarter was 58, 1%.
130 basis points from a year ago.
Hot sandwiches, and dispense beverages performed well in the quarter.
Margin benefited from some modest restock price adjustments by approximately 90 basis points cheese costs were down eight cents per pound from the prior year to $2 and 12 sites and this is having on approximately 20 basis point benefit to the margin.
Same store grocery and general merchandise sales were up four 3% and the average.
Average margin was 34, 4% an increase of 140 basis points from the same period a year ago.
Sales were particularly strong in our non alcoholic alcoholic beverages, and we experienced a favorable mix shift towards smaller pack sizes in the alcohol category reached.
Retail price adjustments the growth of our private label program and cost of goods management were all positive contributors to the margin for the quarter.
During the fourth quarter same store fuel gallons sold were up 0.9% with a fuel margin of $36.05 per gallon that's.
That's up approximately $1.09 per gallon compared to the same period last year.
Our same store gallon volume outperformed relevant opus geographic data by several hundred basis points.
Retail fuel sales.
$139 million in the fourth quarter due primarily to a 9% increase in total gallons sold to 695 million and was partially offset by a 3% decline in the average retail price of fuel from $3 36 last year to $3 28.
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Total operating expenses were up 11% or $57 million in the fourth quarter.
Approximately 6% of that increase was due to operating 137 more stores than a year ago.
Another 2% of the increase was due to higher same store employee expenses.
Approximately 1% of the change is related to an increase in our crude costs for incentive compensation due to strong financial performance and finally, approximately 1% of the increase was due to the discretionary charitable giving special team member bonus.
Depreciation in the quarter was $92 3 million up $11 7 million versus the prior year, primarily due to operating more stores.
Net income was up versus the prior year to $87 million an increase of 55%.
EBITDA for the quarter was $209 million an increase of 32%.
Our balance sheet remains in excellent condition, and we have ample financial flexibility on April 30, we had total available liquidity of $1 $1 billion. Furthermore, we have no significant maturities coming due until fiscal 'twenty 'twenty six.
Our leverage ratio as calculated in accordance with our senior notes is one five times EBITDA and we continue to have sufficient capacity to make good strategic investments as they present themselves.
For the quarter net cash generated by operating activities of $288 million less purchases of property and equipment of $196 million.
Other than the company generating $92 million of free cash flow.
This brought our total free cash flow for the year to $371 million.
Turn on invested capital for the fiscal year finished at 12, 1% that's up 30 basis points from the prior year.
At the June meeting the board of directors voted to increase the dividend to 50 cents per share.
16% increase marks the 20 <unk>.
Consecutive year that the dividend has been increased.
During the fourth quarter, we also repurchased approximately $15 million of stock to bring the total for the year to $105 million and we still have $295 million remaining on the existing share repurchase authorization.
Our primary capital allocation priority remains investing in EBITDA and ROIC accretive growth opportunities and we will continue to be opportunistic in regards to share repurchase.
The company is providing the following fiscal 2025 outlook.
We expect EBITDA to increase at least 8%.
We expect inside same store sales to increase 3% to 5% and for inside margin to be comparable to fiscal 2024.
The company expects same store fuel gallon sold to be between negative 1% to positive 1%.
Total operating expenses are expected to increase approximately 6% to 8%.
Expect to add at least 100 stores in fiscal 2025 through a mix of M&A and new store construction.
Net interest expense is expected to be approximately $56 million depreciation and amortization is expected to be approximately $390 million.
The purchase of property and equipment is expected to be approximately $575 million. The tax rate is expected to be approximately 24% to 26% and tree here.
Consistent with our past practice, we're not guiding to a fuel margin CPG figure nor are we providing EPS estimates.
Finally, our may experience was as follows.
Inside same store sales and same store fuel gallons sold were both consistent with our annual guidance range and expectations.
Fuel CPG margins for May was in the low 40 cents per gallon.
Current cheese costs are modestly unfavorable versus the prior year.
And we expect first quarter operating expenses to be up low double digits and first quarter depreciation to be up mid teens due to the timing associated with lapping the prior year acquisitions, and new store builds and I will turn the call back over to Darren Alright.
Alright, Thanks, Steve.
Like to again say, thank you and congratulate the entire casey's team for delivering another record year.
Our financial performance as a result of the tireless effort of the team and their dedication to executing our three year strategic plan.
The plan, we laid out in June of 2023 had three pillars accelerate the foods business grow the number of units and enhance operational efficiency.
We are off to an excellent start on each of these objectives.
Our prepared foods business, which is the case is most significant differentiator in the convenience store industry.
Improved in fiscal 2024.
Innovated the right products at the right value for our guests.
In June 2023, we rolled out a thin crust pizza offering has allowed us to meet the needs of the entire families their pizza.
And in calendar 2024, we launched a refresh sandwich platform has become a staple of the lunch day part.
This innovation as well as being strategic retail price to ensure that we are a relevant value for our guests as shown up in our financial results.
Our same store inside sales growth has been consistent with the strategic plan and as expected prepared food and dispense beverage has been pacing macros.
Despite lapping a strong fiscal 2023, we were up six 8% and same store sales during the fiscal year.
Our commitment to growing the number of units is also off to a great start.
During the fiscal year, we built 42, new stores and acquired another 112 for a total of 154, new and acquired stores.
We are ahead of our pace for adding at least 350 stores by the end of fiscal 2026.
Our two pronged approach allows us the flexibility to build or buy and our strong balance sheet gives us the freedom to be opportunistic with acquisitions.
That was the case in fiscal 2024, where we had our second most acquisitive year in the company's history.
Physical 2024 continue to trend of operating the business more efficient.
Our operational excellence team has done a tremendous job identifying areas to improve our efficiency.
While simultaneously improving guest satisfaction and team member engagement.
Two of the highlights from the fiscal year happened inside the kitchen with the digital production planner and our automated voice assistant or Eva.
The digital production planner provides the stores with clear data on what quantities of prepared foods need to be made at certain times throughout the day.
However, answers the phone and takes the order so the team members in the kitchen and work on what they do best which is making great food.
The team's work is not done and we're excited to continue to enhance operational efficiency through fiscal 'twenty five and beyond.
Turning to the gas Casey's rewards now has over 8 million members.
As rewards guests visit the store more frequently and spend more per trip joining the rewards program is a win wins for Ulta guest and cases.
Yeah.
I would also like to welcome Maria Casted your honest pulse to the board of directors effective July one.
Most recently served as a leader of Pwc's governance insight Center.
Which helps boards investors and management teams tackled today's toughest governance and strategic challenges.
We're excited am Maria joined the board.
As we look forward to fiscal 2025 and beyond I'm very excited about the future of cases.
We have the financial resources people and leadership team to execute our strategic plan and drive shareholder value.
We will now take your questions.
Okay.
Okay.
Okay.
Ladies and gentlemen, if you do have a question at this time. Please press star one on your Touchtone telephone to withdraw your question. Please press star one again, please limit yourself to one question and I'll follow up one moment for our first question.
Okay.
Okay.
And our first question will be coming from Michael Montana of Evercore ISI. Your line is open.
Hey, good morning, Congrats on the results.
Good morning, Mark just just wanted to ask if I could if you all can discuss some of the value gaps that youre seeing out there today in terms of your prepared.
Meals versus fast food competition.
And what are you doing to drive kind of newness and innovation, whether it's with LTE OS or trying to win a second night of the week sort of like you do in pizza.
Yes.
Mike I'll go ahead and take that this is Darren.
With respect to the value.
You've seen I think it's been broadly recognized in the restaurant industry that restaurants have taken a lot of price over the last couple of years.
And we've we've probably taken a little bit more measured approach to that and we'd like to say, we try to price through the cycle.
Commodities.
Ron up we took some price, but we didn't try to.
Pass on all the price to consumers and we've tried to keep that relative value gaps.
Because we know that the commodities, what's likely to come back down and that.
As that has happened now we see our margins start to improve a little bit on prepared foods, but more importantly that value gap continues to widen between ourselves and our competitors.
And so what we're seeing is people training into our channel and specifically the casey's for that value proposition.
In terms of the innovation I mentioned a couple of things.
Prepared remarks, the first visa same crust pizza and we launched that about this time last year.
We were targeting about a 12% mix.
On that on that product and we have achieved that mix and that was just a different category within pizza.
<unk> definitely want it and that was giving them a veto vote before so we've innovated around that.
But probably the highlight of the show has been our revamped launch Sandwich program.
<unk> added us Kristine spicy chicken sandwich that we upgraded the quality on all of those sandwiches.
While we were able to do is by upgrading the quality. We also passed on some price. So we raise prices, but that category that subcategory.
It has been up 85% in the first quarter and so these products have really resonated with guests and driving performance and preparatory to dispense beverage category.
Thank you for that I guess, the follow up if I could was just around the margin commentary that it could be comparable for inside store. So I'm, just wondering Darren or Steve. If you can talk about some of the puts and takes that you see there you definitely mentioned the cheese spot prices just how to think about that over the course of the year.
Sure Mike This is Steve.
With that one.
Yes, we have quite a bit of margin improvement over the course of.
Fiscal 'twenty four.
Talked about and so it feels like out of engage.
Holding line on that is.
We have a prudent assumption for us to Meg and when I think of the puts and takes on the grocery side of the business.
Yes that is a contractual business for us we have a pretty good sense of the inflation, we're like to likely to occur.
In that business in fiscal 'twenty, five and we've already adjusted retail price points, where we need to to preserve margin in that category and so I think I think we feel pretty good that that will be steady as she goes on the grocery side of the business and then on the prepared foods side of the business at the moment cheese looks like a little bit of a mall.
This headwind for us on a year over year basis, and it was consistently a tailwind we've got about three quarters of our cheese by in the first quarter lock going to couple of hundred basis points.
Headwinds for us in that quarter, we're looking to lock more as we go further out but right now thats occurred is not that can do some of the other commodities I would say broadly.
Main favorable with the exception of beef or we certainly still see some inflation. So you put all that together along with our desire to maintain the value proposition that Darren referenced earlier.
It feels like.
The best way for us to generate gross profit dollar growth in the next fiscal year, which would be to try to targeted comparable margins. So that's what we're doing.
And our next question.
We will be coming from Bobby Griffin.
Of Raymond James.
Bobby Your line is open.
Good morning, Bobby Griffin from Raymond James Thanks for taking my questions and congrats on a great quarter good.
Good morning, Brian.
Hi, excuse me I guess first off I, just wanted to see could you breakout or give a little color on the difference between track traffic and ticket inside the prepared food business or even just inside the store in general really strong results. This quarter. So just curious kind of how it moved throughout throughout the quarter on our traffic and ticket basis.
Yes, Bobby this is Darren our traffic was up about one 5%.
Over the course of the quarter.
And then that the average ticket was up about 2527 so.
That's what gets you to.
So our comp for the quarter.
Thank you.
Leap year effect.
Perfect Yep, good balance there and Darren I guess my second question a follow up is just on the kind of more high level. You guys are trading pretty close to right now $8 million reward members where are you on the journey of leveraging that is there still a big opportunity there or is it more just incremental benefits over the next couple of years, just curious kind of in your thoughts around on that is.
That member profile continues to get larger.
Yes.
Our digital team has done a great job in building up the rewards program as you mentioned 8 million members and we continue to activate that group there.
For sure the most profitable consumers that we have they visit the store more frequently they spend more when they come.
Our real opportunity lies is in being able to get more sophisticated and one to one marketing we do some of that today seems different cohorts, but we really still have a bit better room to go in terms of being able to actually reach out to an individual with their specific.
Vic buying patterns and start to influence that purchasing behavior.
So.
I do think there is still some meaningful runway there.
And our team is actively working on as we speak.
And one moment for our next question.
Our next question will be coming from Anthony <unk>.
<unk> of Wells Fargo Anthony Your line is open.
Yeah, Hey, good morning, guys nice quarter.
So I wanted to ask about fiscal 'twenty guidance in the context of the three year plan.
One clearly finished quite a bit ahead of what all of US initially expected so understanding that there was likely some.
Pull forward versus plan can you just talk about.
One why the low end of the multiyear CAGR is the right growth rate for 25, given the level of momentum in the business right now and then two how does your performance in year one.
Change how youre thinking about what you can ultimately achieve by year three.
Sure Hey, good morning, Anthony This is Steve I'll start with that.
Certainly had a good first year of the plan, we would buy into that statement as well fields.
Feels most prudent for us.
Coming out of the gate to have a number that we feel highly confident in that.
And we've got an ability to influence.
Two writers broadly speaking, yes, there is.
There is some concern of course around the house.
The consumer and once the consumer pocket book look like we feel really good.
About our value proposition and ability to deliver those results.
Right.
That consumer situation, but it just feels like it's the right number for us.
Out of the gate to have and I think as it relates to achieving that.
The three year plan.
We feel really strongly that we continue to control our own destiny regarding that the three year plan number that strong start helps helps our confidence level for sure, but I think the.
The levers that we have available to us and the momentum that we're exiting the first year against that plan whether it's.
Things in the mother ship side of the business.
Driving same store sales growth or the broader dynamics in the industry around consolidation and new unit growth opportunities, we feel really good about our ability to deliver to that strategic plan over the next couple of years.
And one moment for our next question.
And our next question will be coming from Cristina <unk> of Deutsche Bank. Your line is open.
Hey, good morning, and congratulations on very strong results.
I'm wondering if you wanted to.
Thanks, I wanted to ask about grocery and general merchandise that you saw that acceleration sequentially on same store sales and I know you talked about some modest retail price adjustments that you talk.
Last quarter.
Just wanted to get your thoughts on how you see consumers ability to continue to absorb higher prices and I'm asking this in the context of many food retailers that have now started to announce price cuts and then just how do you see that dynamic play out in that segment for the balance of the year promotions have been rising.
Yes, Kristina this is Darren I'll go ahead and take that we have.
We have taken some modest price increases this year and again, we haven't been overly aggressive on taking price throughout this entire.
Inflationary period. So if you look at the sub categories inside the grocery and general merchandise outside of tobacco.
The inflation has been about two to two 5%. So it's not there's not significant inflation there and we have passed on some of that price.
We're seeing.
We're seeing.
Pretty consistent behavior with the upper income consumers are continuing to buy as they normally have.
The lower end consumers, which is only about a quarter of our guest base.
There are still continuing to buy Theyre, just moving around the store a little bit a simple example, as are our fountain soft drink business has been really strong.
This last year and Thats.
And especially so among our lower income consumers in that on a price per ounce basis is a lot more affordable than buying the bottleneck hand version inside the store so.
Theres still purchasing theyre, just making different decisions and as those flow back and forth between categories.
From what we're seeing right now the consumer is still pretty resilient enabled purchase theyre, just being a little more discerning about what they buy in and frankly, where they buy it and I think thats where.
Our reputation for being a good value for the money overall has helped us in this environment because people can rely on us for.
That value occasion.
Got it and if I could just follow up on fuel margins, which came in better than what the opus data would have suggested.
Maybe can you talk about what transpired in your markets from a pricing perspective, and I'd be curious to hear the strength of fuel margins in the context of same store gallon growth that you also put up which significantly outpaced the overall industry as well. Thank you.
Yeah, I guess the thing I would say is that our our field team is doing a fantastic job.
And managing pricing and balancing the.
The margin and volume throughout.
Throughout the quarter, we had four.
49, <unk> increase in wholesale fuel cost through the quarter. So the first couple of months in the quarter margins were a little bit center and then as we started to exit April.
We saw wholesale prices come down and so the margin start to expand a bit.
I would really just get a lot of credit to our fuel team they've been very consistent in their approach.
And very nimble in terms of reacting to wholesale fuel costs and competitive dynamics that allowed us to keep that balance and so we've been able to maintain margins where we needed to.
Still drive those incremental gallons to.
To be slightly positive over the course of the quarter.
Great. Thank you so much.
Thank you and our next question will be coming from Kelly Bania.
Of BMO capital markets Kelly Your line is open.
Gibson.
Good morning, Thanks for taking our question Kelly Bania.
Good morning.
Just about.
Speaker Change: The low income cohorts I think in recent quarters, you've talked about how the fastest growth inside the store was coming from the low income cohorts. I was just curious if you are still seeing that dynamic playing out or if that change.
Changing and I guess that maybe is attributed to your kind of value.
Listening, but just.
Wanted to check in on that and then also just as.
You think about the fiscal 'twenty five plan.
Are you expecting <unk> to get more competitive because it does seem like there's some more.
Speaker Change: Challenges, there and maybe some more value price coming within the <unk> space. So just curious what's in your plan with respect to that.
Yes Kelly.
I guess I would say on the low income consumer we're still seeing.
Some purchasing strength from that consumer like I mentioned previously they are still buying they are just making different purchasing decisions inside the store, but there is still coming to the store.
I wouldn't say, there's any difference.
There with the higher income consumers, we are seeing them accelerate some purchases in certain categories.
I mentioned the <unk>.
New.
Hot Sandwich platform that we launched were having about 85% growth in that category.
It's being driven primarily by the higher income consumers and.
In that category and I think they are trading down from <unk>.
Speaker Change: They are training over to us and so we're seeing some strength there they're also.
More likely to buy the alternative nicotine products. So the pouch products like <unk> and some of the others that you see in the marketplace. Those are those are skewing more higher income so where we're seeing strength on both sides I guess the short answer to the question.
With respect to <unk> as our competitiveness.
It's an interesting question certainly theres been a couple of <unk>.
A larger.
Burger players, who said that they're going to get a little sharper on value.
With some aggressive combo offers and that sort of thing, but I think the.
The restaurant industry is a little bit of a trick bag, because it's primarily a franchise business and a lot of those franchisees don't have places to turn to our other levers to pull to absorb a lot of the operating cost inflation that they've experienced over the last couple of years and Thats why youre seeing menu prices expand as <unk>.
Hi is the half so you're really in that scenario the franchisees have to decide that they can absorb.
The inflation and really take a haircut and their profitability to be able to drop there Sarah restaurant prices.
I really don't anticipate that happening I think youll see what youre starting to see now with some spurts of promotional activity for a month at a time, which is I think what some of these guys have been doing but I don't know that thats very sustainable over the long term given their franchise dynamics.
Yes.
That's very helpful.
Also wanted to just ask about <unk>.
Fuel a little bit just.
Number one how is diesel impacting the fuel margins or how did it in.
In the quarter and then just maybe an update on the fuel arbitrage strategy and the timing of getting that kind of really into motion.
Yes on.
On the diesel side, we've seen a little bit of softness in volume our margin has been been pretty strong hanging in there I don't have the exact number right in front of me, but.
Volume was off a little bit and a lot of that has to do with some softness in construction industry.
It's really kind of dampen some of the demand for diesel fuel overall.
With respect to the upstream procurement activity on fuel.
We are just about ready to.
We began executing on that we're frankly, we're just waiting for paperwork now our filings for all the permits and we just haven't we received verbal approval, but we need the paperwork to codify that before we can start executing.
Some of them some purchases so I'd say its eminent depending on what that paperwork shows.
I'd just add R&R experienced in the quarter in terms of specifically diesel profitability diesels.
Couple of pennies.
More profitable for us on a gallon basis during the quarter and gas was but I don't think thats a significant change from what our experience historically has been.
And one moment for our next question.
Our next question will be coming from Chuck Cerankosky Northcoast Research your line is open.
Good morning, everyone great quarter.
Talk a little bit about logistics over the next 12 to 24 months the company is getting bigger.
Our growth has been considerable any any new Nate need for.
Distribution centers, what might you be doing with trucking and maybe apply it to.
Youre routing and so forth to further streamline costs.
Yes sure.
This point.
Our stores are located and we can supply all of our stores out of our existing three distribution centers that includes the stores and we just recently added in Texas.
So.
We can handle that out of our Joplin DC.
And so we're very comfortable right now with our store footprint and our ability to scale the operation.
Without having to add another dcs at the moment so.
No challenges there and we're doing a lot of.
Work on the it side.
Inside of the supply chain, primarily more on the demand planning side at this point to get a little more sophisticated on how we.
Procure products and bring them into the warehouse as well as the.
Outbound.
How 'bout loads go into our stores so more to come there, but we are definitely up.
Putting a lot of our energy and effort behind that demand planning side of the supply chain.
Yes.
Thank you.
One moment for our next question.
And our next question will be coming from Corey Tarlow of Jefferies. Your line is open.
Great. Thanks.
Darren you mentioned that I think labor hours.
Had been reduced now for I believe eight straight quarters.
How much more opportunity.
Do you think there is to continue to.
Drive efficiency in the stores in this fashion.
Yes Corey.
Corey: That is correct I said eight consecutive quarters of same store labor hour declines.
Built into our plan this year another 1%.
Decrease in same store labor hours, so we expect to to make that happen over the course of the year and I think we have line of sight too.
Fiscal 2006 being able to do the same thing.
So I guess I'll say I'd want to emphasize is that.
This is not just cutting hours.
It has been very strategic.
With our continuous improvement team really analyzing the work thats being done in a store and finding either ways of eliminating that work altogether, we're moving it upstream or outsourcing. It. So we get it out of the store and so we've been very successful at not only taking hours out, which obviously translates into op.
<unk> savings, but also giving hours back in the form of slack.
It makes it a little bit easier for the store store team members to deliver a great guest experience.
Make better food.
And frankly taken a little bit of a stress out of working in the story.
What's been great about it is as we do that the job is easier team member engagement goes up because it's easier our team members get better at their jobs, because they stay longer they don't turnover as much with aon turnover as much we don't spend as much in training and overtime in fact training.
<unk> dollars in the fourth quarter were down almost 19% year over year.
Guest engagement guest satisfaction scores go up so it's really a virtuous cycle.
The root of all of that is taken complexity out of the store and make it easier for our team members to execute so we're really happy with the progress we've made and we still have a decent runway of more improvements to make.
Got it Thats very helpful.
Just wanted to follow up on private label.
There are some recent successes that you've seen within that.
<unk>.
And within your.
Expectations for this year, how are you planning that business. Thank you.
Yeah.
Yes.
Private label continues to be.
Corey: A good contributor for us and and really presents a value opportunity for our guests.
One of the more recent successes as we got into the liquor category with our truss trail vodka and silicon gold Bourbon and actually.
Crossrail vodka has become the number two selling marked in our stores behind cheetos. So that's been a nice success story. The team continues to innovate across the categories. We have about 320 products in the assortment right now with another 20 or so under development.
And the team is continuing to evaluate ways.
Getting into different tiers of private label, whether that'd be a more premium offer or a more value oriented offers so more to come on that but.
Teams actively working on evolving our private label portfolio to the next level.
One moment for our first next question.
Our next question will be coming from John Royall of J P. Morgan Your line is open.
Hi, good morning, Thanks for taking my question.
The first one is can you talk about how we should think about the mix of build versus acquisition.
And the 100 plus store additions in fiscal 'twenty five should we assume from the increase in Capex that new store portion.
Is it accelerating or just any color on that would be helpful.
Yes, good morning, John This is Steve.
Our assumption at the moment is going to be 50 50, right in terms of units.
Would shade, a higher proportion of total new units.
25 towards new builds and the proportion that we had.
In FY <unk>.
<unk> four so there is a little more PP&E spending associated with 50, new units versus the <unk> 42.
That we had in FY 'twenty four but we also remember are continuing to remodel stores associated with all the acquisition activity and so there's a lag between closing and acquisition and actually putting capital into those stores.
Corey: Slightly more ntis year over year, but theres more remodel activity as well kind of baked into that starting assumption around.
And one moment for our next question.
And our next question will be coming from Irene <unk> of RBC capital markets. Your line is open.
Thanks, Nick and good morning, just a couple of follow ups on the private labor piece can you update us on current penetration. Please.
Yeah.
Yes, I agree.
Current penetration from a gross profit dollar perspective is right around 10%.
And if we exclude subcategories that we don't participate in like tobacco and beer that number goes up to about 13% of the grocery and general merchandise category. So that's that's where our penetration is at this moment.
That's great. Thank you.
And then.
And just tying together the innovation piece with the consumer spending piece as you think about sort of F. 'twenty five 'twenty six and the new product development pipeline to what degree are you taking into account some of the pressure on consumer pocketbooks.
If you will offer the right types of products by the current environment.
Yes, we really spend most of our time innovating is on prepared foods and on private label. So both of those categories kind of.
Just naturally represent a very good value proposition to the gas, especially relative to.
Corey: International brand alternatives, Orange and <unk> as the case may be so what.
What we do is we focus on what the guest is looking for from a product perspective first we got to have the right product at the right level of quality and then we price it appropriately in our in our pricing.
And just as a matter of normal course tends to be positioned as a much better value versus other alternatives.
We're certainly conscious of the value, but we're not overly trying to engineer the product.
To be cheap frankly, we're trying to make it as good as we possibly can.
Because we do believe we win with quality and then we can price accordingly toward the value proposition.
Okay.
One moment for our next question.
And our next question will be coming from John Lawrence of Bitch Benchmark. Your line is open.
Great Thanks, guys great quarter.
Would you speak to a little bit about Casey rewards and talk about.
The difference in spend for somebody that's really engaged on the rewards program versus.
Somebody that's not and just how that has changed.
So over the last couple of years, we'll start there.
Yes, John with rewards.
I guess, where I'd start is about 40% of our guests are using some form are using the rewards programs are 40% of our transactions have a rewards account tied to it.
They visit more frequently and they spend more when they come they spent about 15% more when they visit.
<unk> is a non rewards members. So it's certainly a cruise or benefit to get more and more people into that rewards program.
And we've been on a cadence over the last really almost since the inception of <unk>.
100000, new members per months, so give or take a little over $1 billion, a year, who will comment on the rewards program and with that engagement rate is about 40%.
That's a pretty good number we're still trying to grow that but that's where we stand.
As we sit here today.
Okay.
Okay.
One moment for our next question.
And our next question will be coming from Bonnie Herzog of Goldman Sachs. Your line is open.
Bonnie Lee Herzog: Great. Thank you good morning.
I had a question on your insight and margins.
John expansion last year, but are guiding margins.
Margins should be flat this year and I know you touched on cheese costs, but hoping you could just highlight any other.
Headwind or tailwind that we should be mindful of this next fiscal year.
Sure Hey, good morning, this is Steve.
On the grocery side of the business specifically.
I think there is.
Not a lot of.
Pressure on that on that margin again, I think we referenced earlier thats a contractual business for us we know what those cost increases are going to be it's a couple of hundred.
<unk> points generally across that category, we've adjusted retails. Accordingly, So I think we priced to preserve margin on the grocery side.
And broadly speaking on the prepared foods side.
Cheese is a little bit of a headwind yes.
I think the aggregation.
Our team is a little bit of a tailwind so beef beef is up for us, but almost all of the other proteins are are a modest tailwind. So I think that kind of washes washes out based on what we know now and have you end up with generally speaking comparable comparable margins year over year.
Okay. That's helpful and I know a lot's been asked already but maybe a big picture question from.
From me Darin and I guess, Steve as you guys sit here today, where do you see the biggest opportunity for upside to your guidance.
25, and as well as maybe where you see the biggest risk to your business. Thanks.
Yes.
I'd say the biggest upside do we have is on the store growth side I mean, we feel good about the entire business, we have a lot of momentum across the board, but I think.
As the industry continues to be challenged.
More operationally as we as we get into a more normal operating environment. Those pressures are continuing to mount on smaller operators.
We see that in terms of the velocity of potential M&A opportunities and so I would say probably the single biggest opportunity we have.
If we can transact on some larger opportunities.
Give us a step change in our stock price and of course, all the benefits that come with that.
From a risk standpoint I.
I would say that I feel really good about where we're at with the consumer I think the consumer health is probably the single biggest risk of that that's a risk for everyone.
In retail but.
Bonnie Lee Herzog: Because we've been able to maintain a strong value proposition and preserve margins at the same time I feel really good that.
Bonnie Lee Herzog: So we stand to benefit from that risk actually.
Bonnie Lee Herzog: Yes.
Bonnie Lee Herzog: Consumer was getting a little bit tighter will probably be more of a beneficiary of that.
Impacts then benefactor of it.
Speaker Change: And Im showing no further questions I would now like to turn the conference back to Darren <unk> for closing remarks.
Darren M. Rebelez: Okay. Thank you for taking the time today to join US on the call I'd also like to thank our team members once again for their contributions in delivering another record year have a great day everyone.
Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.
Darren M. Rebelez: Okay.
Darren M. Rebelez: Okay.
Okay.
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