Q1 2025 Casey's General Stores Inc Earnings Call
And there'll be a question and answer session to ask a question during the session need to press star one on your telephone you will then hear an automated message advising your hand is raised to withdraw your question. Please press star. One again. Please be advised today's conference is being recorded I would now like to turn the conference over to your Speaker today, Brian Johnson Senior Vice President Investor Relations and business development. Please go ahead.
Darren Rebelez: Now let's discuss the results from the quarter. Deluted EPS finished at $4.83 per share, but 7% increased from the prior year. The company generated $180 million in income, an increase of 6%, and $346 million in EBITDA, an increase of 9% from the prior year. The first quarter was another great example of the strength and resiliency of the case's business model, as we were able to expand gross profit dollars while growing the storebiz. Inside the store, we saw continued strength with our prepared food innovation, as well as margin expansion driven primarily by the grocery and rental merchandise category.
Good morning, and thank you for joining us to discuss the results of our first quarter ended July 31, 2024, I'm, Brian Johnson Senior Vice President Investor Relations and business development with me today are Dan rebel as Board Chair, President and Chief Executive Officer, and Steve Bramlage, Our Chief Financial Officer.
Speaker Change: 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 1095.
Darren Rebelez: On the fuel side, the team is doing a tremendous job balancing volume in margin, with positive, safe store gallons combined fuel margins over 40 cents per gallon. We continue to show that our three-year strategic plan is credible and achievable, and that our team is doing a great job both inside and outside the store.
Speaker Change: These forward looking statements include any statements relating to the ability to consummate the <unk> transaction the potential impact of the confirmation of the <unk> transaction on the relationships with third parties expectations for future periods possible or assumed future results of operations financial conditions liquidity and related sources our needs.
and a few minutes later, I'll be back in a minute.
Speaker Change: Good day and thank you for standing by. Welcome to the first quarter F.I. 2025 Casey's Journal of Storage, earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, they'll be a question and answer session.
Speaker Change: to ask a question during the session lead to press star 1 on your telephone.
Darren Rebelez: I would now like to go over our results and share some of the details in each of the categories. Inside, same-store sales were up 2.3% for the first quarter, or 7.9% on a two-year stack basis, for the average margin of 41.7%. Same-store prepared food and dispensed beverage led away, as sales were up 4.4%, or 10.6% on a two-year stack basis, for the average margin of 58.3%. Hot sandwiches continued its momentum from the fourth quarter, and bakery also performed well. Margin was comparable to the prior year, as favorability and waste was offset by a modest cheese headwind.
Brian Johnson: You'll then hear an automated message advising your hand is raised. To withdraw your question, please press star one again. Please be advised for these conferences being recorded. I would like to end the Comps over your speaker today. Brian Johnson, Senior Vice President, Investor Relations and Business Development, please go ahead.
Speaker Change: The company's supply chain business, and integration strategies plans and synergies and growth opportunities and performance at our stores. 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.
Brian Johnson: Good morning, and thank you for joining us to discuss the results from our first quarter-ended July 31, 2024. I'm Brian Johnson, the Senior Vice President, the Investor Relations and Business Development. With me today are Darren Rebelez, board chair, president, chief executive officer and Steve Bramlage, chief financial officer.
Speaker Change: <unk>, but not limited to the integration of the recent acquisitions, our ability to execute on our strategic plan or to realize benefits from our strategic plan the impact 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.
Speaker Change: Before we begin, I would remind you that certain statements made by us during this investor call and they constitute board-looking statements within the meaning of the private securities litigation reform act of 1995.
Speaker Change: Ports on Form 10-Q, as filed with the SEC and available on our website.
Darren Rebelez: Same-store grocery and general merchandise sales were 1.6%, or 6.9% on a two-year stack basis, for the average margin of 35.4%, an increase of approximately 130 basis points from the prior year, primarily due to good costs of goods management. We saw a positive momentum in the category, notably in both non-alcoholic and alcoholic beverages, specifically liquor. Our 1,500 liquor licenses continued to be a strategic advantage for cases. For fuel, same-store gallons sold were up 0.7%, with a fuel margin of 40.7 cents per gallon. We continued to perform our geographic region on volume, as of its fuel gallon sold. Data shows the mid-continent region down approximately 5% in the quarter, indicating that we are taking share in the category.
Speaker Change: These four looking statements include any statements relating to the ability to eliminate the fight's transaction.
Speaker Change: 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.
Speaker Change: The potential impact of the transformation of the facts, transaction on the relationship with the third part of us.
Speaker Change: Expectations for future periods
Speaker Change: Possible or assumed future results of operations, financial conditions, liquidity and related sources or needs, the company supply chain, business and integration strategies, plans and synergies and growth opportunities and performance at our stores.
Speaker Change: A reconciliation of non-GAAP to GAAP financial measures referenced in this call as well as a detailed breakdown of the operating expense increase for the first quarter can be found on our website at www Dot cases dot com under the Investor Relations link.
Speaker Change: There are a number of known and unknown risks on certainties and other factors that make cause our actual results to defer materially and from any feature results of express or imply by those board-looking statements.
Speaker Change: But that said I would now like to turn the call to Darren to discuss our first quarter results Derrick.
Darren: Thanks, Brian and good morning, everyone. We're excited to discuss the first quarter results in a moment first however, I want to thank our team for their hard work and dedication, which enable us to start the fiscal year off strong.
Speaker Change: including but not limited to the integration of the recent acquisitions. Our ability to execute on our strategic plan, or to realize benefits from a strategic plan.
Speaker Change: The impact and duration of the conflict in Ukraine in related governmental actions, as well as other risks on certainties and factors which are described in our most recent in-report on form 10k and quarter-leports on form 10k, as filed with the SEC in the Vaila on our website.
Speaker Change: Also look forward to welcoming the <unk> team to the Casey's family when we will discuss that later in the call.
Darren Rebelez: Our fuel team is doing a tremendous job balancing volume growth and margin, and the results continue to show it. We prudently managed operating expenses, with an increase of just 0.7% on the same-store, excluding credit card fee basis. Our continuous improvement team is doing a great job identifying areas to be more efficient, and it shows the same-store labor hours were down 2%.
Speaker Change: As the school year begins Casey's is proud to see projects funded by its cash for classrooms grants and action.
Speaker Change: Last year, we donated over $1 million in grants to schools across our footprint.
Speaker Change: Any forward-looking statements made during this call reflect our current views as of today with respect to future events and cases, disclaims, any intention or obligation to update or revise forward-looking statements, whether as a result of new information, future events or otherwise.
Speaker Change: We are grateful to our team members and guests for raising nearly $600000 in this August campaign.
Speaker Change: This will allow us to continue to have a positive impact on schools and children in our community.
Steve Bramlage: I now like to turn the call over to Steve to discuss the financial results from the first quarter.
Speaker Change: A reconciliation of non-gap to get financial measures referenced in this call, as well as a detailed breakdown of the operating expense increase for the first quarter. Can be found on our website at www.cases.com under the Investor Relations blink.
Steve Bramlage: Steve? Thank you, Darren. Good morning. I'm very grateful for the hard work of our team during the quarter. It's been a great start to the second year and our three-year strategic plan, and our first quarter results both well for a very solid fiscal 2025. Total revenue for the quarter was $4.1 billion, and an increase of $228 million, or 5.9% from the prior year, due primarily to higher inset sales, as well as higher fuel gallons sold, personally offset by lower retail fuel prices. Results were also favorably impacted by operating approximately 5% more stores on a year-over-year basis.
Speaker Change: Now, let's discuss the results in the quarter.
Speaker Change: Diluted EPS finished at $4 83 per share a 7% increase from the prior year.
Speaker Change: The company generated $180 million of net income an increase of 6% and $346 million in EBITDA, an increase of 9% from the prior year.
Speaker Change: But that said, I would now like to turn the call of Darren to his guess or first quarter results. Dan. Thanks Brian, and good morning everyone. We're excited to discuss the first quarter results in a moment. First however, I wanted to thank our team for their hard work and dedication, which enabled us to start the physical year off strong.
Speaker Change: The first quarter was another great example of the strength and resiliency of the cases business model as we are.
Speaker Change: We're able to expand gross profit dollars, while growing the store base.
Speaker Change: Inside the store, we saw continued strength with our prepared food innovation as well as margin expansion driven primarily by the grocery and general merchandise category.
Speaker Change: I also look forward to welcoming the Fikes team to the KC's family, and we'll discuss that later in the call.
Speaker Change: As a school year begins, T.C. is proud to see projects funded by its cash for classrooms, grants, and action.
Steve Bramlage: Total inside sales for the quarter were $1.47 billion, an increase of $104 million, or 7.6% from the prior year. For the quarter, prepared food and dispensed beverage sales rose by $32 million to $405 million, an increase of 7.8%. Grocery and general merchandise sales increased by $72 million to $1.07 billion, an increase of 7.2%. As a reminder, we're lapping a $4.9 million, one-time benefit related to an adjustment we made to the Casey's Rewards program in the prior year. In the quarter, this negatively impacted both prepared food and dispensed beverage sales by approximately 140 basis points and margin by approximately 60 basis points.
Speaker Change: On the fuel side. The team is doing a tremendous job balancing volume and margin with positive same store gallons combined with fuel margins over 40 per gallon.
Speaker Change: Last year, we donated over $1 million in grants to schools across our footprint.
Speaker Change: Regretful to our team members and guests for raising nearly $600,000 in this August campaign.
Speaker Change: We continue to show their three year strategic plan is credible and achievable and our team is doing a great job both inside and outside the store.
Speaker Change: This will allow us to continue to have a positive impact on schools and children in our community.
Speaker Change: I would now like to go over our results and share some of the details in each of the categories.
Speaker Change: Now let's discuss the results from the border.
Speaker Change: Inside same store sales were up two 3% for the first quarter or seven 9% on two year stack basis with an average margin of 41, 7%.
Speaker Change: Deluded EPS, finished at $4.83 per share, but 7% increase from the prior year.
Speaker Change: The company generated $180 million in that income and increased of 6% and 346 million in the end of an increase of 9% from the prior year.
Speaker Change: Same store prepared food and dispense beverage led the way as sales were up four 4% or 10, 6% on a two year stack basis with an average margin of 58, 3%.
Speaker Change: The first quarter was another great example of the strength and resiliency of the Casey's business model, as we were able to expand gross profit dollars while growing the store base.
Speaker Change: Hot sandwiches continued its momentum from the fourth quarter and bakery also performed well.
Steve Bramlage: Retail fuel sales were up $128 million in quarter; an 8% increase in fuel gallons was partially offset by a 3% decline in the average retail price. The average retail price of fuel during this period was $3.31 a gallon compared to $3.40 a year ago. We define gross profit as revenue less cost of goods sold, but excluding depreciation and amortization. 8% gross profit of $955 million in the quarter, an increase of $78 million, or 8.8% from the prior year. This is driven by both higher inside gross profit of $57.9 million, or 10.4%, as well as higher fuel gross profit of $17.6 million, or 5.9%.
Speaker Change: Inside the store, we saw continuous strength with our prepared food innovation, as well as margin expansion driven primarily by the grocery and general merchandise category.
Speaker Change: Margin was comparable to the prior year as favorability in waste was offset by a modest cheese headwind.
Speaker Change: Same store grocery and general merchandise sales were up one 6% or six 9% on a two year stack basis with an average margin of 35, 4% in.
Speaker Change: On the fuel side, the team is doing a tremendous job balancing volume and margin, with positive faints for a gallons, combined with fuel margins over 40 cents per gallon.
Speaker Change: An increase of approximately 130 basis points from the prior year, primarily due to good cost of goods management.
Speaker Change: We continue to show that our three-year strategic plan is credible and achievable and our team is doing a great job both inside and outside the store.
Speaker Change: We saw positive momentum in the category.
Speaker Change: I would now like to go over our results and share some of the details in each of the categories.
Speaker Change: And both non alcoholic in alcoholic beverages specifically.
Speaker Change: Our 500 liquor licenses continue to be a strategic advantage for cases.
Speaker Change: Inside same store sales, we're up 2.3% for the first quarter, or 7.9% on two-year stack basis for the average margin of 41.7%.
Speaker Change: For fuel same store gallons sold were up 7% with a fuel margin of 47 per gallon.
Speaker Change: St. Sir prepared food and dispense beverage, led away, that sales were up 4.4% or 10.6% on a two-year stack basis.
Speaker Change: We continue to outperform our geographic region on volume.
Steve Bramlage: Inside gross profit margin was 41.7%, up 110 basis points from a year ago. Prepared food at dispensed beverage margin was 58.3%, up 10 basis points from prior year. The category margin benefited from lower waste, but did experience a modest headwind on cheese, which was $2.9 per pound in the quarter compared to $2.4 per pound last year. That's an increase of 2% or approximately 13 basis points. The gross tree in general merchandise margin was 35.4%, an increase of 130 basis points from the prior year. And it changes primarily due to proactive cost of goods management. Fuel margin for the quarter was 40.7 cents per gallon, down about a penny per gallon from the prior year.
Speaker Change: As opus fuel gallon sold.
Speaker Change: Data shows the mid continent region down approximately 5% in the quarter, indicating that we are taking share in the category.
Speaker Change: for the average margin of 58.3%.
Speaker Change: Hot Sandwiches continued its momentum from the fourth quarter and bakery also performed well.
Speaker Change: Our field team is doing a tremendous job balancing volume growth and margin and the results continue to show it.
Martin: Martin was comparable to the prior year as favorite bills in waste was offset by a modest cheese henland.
Speaker Change: We prudently managed operating expenses was an increase of just <unk>, 7% on a same store excluding credit card fee basis.
Speaker Change: seems to have a grocery and general merchandise sales, rub 1.6%, or 6.9% on two-year stack bases, put an average margin of 35.4%. An increase of approximately 130 basis points from the prior year primarily due to good cost of goods management.
Speaker Change: Our continuous improvement team is doing a great job identifying areas to be more efficient and it shows the same store labor hours were down 2%.
Speaker Change: I would now like to turn the call over to Steve to discuss the financial results from the first quarter Steve.
Speaker Change: Thanks for watching!
Speaker Change: We saw a positive momentum in the category, not a bullying in both non-alcoholic and alcoholic beverages.
Steve: Thank you Darren and good morning, I'm very grateful for the hard work of our team during the quarter. It's been a great start to the second year in our three year strategic plan in our first quarter results bode well for very solid fiscal 2025.
Speaker Change: specifically like me.
Speaker Change: are 1500 liquor licenses continue to be a strategic advantage for cases.
Speaker Change: for fuel, same store down sold, we're up 0.7% with fuel margin of 40.7 cents per gallon.
Steve: Total revenue for the quarter was $4 1 billion.
Steve Bramlage: Fuel gross profit benefited by $4.8 million from the sale of rents. That's down 15.4 million from the same quarter in the prior year. Total operating expenses were up 8.7% or $48.6 million in the quarter, which was lower than we expected it to do the strong operating performance in the stores. Approximately 5% of the total operating expense increases due to unit growth, as we operated the 138 more stores than the prior year. Approximately 1% is related to one-time deal costs pertaining to the previously disclosed bikes acquisition. Higher insurance expense, including health, property and casualty, workers' compensation, and others, contributed approximately 2% of the increase.
Speaker Change: An increase of $228 million or five 9% from the prior year due primarily to higher inside sales as well as higher fuel gallons sold partially offset by lower retail fuel price.
Speaker Change: We continue to perform our geographic region on volume.
Speaker Change: As of this field, gallon sold.
Speaker Change: Data shows the mid-continent region down approximately 5% in the quarter, indicating that we are taking here in the Cavalry.
Speaker Change: Results were also favorably impacted by operating approximately 5% more stores on a year over year basis.
Speaker Change: Our field team is doing a tremendous job in boling, broken margin and the results continue to show it.
Speaker Change: Total inside sales for the quarter were $1 $47 billion at.
Speaker Change: We prettyly managed operating expenses with an increase of just 0.7% on a same store excluding credit card fee basis.
Speaker Change: An increase of $104 million or seven 6% from the prior year.
Speaker Change: Our continuous improvement team is doing a great job by identifying areas to be more efficient, and it shows the same store labor hours were down 2%.
Speaker Change: For the quarter prepared food and dispensed beverage sales rose by $32 million to $405 million, an increase of eight 7% in grocery and general merchandise sales increased by $72 million to one 7 billion an increase of seven 2%.
Speaker Change: I'd now like to turn the call over to Steve to discuss the financial results from the first quarter. Steve?
Steve: Thank you, Darren, and good morning. I'm very grateful for the hard work of our team during the quarter. It's been a great start to the second year in our three-year strategic plan and our first quarter results both well for a very solid fiscal 2025.
Steve Bramlage: Same-store employee expense accounted for approximately 1% of the increase, as modest increases in wage rates were partially offset by the reduction in same-store hours. Depreciation in the quarter was $94.4 million; that's up $11.5 million versus the prior year. Primarily due to operating more stores. Net interest expense was $14.1 million in the quarter; that's up $1.6 million versus the prior year. Primarily due to lower interest income as we funded several acquisitions out of cash on hand, and we had purchased shares in the prior year. The effective tax rate for the quarter was 24.1% compared to 23.6% in the prior year.
Speaker Change: As a reminder, we're lapping a $4 $9 million one time benefit.
Weighted to an adjustment we made to the Casey's rewards program in the prior year.
Steve: Total revenue for the quarter was $4.1 billion and increased of $228 million or $5.9% from the prior year. Do primarily to higher-inside sales, as well as higher fuel gallons sold. Personally offset by a lower retail fuel price.
Speaker Change: In the quarter this negatively impacted both prepared food and dispense beverage same store sales by approximately 140 basis points in margin by approximately 60 basis points.
Speaker Change: Retail fuel sales were up $128 million in the quarter as an 8% increase in fuel gallons sold was partially offset by a 3% decline in the average retail price.
Steve: Results were also favorably impacted by operating approximately 5% more stores on a year over your bases.
Steve: Total inside sales for the quarter will $1.47 billion and increase of $104 million for 7.6% from the prior year.
Speaker Change: The average retail price of fuel during this period was $3.31 a gallon compared to $3 40, a year ago.
Steve Bramlage: Any increases driven by a one-time benefit in the prior year, that was recorded due to an income tax rate reduction in Nebraska. Net income was up versus the prior year to $180.2 million, an increase of 6.5%. EBITDAF for the quarter was $345.8 million compared to $316.9 million a year ago, and that's an increase of 9.1%. Our balance sheet is in excellent condition, and it's given us the ability to seamlessly make the pending acquisition of bikes. On July 31st, we had total available liquidity of $1.2 billion. In our leverage ratio calculated in accordance with our senior nets is 1.5 times.
Steve: For the quarter, prepare food and dispense to beverage sales rose by $32 million to $405 million.
Speaker Change: We define gross profit as revenue less cost of goods sold but excluding depreciation and amortization.
Steve: and increase of 8.7% and grocery and general merchandise sales increased by $72 million to $1.07 million and increase to $7.2%.
Speaker Change: <unk> gross profit of $955 million in the quarter, an increase of $78 million or eight 8% from the prior year.
Speaker Change: This is driven by both higher inside gross profit of $57 $9 million or 10, 4% as well as higher fuel gross profit of $17 6 million or five 9%.
Steve: As a reminder, we're laughing a $4.9 million one-time benefit.
Steve: Related to an adjustment we made to the Casey's rewards program in the prior year.
Steve: and the quarter this negatively impacted both prepare for and dispense of average saints to her sales by approximately 140 basis points and margin by approximately 60 basis points.
Speaker Change: <unk> gross profit margin was 41, 7% up 110 basis points from a year ago.
Speaker Change: Prepared food and dispense beverage margin was 58, 3% up 10 basis points from prior year.
Steve: retail fuel sales were up $128 million in quarter as an 8% increase in fuel gallons. So it was partially all set by a 3% decline in the average retail price.
Steve Bramlage: For the quarter, net cash generated by operating activities of $281 million less purchases of property and equipment of $100 million resulted in the company generating $181 million of free cash flow. This compares generating $160 million in the prior year. At the August meeting, the Board of Directors voted to maintain the quarterly dividend at $0.50 per share. Investing in EBITDAF and ROIC accretive growth investments remains our primary capital allocation priority, and with the pending acquisition of bikes, we do not expect to repurchase shares until the leverage ratio is in line with our long-term target of two times.
Speaker Change: The category margin benefited from lower waste, but did experience a modest headwind on cheese, which was $2 nine per pound in the quarter.
Steve: The average retail price of fuel during this period was $3.31 a gallon compared to $3.40 a year ago.
Speaker Change: Impaired to $2.04 per pound last year, that's an increase of 2% or approximately 13 basis points.
Steve: We define Gras Profit as revenue, less cost of this sold, but excluding depreciation and an amortization.
Speaker Change: The grocery and general merchandise margin was 35, 4%.
Speaker Change: An increase of 130 basis points from the prior year.
Steve: BTC gross profit of $955 million in the quarter, and increase of $78 million or $8.8% from the prior year.
Speaker Change: The change was primarily due to proactive cost of goods management.
Speaker Change: Fuel margin for the quarter was <unk> 47 per gallon down about a penny per gallon from the prior year.
Steve: This is driven by both higher and side-grows profit of $57.9 million or $10.4 per cent. As well as higher fuel-grows profit of $17.6 million or $5.9 per cent.
Speaker Change: Fuel gross profit benefited by $4 $8 million from the sale of brands.
Steve Bramlage: We are not updating our previously communicated fiscal year guidance until after the bikes transaction closes, with the exception of our store growth target. We now expect store growth to be approximately 207 units for the fiscal year, and that's up from our previously disclosed 100 units. We will make some modest adjustments to our current new build schedule to ensure that we can expeditiously capture the expected synergies from this transaction via remodeling projects. As a reminder, the bikes transaction has a gross purchase price of $1.145 billion with approximately $165 million in acquired tax benefits for a net purchase price of $980 million.
Speaker Change: Down $15 4 million from the same quarter prior year.
Steve: In Cyprus profit margin was 41.7% up 110 basis points from a year ago.
Speaker Change: Total operating expenses were up eight 7% were $48 $6 million in the quarter, which was lower than we expected it to be due to strong operating performance in the stores.
Steve: Prepared Food and Spence Beverage margin was 58.3% of 10 basis points from prior year.
Speaker Change: Approximately 5% of the total operating expense increase is due to unit growth as we operated the 138 more stores than the prior year.
Speaker Change: The category margin benefited from lower waste, but did experience a modest headwind on cheese, which was $2.9 per pound in the quarter compared to $2.4 per pound last year. That's an increase of 2% or approximately 13 basis points.
Speaker Change: Approximately 1% is related to one time deal costs pertaining to the previously disclosed <unk> acquisition.
Speaker Change: Higher insurance expense, including health property, and casualty worker's compensation and others contributed approximately 2% of the increase.
Speaker Change: The grocery and general merchandise margin was 35.4% an increase of 130 base points from the prior year and it changes primarily due to proactive cost of goods management.
Steve Bramlage: And that transaction will be financed through a combination of balance sheet cash and external finance. The transaction includes $198, Cefko convenience stores, with 148 of them being in Texas and the remaining 50 in Alabama, Florida, and Mississippi. The financial performance includes approximately 400 million a few gallons sold approximately $400 million and inside sales and a generated 2023 pro forma adjust to be the top of $89 million. We expect the company's pro forma leverage level to reach approximately 2.4 times at closing, and that's based on our current leverage calculation in our notes. We will quickly reduce this to approximately two times within the first 12 months of closing through a combination of modest but prudent de-leveraging, growth, and synergy capture.
Speaker Change: Same store employee expense accounted for approximately 1% of the increase is modest increases in wage rates were partially offset by the reduction in same store hours.
Speaker Change: Fuel margin for the quarter was 40.76 per gallon down about a penny per gallon from the prior year.
Speaker Change: Depreciation in the quarter was $94 4 million, that's up 11 $5 million versus the prior year.
Speaker Change: fuel gross profit benefited by $4.8 million from the sale of rent. That's down $15.4 million from the same quarter in the prior year.
Primarily due to operating more stores.
Speaker Change: Net interest expense was $14 $1 million in the quarter up $1 6 million versus the prior year.
Speaker Change: Total operating expenses were up 8.7% for $48.6 million in the quarter, which was lower than we expected it to be due to strong operating performance in the stores.
Speaker Change: Primarily due to lower interest income as we funded several acquisitions out of cash on hand, and we have purchased shares in the prior year.
Speaker Change: Approximately 5% of the total operating expense increases due to unit growth as we operate at the 138 more stores than the prior year.
Speaker Change: The effective tax rate for the quarter was 24, 1% compared to 23, 6% in the prior year.
Speaker Change: The increase was driven by a one it was driven by a onetime benefit in the prior year that was recorded due to an income tax rate reduction in Nebraska.
Speaker Change: Approximately 1% is related to one-time deal costs pertaining to the previously disclosed by exact position.
Steve Bramlage: Our results for August were as follows. Both inside and fuel, same per sales, were within the range of our annual outlook. CPG was near $0.40 per gallon. Current cheese costs remain unfavorable versus the prior year by about 10%. In our second quarter, total operating expense expectation is as follows. We expect to be within our annual range, and that will be inclusive of several million dollars of certain one-time deal costs that we will incur during the quarter associated with the Fikes transaction.
Speaker Change: Higher Insurance expense, including health, property and casualty, workers compensation and others, contributed approximately 2% of the injuries.
Speaker Change: Net income was up versus the prior year to $182 million, an increase of six 5% EBITDA for the quarter was $345 $8 million compared to $316 9 million a year ago, and that's an increase of nine 1%.
Speaker Change: The same stormfully expense accounted for approximately 1% of the increase as modest increases in wage rates, were partially offset by the reduction in same surroundings.
Speaker Change: Alex sheet is in excellent condition, and it's given us the ability to seamlessly make depending acquisition of bikes.
Speaker Change: To appreciation in the quarter was 94.4 million dollars, that's up 11 and a half million versus the prior year, primarily due to operating more stores.
On July 31, we had total available liquidity of $1 2 billion and our leverage ratio calculated in accordance with our senior notes is one five times.
Speaker Change: Net interest expense was $14.1 million in the quarter of sub 1.6 million versus the prior year. Primarily due to lower interest income as we fund it several acquisitions out of cash on hand and we have purchased shares in a prior year.
Darren Rebelez: We now let's turn the call back over to Darren. Thanks to you. I'd like to thank the entire Cases team for another strong quarter. We're off to the great start of fiscal year, and the team is doing an outstanding job on executing on the three-year strategic plan. One of the pillars of our strategic plans to grow the number of units. The initial target of at least 350 new units is expected to be accomplished nearly 18 months early with the closing of the announced acquisition of Fikes and Encephco community stores. As we noted in our announcement, these are highly strategic and high-quality assets in a great geography in Texas, as well as further in the South.
Speaker Change: For the quarter net cash generated by operating activities of $281 million less purchases of property and equipment of $100 million resulted in the company generating $181 million in free cash flow.
Speaker Change: The effect of tax rate for the quarter was 24.1%, compared to 23.6% in the prior year. Any increase is driven by a one time benefit in the prior year that was recorded due to an income tax rate reduction in the brass tip.
Speaker Change: This compares to generating $160 million in the prior year.
Speaker Change: At the August meeting the board of directors voted to maintain the quarterly dividend at <unk> 50 per share.
Naren Kambuzov: Naren Kambuzov.
Speaker Change: Investing in EBITDA and ROIC accretive growth investments remains our primary capital allocation priority and with the pending acquisition of <unk>, we do not expect to repurchase shares until the leverage ratio was in line with our long term target of two times.
Speaker Change: First of the prior year to $180.2 million in increase of 6.5%. Even though for the quarter was 345.8 million dollars compared to 316.9 million dollars a year ago and that's an increase of 9.1%.
Darren Rebelez: We're excited about integrating the business and welcoming the Fikes team into the Casey's family. In addition, we're raising our three-year store growth target to approximately 500 stores. Another pillar of the plan is to accelerate the food business. The hot sanders line up that launched earlier in calendar 2024 continues to drive growth as the category was up approximately 70% in the quarter. We brought back a popular promotion for the summer with 99 cent fountain drinks, and the results were strong, with cold dispensed beverages outpacing the category's growth. Our prepared foods team continues to innovate and create craveable foods at the right price points to provide Casey's guests with products that they want.
Speaker Change: We are not updating our previously communicated fiscal year guidance until after the <unk> transaction closes with the exception of our store growth target.
Speaker Change: and I'll see you in the next one condition and it's given us the ability to seamlessly make the pending acquisition of fikes.
Speaker Change: On July 31st, we had total available liquidity of $1.2 billion in our leverage ratio calculated in accordance with our senior net.
Speaker Change: We now expect store growth to be approximately 270 units for the fiscal year and that's up from our previously disclosed 100 units.
Speaker Change: is 1.5 times.
Speaker Change: We will make some modest adjustments to our current newbuild schedule to ensure that we can expeditiously capture the expected synergies from this transaction via remodeling projects.
Speaker Change: For the quarter net cash generated by operating activities of $281 million, less purchases of property and equipment of $100 million resulted in the company generating $181 million dollars of free cash fund.
Speaker Change: As a reminder, the <unk> transaction has a gross purchase price of $1 145 billion.
Speaker Change: This compares generating a hundred and sixty million dollars in a prior year.
Speaker Change: With approximately $165 million and acquire tax benefits for a net purchase price of $980 million and that transaction will be financed through a combination of balance sheet cash and external financings.
Darren Rebelez: The third pillar of our strategic plan is to enhance operational efficiency. Our continues improvement team working with store operations is delivering great results. The first quarter marked a ninth consecutive quarter with a reduction in same-store labor hours. These reductions are the result of simplifying the operation and removing non-value-added work from the stores.
Speaker Change: At the August meeting, the board of directors voted to maintain the quarterly dividend at 56 per share.
Speaker Change: Investing in EBITDA, an ROSC creative growth investments, remains our primary capital allocation priority, and with the pending acquisition of fights, we do not expect to re-purchase shares until the leverage ratio is in line with our long-term target of two times.
Speaker Change: The transaction includes a 198 <unk> convenience stores with 148 of them being in Texas, and the remaining 50 in Alabama, Florida and Mississippi.
Darren Rebelez: We're excited about the impact this is having on our guest experience, because our overall guest satisfaction scores improved 320 basis points over the same period last year. last year. On the fuel side of the business, I'm extremely proud of the team's ability to balance fuel gallons with gross profit dollars. Growing saves for gallons while posting a cents per gallon above 40 cents is a testament to the team and the tools we have in place. During the quarter, we also released our fourth annual Sustainability Report in July, which is available on our website. Our team continues to make progress on making cases become a more sustainable business.
Speaker Change: We are not updating our previously communicated fiscal year guidance until after the fight's transaction closes with the exception of our store growth target.
Speaker Change: The financial performance includes approximately $400 million of fuel gallons sold approximately $400 million in inside sales and have generated a 2023 pro forma adjusted EBITDA of $89 million.
Speaker Change: We now spent store growth to be approximately 270 units for the fiscal year and that's up from our previously the fiscal year and that's up from the fiscal year.
Speaker Change: We expect the company's pro forma leverage level to reach approximately two four times at closing net based on our current leverage calculation in our notes.
Speaker Change: We will make some modest adjustments to our current new build schedule to ensure that we can expeditiously capture the expected synergies from this transaction via Ramonlin projects.
We will quickly reduce this to approximately two times within the first 12 months of closing through a combination of modest but prudent deleveraging growth and synergy capture.
Speaker Change: As a reminder, the FIX transaction has a gross purchase price of $1.145 billion, with approximately $155 million and a quarter tax benefits.
Darren Rebelez: We're excited to share our sustainability journey with our shareholders.
Speaker Change: Our results for August were as follows.
Unknown Executive: We'll now take your questions. Thank you, ladies and gentlemen. If you have a question or a comment at this time, please press star 1-1 on your telephone. If your question has been answered, you were seeing with yourself from the queue. Please press star 1-1 again. And we also ask that you limit yourself to one question and one follow-up. We'll pause for a moment while we compile our Q&A roster. Our first question comes from Michael Montani with Evercore ISI. Your line is open. Michael, your line is open. You can ask your question. Yes, hi. Thank you for taking the question.
Speaker Change: Inside and fuel same store sales were within the range of our annual outlook.
Speaker Change: for a net purchase price of $980,000,000 and a transaction will be financed through a combination of balance sheet cash and external finance sense.
Speaker Change: CPG was near 40 per gallon.
Speaker Change: <unk> cheese costs remain unfavorable versus the prior year by about 10%.
Speaker Change: The transaction includes 198 Cepco convenience stores with 148 of them being in Texas and the remaining 50 in Alabama Florida and Mississippi.
Speaker Change: And our second quarter total operating expense expectation is as follows.
Speaker Change: We expect to be within our annual range and that would be inclusive of several million dollars of certain one time deal costs that we will incur during the quarter associated with the <unk> transaction.
Speaker Change: The financial performance includes approximately 400 million fuel gallons sold approximately $400 million in inside sales, and it generated a $223 pro-forma, a just leave-a-dough of $89 million.
Darren Rebelez: I just wanted to ask a two-parter if I could. First, was hoping that you all could discuss the underlying health of your consumer in light of some of the cross-currents that we've been seeing lately. And then secondly, on the gross margin front, I just wanted to dig a little deeper into the second quarter on prepared meal and grocery margin. Is it possible to enact hedging or take modest pricing to offset what we're seeing with cheese costs, Steve. Yeah, thanks, Michael. I'll go ahead and talk about the consumer; let Steve address the cheese costs and hedging.
Speaker Change: I'd now like to turn the call back over to Dan.
Dan: Thanks, Steve.
Dan: I'd like to thank the entire cases team for another strong quarter, we're off to a great start in our fiscal year and the team is doing an outstanding job on executing on the three year strategic plan.
Speaker Change: We expect the company's pro-formal leverage level to reach and approximately 2.4 times at closing, and that's based on our current leverage calculation in our notes.
Speaker Change: We will quickly reduce this to approximately two times within the first 12 months of closing, through a combination of modest but prudent, leveraging growth and synergy capture.
Dan: One of the pillars of our strategic plans to grow the number of units.
Speaker Change: The initial target of 350 at least 350 new units. This is expected to be accomplished nearly 18 months early with the closing of the announced acquisition of <unk> and then Stefko convenience stores.
Speaker Change: and Results for August or as follows.
Speaker Change: Both inside and fuel, same's her sales were within the range of our annual outlet.
Speaker Change: As we noted in our announcement these are highly strategic and high quality assets and a great geography in Texas as well as further in the south.
Darren Rebelez: It was a respect of the consumer, you know, just as a reminder: about three-quarters of our guests make over $50,000 a year in income. And so we consider those to not be low income. So about a quarter of our guest base is in lower income. For that three-quarters of the guest base, we're not seeing really any change in behavior and purchasing behavior. They continue to come to the store with the same level of frequency and essentially purchasing as they have typically. Delivery and income consumers are modestly changing their purchasing habits. I wouldn't say that they're coming in less frequently than they had before, but they're opting to not buy as many units or items in their basket as they had previously.
Speaker Change: CPG was mayor 47's per gallon.
Speaker Change: Current Chief Costs remain unfavorable versus a prior year by about 10%.
Speaker Change: We're excited about integrating the business and welcoming the <unk> team into the Casey's family.
Speaker Change: In our second quarter, total operating expense expectation is as follows.
Speaker Change: In addition, we're raising our three year store growth target to approximately 500 stores.
Speaker Change: We expect to be within our annual range, and that will be inclusive of several million dollars of certain one time deal cost that we will incurder in the quarter associated with the fight's transaction. And when now let's turn the call back over to Darren's.
Another pillar of the plan is to accelerate the food business.
Speaker Change: The hot Sandwich lineup that launched earlier in calendar 2024 continues to drive growth as a category was up approximately 70% in the quarter.
Darren: Thanks to you.
Speaker Change: We brought back a popular promotion for the summer with 99 patents rings and the results were strong with KOL dispense beverages outpacing the categories growth.
Darren: I'd like to thank the entire team for another strong court. We're off to a great start in our fiscal year and the team is doing an outstanding job on executing on the three-year strategic plan.
Our prepared foods team continues to innovate and create craveable food at the right price points to provide casey's guests with products that they want.
Darren: One of the pillars of our strategic plans to grow the number of units.
Darren: The initial target of 350 at least 350 new units is expected to be accomplished nearly 18 months early with the closing of the announced acquisition of Fikes and Encefco Community and Source.
Speaker Change: The third pillar of our strategic plan is to enhance operational efficiency.
Steve Bramlage: So there's a little bit of pressure there, but overall, Michael, I'd say our guest base is hanging in there pretty good. And Michael, hey, good morning. This is Steve. You know, on the margin, questions specifically on cheese. We're about a quarter of our requirements are hedged out the remainder of the year. At this point, I'm the remainder of the fiscal year, and for sure, we obviously, per the script, do expect more inflation on cheese here in the second quarter, even than we had in the first. But, you know, I would just remind you that when we think about margin broadly, we're really trying to manage the inside of the store, total profitability to a level that we're comfortable with.
Speaker Change: Our continuous improvement team working with store operations is delivering great results.
Darren: As we noted in our announcement, these are highly strategic and high-quality assets in a great geography in Texas, as well as further in the south.
Speaker Change: The first quarter marked the ninth consecutive quarter with a reduction in same store labor hours.
Speaker Change: These reductions are the result of simplifying the operation and removing non value added work from the stores.
Darren: We're signed about integrating the business and welcoming the Fife's team into the case's family.
Speaker Change: We're excited about the impact this is having on our guest experience as our overall guest satisfaction scores improved 320 basis points over the same period last year.
Darren: In addition, we're raising our three-year stored-growth target to approximately 500 stores.
Darren: Another pillar of the plan is to accelerate the food business.
Speaker Change: The hot-fandering line up that launched earlier in calendar 2020-24 continues to drive growth as a category was up approximately 70% in the quarter.
Speaker Change: On the fuel side of the business I am extremely proud of the team's ability to balance fuel gallons with gross profit dollars.
Speaker Change: Growing same store gallons, while posting a cents per gallon above 40.
Speaker Change: We brought back a popular promotion for the summer with 99 cent fattened drinks and the results were strong with cold and spent spare ridges outpacing the category's growth.
Steve Bramlage: We don't necessarily drive the bus specifically on the prepared food margin per se, and we're quite comfortable with a gross profit dollar growth that we're generating with the pricing we currently have. We've made a little bit of adjustments on price and a couple of items against prepared food. But we're proud of our value proposition that we have in that category, both retail price and quality of the product combined. And we've had such a strength in cost of goods management on the grocery business. It obviously has flattered the overall inside margin, and it gives us, frankly, that much more room to continue leaning into the value offer on the prepared food side.
Speaker Change: Testament to the team and the tools we have in place.
Speaker Change: During the quarter. We also released our fourth annual sustainability report in July which is available on our website.
Speaker Change: Our prepared foods team continues to innovate and create craveable foods at the right price points to provide cases guess with products that they want.
Speaker Change: Our team continues to make progress on making cases become a more sustainable business.
Speaker Change: We're excited to share our sustainability journey with our shareholders.
Speaker Change: with third pillar of our strategic plan is to enhance operational efficiency.
Speaker Change: We will now take your questions.
Speaker Change: Our continues improvement team, working with store operations, is delivering great results.
Speaker Change: Thank you ladies and gentlemen, if you have a question or a comment at this time. Please press star one on your telephone. If your question has been answered or you wish to move yourself from the queue. Please press star one again and we also ask that you limit yourself to one question and one follow up we will pause for a moment, while we compile the Q&A roster.
Speaker Change: The first quarter marked a ninth consecutive quarter with a reduction in same store labor hours.
Speaker Change: These reductions are the result of simplifying the operation and removing non-value added work from the stores.
Speaker Change: My first question comes from Michael <unk> with Evercore ISI. Your line is open Michael Your line is open you can ask your question.
Speaker Change: We're excited about the impact this is having on our guest experience as our overall guest satisfaction scores improved 320 basis points over the same period last year.
Bobbi Griffin: I would expect we would continue to pay attention to inside margin more than either of the two individual categories here. and a moment for our next question. Our next question comes from Bobbi Griffin with Raymond James; your line is open. Hey guys, good morning. Thank you for taking the questions. Good morning. Another good quarter.
Speaker Change: Yes, hi, Thank you for taking the question just wanted to ask a two part if I could first.
Speaker Change: On the field side of the business, I'm extremely proud of the team's ability to balance fuel gallons with gross profit dollars.
Speaker Change: I was hoping that you all could discuss the underlying health of your consumer in light of some of the cross currents that we've been seeing lately and then secondly on the gross margin front.
Speaker Change: Growing Saints for gallons while posting a sense for gallon above 46 is a testament to the team and the tools we have in place.
Speaker Change: Just wanted to dig a little deeper into the second quarter unprepared meal and grocery margin is.
Speaker Change: During the quarter, we also released our fourth annual sustainability report in July, which is available on our website.
Speaker Change: Is it possible to enact hedging or take modest pricing to offset.
Bobbi Griffin: So, yeah, I guess first I want to move over to the off-ex side and maybe talk a little bit more about the continues and premiums you guys are seeing. Been a strong success story. Can you unpack some newer examples of what's driving it? I think in the past you know we've used examples of taking the cash of the bank or maybe the laundry, but just it seems like the team continues to find nuggets to drop down for savings. Just curious kind of what is on the kind of cards today and what is left there. Yeah, Bonnie, happy to.
Speaker Change: Our team continues to make progress on making cases become a more sustainable business, more excited to share our sustainability journey with our shareholders.
Speaker Change: What we're seeing with cheese costs Steve.
Yes, Thanks, Michael I'll go ahead and talk about the consumer I'll, let Steve address.
Speaker Change: We'll now take your questions.
Speaker Change: Yeah.
Speaker Change: Thank you, ladies and gentlemen, if you have a question or a comment at this time, please for a star one on your telephone. If your question has been answered, you were seeing with yourself from the queue, please press star one and one again. And we also ask that you limit yourself to one question and one follow-up. We'll pause for a moment while we compile our queue in a roster.
Steve: The cheese costs and hedging.
Speaker Change: With respect to the consumer.
Just as a reminder, about three quarters of our guests.
Speaker Change: Make over $50000 a year in income and so we.
Speaker Change: We consider those to not be low income so about a quarter of our gas space.
Darren Rebelez: Yeah, the team does a great job of identifying opportunities to just operate our source more efficiently. And what I tell you is a lot of them aren't as the things going forward aren't as significant in as an individual initiative as you know some of the bigger things like removing a trips to the bank and doing laundry and those sorts of things. But more recently, a couple of things that were implemented was the digital production planner in our stores. And that's in the kitchen where the kitchen manager is responsible for forecasting the production of all of our food items in the store.
Speaker Change: In lower income for that three quarters of the guest base, we're not seeing really any change in behavior and purchasing behavior. They are continuing to come to the store with the same level of frequency and essentially purchasing as they have typically the lower income consumers are.
Speaker Change: A first question comes from Michael Montanney with Evercore ISI. Your line is open.
Speaker Change: Thank you for watching!
Speaker Change: Michael, your line is open, you can ask your question.
Michael Montanney: Yes, hi, it's thank you for taking the question. Just wanted to ask a two-part if I could. First was hoping that you all could discuss, you know, the underlying health.
Speaker Change: Modestly changing their their purchasing habits, and I wouldn't say that they're coming in less frequently than they had before but they are opting to not buy as many units.
Speaker Change: of your consumer in light of some of the cross currents that we've been seeing lately.
Speaker Change: and then, secondly, on the gross margin front.
Speaker Change: I just wanted to...
Speaker Change: Our items in their basket as they add previously so there is a little bit of pressure there, but overall, Michael I'd say.
Speaker Change: Dig a little deeper into the second quarter on prepared meal and grocery margin, is it possible to enact hedging or take modest pricing to offset what we're seeing with cheese cost-steaf.
Michael: Our guest base is hanging in there pretty good.
Darren Rebelez: That historically was a manual process with a lot of paper and a lot of manual accounting, and then having to take that paper into the back office and entering into a system, and there're accuracy issues, and it just took a lot of manager time. That's all of digital now. So they scan items' labels, print the system, does forecasting; there's no math being done by store managers. No paperwork being done by store managers anymore. So that takes a lot of time away that they were having to spend on that and gives them some more time back to work with their teams in the kitchen.
Michael: And Michael Hey, Good morning. This is Steve you know on the margin question, specifically on sheets were about a quarter.
Steve: Yeah, thanks Michael. I'll go ahead and talk about the consumer, let Steve address the cheese costs and the adging.
Speaker Change: Of our requirements are hedged out the remainder of the year at this point in time, the remainder of the fiscal year and for sure. We obviously per the script to expect more inflation on cheese here in the second quarter, even than we had in the first but.
Steve: He was respected the consumer.
Speaker Change: You know, just as a reminder, about three quarters of our guests.
Speaker Change: Make over $50,000 a year in income and so we...
Speaker Change: I would just remind you that when we think about.
Speaker Change: Do we consider those to not be low incomes about a quarter of our gas space?
Speaker Change: Margin broadly.
Speaker Change: Really trying to manage.
Speaker Change: The inside of the store total profitability to a level that we're comfortable with we don't necessarily drive the bus specifically on the prepared food.
Steve: is in Lower Income. For that three quarters of the guest base, we're not seeing really any change in behavior in purchasing bag with their continuing to come to the store with the same level of frequency and essentially purchasing as they have typically.
Darren Rebelez: Another initiative is what we call 5 S, and essentially it's a way of organizing and structuring the inventory and in the kitchens and the rest of the store to be efficient, to reduce foot steps in the kitchen, to make sure inventory levels are appropriate. Ordering is done accurately, and you see that come through in the results with not only some labor savings but also waste improved. In the quarter, inventory of supplies was down in the quarter. So a lot of those efforts are starting to yield results not only in the off-ex line but in some of the margin lines as well.
Speaker Change: Margin per se and we're quite comfortable.
Speaker Change: With the gross profit dollar growth that we're generating with the.
Speaker Change: The lowering, home consumers are modestly changing their purchasing habits, I wouldn't say that they're coming in less frequently than they add before, but they're opting to not buy as many units.
The pricing. We currently have we have made a little bit.
Speaker Change: Adjustments on price in a couple of items against prepared food.
Speaker Change: But we're proud of our value proposition that we have in that category, both retail price and quality of the product combined and we've had such strength.
Speaker Change: are items in their basket as they had previously. So there's a little bit of pressure there, but overall Michael, I'd say, our guest base is hanging in there pretty good.
Speaker Change: And cost of goods management on the grocery business. It obviously is flattered the overall inside margin and it gives us frankly that much more room to continue leaning into the value offer on the prepared food side I would expect we would continue to.
Steve: And Michael, hey, good morning, this is Steve. You know, on the margin question, specifically on cheese, we're about a quarter.
Darren Rebelez: Very good. That's helpful, and I guess second me from my thought. Will you prepare food business? Are you seeing the notable difference in your different geographic markets by population, and I guess I'm just asking in the context of some of the fears around QSR pricing investments that are taking place. So in the markets where you operate with a little bit larger population, go up against more of the name QSRs that we know. Are you seeing any type of difference in the performance of the prepared food business? Yeah, well, I mean I can't say that we are seeing any sort of difference.
Michael Montanney: of our requirements or our hedged out the remainder of the year at this point in time the remainder of the fiscal year.
Speaker Change: Pay attention to inside margin more.
Speaker Change: More than either of the two individual categories here.
Michael Montanney: For sure, we obviously...
Speaker Change: Perscript to expect more inflation on cheese here in the second quarter, even then we had in the first. I would just remind you that when we think about...
Speaker Change: Thank you and good luck.
Speaker Change: One moment for our next question.
Speaker Change: Our next question comes from Bobby Griffin with Raymond James Your line is open.
Speaker Change: Margin Broadley, we're really trying to manage the inside of the store total profitability to a level that we're comfortable with. We don't necessarily drive the bus specific beyond the prepared food.
Bobby Griffin: Hey, guys. Good morning, Thanks for taking the questions.
Speaker Change: Another good quarter.
Darren Rebelez: What I can tell you is that in spite of a lot of the value offers that are happening QSR, those are primarily lunch day part focused, and our lunch day part was actually the strongest day part we had in prepared food this quarter. I think it's a reflection of the innovation that the team has done on the sandwich lineup that we've talked about, but also keeping that price point low. So we've got a really strong value proposition, particularly for the level of quality that we're producing in our kitchens right now, and I think that's resonating with the guests.
Speaker Change: Yes, I guess first I wanted to move over to the Opex side, and maybe talk a little bit more about the continuous improvements you guys are seeing strong success story can you unpack them. Some newer examples of what's driving it I think in the past we've used examples of taking the cash of the bank or maybe the laundry, but just it seems like the team continues.
Speaker Change: Margin Perseye, and we're quite comfortable with a gross profit dollar gross that we're generating with a...
Speaker Change: The pricing we currently have, we've made a little bit of adjustments on price in a couple of items against prepare food. But we're proud of our value proposition that we have in that category, both.
Speaker Change: Define nugget the dropdown for savings. So just curious kind of what is on the on the kind of cards today and what is left there.
Speaker Change: Retail Price and Quality of the product combined and we've had such a strength.
Bobby Griffin: Yes, Bobby happy too.
Bobby Griffin: The team does a great job of identifying opportunities to just operate our stores more efficiently.
Speaker Change: and cost of goods management on the grocery business.
Bonnie Herzog: Very good. Appreciate the details best to look on for. Thank you. One moment for our next question. Our next question comes from Bonnie Herzog with Goldman Sachs. The line is open. All right. Thank you. Good morning, everyone. I just had a morning. I just had a question on, you know, inside, same source bail, which I guess, you know, grew 2.3 percent, but maybe it was a little softer than we were expecting, especially grocery and general merchandise, which, you know, I guess, same source sales growth for that was about just 1.6. So hoping you guys could just maybe lay out some of the puts and takes there.
Speaker Change: It obviously has flattered the overall insight margin and it gives us frankly that much more room to continue leaning into the value offer on the prepared suit side I would expect we would continue to pay attention to insight margin more than either of the two individual categories here
Bobby Griffin: What I would tell you is a lot of them aren't as.
Bobby Griffin: And things going forward or arent as significant.
<unk>.
Bobby Griffin: And as an individual initiative as some of the bigger things like <unk>.
Speaker Change: Removing the trips to the bank and doing laundry and those sorts of things, but more recently a couple of things that were implemented was the digital production plan or in our stores and that's in the kitchen Ware.
Speaker Change: Thank you and good luck!
Speaker Change: and the first time I've ever seen this, I've never seen it before.
Speaker Change: The next question comes from Bobby Griffin with Raymond James your line is open
Speaker Change: The kitchen manager is responsible for forecasting.
Bobby Griffin: Hey guys, good morning, thanks for taking the questions, good morning, another week quarter
Speaker Change: The production of all of our food items in the store that historically was a manual process with a lot of paper and a lot of manual accounting and then having to take that paper into the back office entering into it into our system in there.
Bobby Griffin: So...
Bobby Griffin: Again, I guess first I wanted to move over to the op-act side and maybe talk a little bit more about the continues and premiers you guys are seeing in a strong success story.
Darren Rebelez: And maybe any changes to how value is being perceived in the store, you know, given the signs of the pressure on, you know, the consumer and actually maybe even more pressure building on the middle-income consumer. Yeah, sure, but you know, there's a couple of things going on in this quarter from same source sales perspective. I think the first one being we're just cycling a really strong quarter from a year ago, as our strongest quarter or next or strongest quarter of the year last year. So we do. Going in that the first quarter was going to be a little bit of a steeper hill to climb, and that proved to be the case.
Speaker Change: Can you unpack some newer examples of what's driving it? I think in the passion we've used examples of taking the cash of the bank or maybe the laundry, but just...
Speaker Change: Their accuracy issues and it just took a lot of manager time.
Speaker Change: That's all digital now so they scan items.
Speaker Change: It seems like the team continues to find nuggets to drop down for saving, so just curious kind of what is on the kind of cards today and what is left there.
Speaker Change: <unk> print.
Speaker Change: This system does forecasting theres no mass being done by store managers, no paperwork being done by store managers anymore. So that takes a lot of time away that they are having to spend on that and it gives them. Some more time back to work with their teams in the kitchen.
Speaker Change: Yeah, I'm a body.
Speaker Change: Appetit. The team does a great job of identifying opportunities to just operate our source more efficiently and what I tell you is a lot of our learners.
Speaker Change: Another initiative is what we call five S and essentially it's.
Speaker Change: that the thing's going forward aren't as significant.
Speaker Change: It's a way of organizing and structuring.
Darren Rebelez: The second thing was kind of a little bit of an anomaly that we experienced this year. You know, if you look back at the last 13 months, we've had only 3 months that had negative traffic in our stores. Every other month has been positive. Each one of those months has corresponded to us cycling over and over $1 billion jackpot in either the Mega Millions or the Powerball lottery. And so two of those three months in this that we cycle over just happened to be in this quarter. And so when we saw a little bit of softness in traffic, we can directly point to those lost lottery transactions as some of that softness now.
Speaker Change: The inventory in the kitchens into the rest of the store to be efficient to reduce footsteps in the kitchen to make sure inventory levels are appropriate ordering has done accurately.
Speaker Change: and as an individual initiative has some of the bigger things like
Speaker Change: Removing a trip to the bank and doing laundry, those sorts of things, but more recently, a couple of things that were implemented was the digital production plan or in our stores. And that's in the kitchen where the kitchen manager is responsible for forecasting.
Speaker Change: You'll see that come through in the results with not only some labor savings, but also waste improved in the quarter inventory.
Speaker Change: The production of all of our food items in the store. That historically was a manual process for the lot of paper and a lot of manual accounting and then having to take that paper into the back office, entering into a system.
Speaker Change: Supplies was down in the quarter. So a lot of those efforts are starting to yield results not only in the Opex line, but in some of the margin lines as well.
Speaker Change: Very good that's helpful and I guess secondly for my follow up when you look at the prepared food business are you seeing any notable difference in.
Speaker Change: They're accuracy issues and it just took a lot of manage or time.
Speaker Change: Your different geographic markets by population and I guess I'm, just asking in the context of some of the fears around <unk> pricing investments that are taking place. So in the markets where you operate.
Speaker Change: That's all of the digital now, so they scan items, labels print, the system does forecasting, there's no math being done by storm managers, no paperwork being done by storm managers anymore. So that takes a lot of...
Darren Rebelez: As you know, lottery is a commission sales product that doesn't really factor into our same store sales, but we carry it because it does drive traffic. And so we were attributing some of that softness to that dynamic with lottery. Those things are going to happen from time to time, and last year we got to enjoy the additional traffic this time. We have to fight through that a little bit, but you know, as Steve mentioned, August seemed to go back into that to the range of the annual guy. And so we don't feel like there's anything systemic; it's just more of a cycling anomaly.
Speaker Change: A little bit larger population go up against more of the named <unk> that we know are you seeing any type of difference in the performance of the prepared food business.
Speaker Change: Time away that they were having to spend on that and give them some more time back to work with their teams in the kitchen.
Speaker Change: Yeah, well I mean, I can't say that we are seeing any sort of difference what I can tell you is.
Speaker Change: Another initiative is what we call 5S, and essentially it's...
Speaker Change: Is that in spite of a lot of the value offers that are happening in <unk>.
Speaker Change: is a way of organizing and structuring.
Speaker Change: Or primarily lunch day part focused and our lunch day part was actually the strongest day part we had in prepared foods this quarter and I think it's a reflection of the innovation that the team has done on the sandwich lineup that we've talked about but also keeping that price point low. So we've got a really strong.
Speaker Change: The inventory in the kitchens and the rest of the store to be efficient to reduce.
Speaker Change: Footsteps in the kitchen to make sure inventory levels are appropriate ordering is done accurately and you see that come through in the results with not only some labor savings.
Darren Rebelez: With respect to value, like I mentioned earlier, we're not seeing that pressure on the middle income or higher income consumers translate. I'll just give you one data point. And if you look at fuel, your E15 fuel volume was down about 10%. Our E85 volume is down 2%. Premium fuel sales were almost 9%. That's not the behavior that we see when consumers are under stress. They'll typically gravitate more towards those higher ethanol blends because they're cheaper. They'll pull back on premium sales because it's more expensive. We're just not seeing that behavior. So I think at the lowest end, there is some moderating behavior, but overall, we're just not seeing that pressure translate into sales impact just yet.
Speaker Change: but also waste improved in the quarter inventory supplies was down in the quarter. So a lot of those efforts are starting to yield results, not only in the opx line, but in some of the margin line as well.
Speaker Change: <unk> proposition, particularly for the level of quality that we're producing in our kitchens right now and I think thats resonating with the guests.
Speaker Change: Very good I appreciate the details best of luck going forward.
Speaker Change: Thank you.
Speaker Change: Enrollment for our next question.
Speaker Change: We're good, that's helpful and I guess that can be from my childhood.
Speaker Change: When you look at the prepared food business, are you seeing the notable difference in your different geographic markets by population, and I guess I'm just asking in the context of some of the fears around QSR, pricing and investments that are taking place, so in the markets where you operate.
Speaker Change: Our next question comes from Bonnie Herzog with Goldman Sachs. Your line is open.
Speaker Change: Alright. Thank you good morning, everyone.
Bonnie Herzog: Good morning, Good morning, I just had a question on inside same store sales, which grew two 3%, but maybe with a little softer than we were expecting especially in grocery and general merchandise.
Speaker Change: with a little bit larger population, go up against more of the name QSRs that we know are you seen any type of difference in the performance of the prepared food business.
Speaker Change: Yeah, I guess the same store sales growth for that was that just one SEC. So hoping you guys could just maybe lay out some of the puts and takes there and maybe any changes to how value is being perceived in the store you know given the size of the pressure.
Speaker Change: Yeah, well, I can't say that we are seeing any sort of difference what I can tell you.
Bonnie Herzog: Okay, that's tough. If I may, just a quick false question, just maybe more in private label. Just curious to hear a little more color on how your private label business has been performing. Are you still getting the same list in the store? Have you, I guess, made any more progress on building out your tiered offerings? I'm just thinking about whether it's a little more premium or value, et cetera. Thank you. Yeah, with the private label, I'd say we pretty much held steady from where we've been historically. The percentage of sales units and gross profit dollar contribution from private label is then what it's been for about the last year or so.
Speaker Change: is that in spite of a lot of the value offers that are happening in QSR, you know, those are primarily lunch day part focused and our lunch day part was actually a stronger day part we had.
Speaker Change: On the consumer and actually maybe even more pressure building on that the middle income consumer.
Speaker Change: in prepare food this quarter and I think it's a reflection of
Speaker Change: Yes sure.
Speaker Change: The innovation that the team has done on the sandwich line up that we've talked about but also keep in that price point low. So we've got a really strong value proposition, particularly for the level of quality that we're producing in our kitchens right now and I think that's resonating with the guests.
Theres a couple of things going on in this quarter.
Speaker Change: From a same store sales perspective, I think the.
Speaker Change: The first one being we're just cycling a really strong quarter from a year ago. It was our strongest quarter.
Speaker Change: Next our strongest quarter of the year last year. So we knew going in the first quarter was going to be a little bit of a steeper hill to climb and that proved to be the case.
Speaker Change: Welcome to Digital Special.com for all of you.
Speaker Change: Thank you, one moment for our next question.
Steve Bramlage: So no change there. The team is working hard on that process of tearing out our private label offering. We're still working progress, but but we're not you know, but we're still on that that trajectory and we will get that done here in the in the not so distant future. And Bonad probably add just from a margin contribution standpoint, you know, the private label business for sure has contributed to mixing up the overall margin in the inside of the store, and specifically in grocery, you know, we're probably a hundred basis points to a good on the grocery margin because of the penetration of, you know, we got over 300 and 325 skews I think at this point on private label.
The second thing was kind of a little bit of an anomaly.
Speaker Change: And next question comes from Bonnie Harris, why would Goldman's actual line is open?
Bonnie Harris: Alright, thank you. Good morning, everyone. I just got out.
Speaker Change: Do we experienced this year if.
Speaker Change: If you look back at the last 13 months, we've had only three months that had negative traffic in our stores every other month has been positive.
Bonnie Harris: I just had a question on, you know, inside same-circels, which I guess, you know, grew 2.3 percent, but maybe it was a little softer than we were expecting, especially in grocery and general merchandise.
Speaker Change: Each one of those months, hence SCOR corresponded to a cycling over.
Speaker Change: which I guess same-sour sales growth for that was up to 1.6. So hoping you guys could just maybe lay out some of the putt and take there and maybe any changes to how.
Speaker Change: And over $1 billion jackpot in either the mega millions or the.
Speaker Change: The Powerball lottery.
Speaker Change: So two of those three months and this that we cycled over just happened to be in this quarter and so when you we saw a little bit of softness in traffic in and we can directly point to those lost lottery transactions at some of that softness now.
Speaker Change: Value is being perceived in the story, given the signs of the pressure on the consumer. And actually, maybe even more pressure is building on the middle income consumer.
Steve Bramlage: And that's worth over a hundred basis points of margin to us in that category.
Speaker Change: Yes, sure, Brian. There's a couple of things going on in this quarter.
Speaker Change: As you know our lottery is a commissioned sales products, so that doesn't really factor into our same store sales but.
Unknown Executive: Thank you one more time for our next question. Our next question comes from Chuck Sarankovsky with North Coast Research. The line is open. Good morning everyone. Great quarter. When you look at this period ahead of closing on the F-like acquisition, will you be looking at any other deals? Well, Chuck, I'd say we're always looking at deals, you know, so you know, this wouldn't preclude us from looking at others. You're just practically speaking, you know, if we're talking about larger deals, comparable in size to what this one is, we probably have to think really hard about going down that path just from a balance sheet perspective.
Speaker Change: from St. Sour Seals perspective. I think the...
Speaker Change: The first one being we're just cycling a really strong quarter from a year ago as our strongest quarter or next our strongest quarter of the year last year. So we do go in and the first quarter was going to be a little bit of a steeper hill of a climb.
Speaker Change: We carry it because it does drive traffic and so we.
Speaker Change: We're attributing some of that softness to.
Speaker Change: So that dynamic with lottery those things are going to happen from time to time in the last year, we got to enjoy the additional traffic this time.
Speaker Change: and approved to be the case. The second thing was kind of a little bit of an anomaly that we experienced this year. You know, if you look back at the last 13 months.
Speaker Change: We have to fight through that a little bit but.
Speaker Change: As Steve mentioned August seem to go back into the to the range of the annual guidance. So we don't feel like Theres anything systemic it's just more of a <unk>.
Speaker Change: We've had only three months that had negative traffic in our stores. Every other month has been positive.
Cycling anomaly.
Steve: With respect to value.
Speaker Change: Like I like I mentioned earlier right.
Speaker Change: Each one of those months that corresponded to a cycling over an over $1 billion jackpot and either the megamillions or the powerball lottery.
Speaker Change: Not seeing that pressure on the middle income or higher income consumers translate and I'll just give you one data point, if you look at fuel.
Speaker Change: R. R. <unk> fuel volume was down about 10% or 85 volume was down 2%.
Darren Rebelez: We have a capacity to do it. It's whether we want to take on that amount of leverage to be able to do it. But aside from that, the M&A team will continue their work on the small acquisitions that we always do. And we'll also continue our organic growth, our new industry stores. We'll pull back a little bit just to help us manage the balance sheet a little bit, but aside from that, we're going to continue on the trajectory. And, you know, deals take time, and you have to be in the market to be in the market, so to speak.
Speaker Change: And so, two of those three months, and this, that we cycle over just happened to be in this quarter. And so, when you, we saw a little bit of softness and traffic and, and we can directly point to those, lost a lot of retransactions as some of that softness.
Speaker Change: Premium fuel sales.
Speaker Change: Almost 9% that's not the behavior that we see when consumers are under stress that will typically gravitate more towards those higher ethanol blends because they're cheaper they will pull back on premium sales because it's more expensive.
Speaker Change: You know, a lottery is a commission sales product that is really factoring the same store sales.
Speaker Change: We're just not seeing that behavior. So.
Speaker Change: Think that at the lowest end there is some moderating behavior, but but overall, we're just not seeing that pressure translate into.
Speaker Change: We carry it because it does drive traffic and so we're treating some of that softness to that dynamic with the lottery. Those things are going to happen from time to time and last year we got to enjoy the additional traffic this time.
Two sales impact just yet.
Darren Rebelez: So we will continue to be looking and see what's out there. As a follow-up, Darren, what kind of CAPX will flakes need to update kitchens, et cetera? We had, we had, we had, and we anticipated about $145 million, specifically to kind of renovate slash retrofit the pipe stores that are going to get kitchens. The majority of them will end up with a Casey's itch in them. That'll be spread over three to four years realistically, kind of from closing, just because of the permitting timeline. But $145 million, kind of true incremental cat-backs, is our current belief.
Speaker Change: Okay. That's helpful. If I may just a quick follow up question just maybe line private label, just curious to hear a little more color on.
Steve: We have to fight through that a little bit, but you know, as Steve mentioned, August seemed to go back into the range of the annual guidance, so we don't feel like there's anything systemic, it's just more of a cycling anomaly. With respect to value.
Speaker Change: How your private label business has been performing still getting the same lift in the store.
Speaker Change: Have you made any more progress on building out your tiered offerings I'm, just thinking about whether it's a lot more premium or value et cetera. Thank you.
Speaker Change: Like I mentioned earlier, right? We're not seeing that pressure on the middle income or hiring consumers translate. I'll just give you one data point if you look at fuel.
Speaker Change: Yes.
Speaker Change: With the private label I'd say we.
Speaker Change: Pretty much held steady from where we've been historically the percentage of sales units and gross profit dollar contribution from private label has been what it's been for about the last year or so so no change there. The team is working hard on that process of tearing out our private label offering.
Speaker Change: Your E-15 fuel volume was down about 10% or E-85, I'm down 2% premium fuel sales were up almost 9%.
Speaker Change: That's not the behavior that we see when consumers are under stress.
Christina Katai: Great, thank you. One moment for our next question. Our next question comes from Christina Katai with Deutsche Bank; your line is open. Hi, good morning. Thank you for taking a question. I wanted to ask about some of the recent retail price adjustments that you took in grocery and general merchandise. As consumers are increasingly gravitating towards value, just how do you see Casey's position, price, and product-wise today to continue that positive traffic growth to stores. And how are you leveraging the volatility program and then increasingly private label to help reinforce that value proposition? Yeah, Christina, we're trying to be prudent on our pricing for sure.
Speaker Change: We're not ready for prime time, yet so that's still work in progress but.
Speaker Change: They'll typically gravitate more towards those IRF and all plants because they're cheaper. They'll pull back on premium sales, but it's more expensive.
Speaker Change: But we're not.
Speaker Change: But we're still on that trajectory and we will get that done here.
Speaker Change: We're just not seeing that behavior, so I think at the lowest end there is some moderating behavior but overall we're just not seeing that pressure translate into sales in just yet.
Bonnie Herzog: And the not so distant future and Bonnie I'd, probably add just from a margin contribution standpoint, you know the private label business for sure has contributed to mixing up the overall margin.
Bonnie Herzog: On the inside of the store and specifically in grocery.
Speaker Change: Okay, that's helping me to make this a quick fall question, just maybe one private label, just curious to hear a little more color on.
Speaker Change: Probably 100 basis points to the good on the grocery margin because of <unk>.
Speaker Change: You know how your private label business has been performing, you know, are you still getting the same list in the store and, you know, have you, I guess made any more progress on building out your tiered offerings. I'm just thinking about whether it's a little more premium or value etc. Thank you.
Penetration of all you've got over 300.
Bonnie Herzog: 25, Skus I think at this point.
Private label and that's worth over 100 basis points of margin to us in that category.
Darren Rebelez: I mean, you got a couple of different things going on. You know, we're still experiencing those quarterly price increases or costing increases being passed on by the tobacco manufacturers, and so, as it's been our practice, we continue to pass those on to the consumer. That's probably the bulk of the pricing action we've been taking in grocery and general merchandise. There's been a couple other categories, candy in particular, some snacks that we've had some cost increases, and we've had to pass that on. But by and large, we were trying to keep retail pricing consistent in our merchandise, and deals a fantastic job working with our suppliers to manage the costs of goods.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Yeah, with...
Speaker Change: With the private label, I'd say we pretty much held steady from where we've been historically the percentage of sales, units, and gross profit dollar contribution from private label has been what it's been for about the last year or so. So no change there, the team is.
Speaker Change: Our next question comes from Chuck Cerankosky with Northcoast Research Your line is open.
Speaker Change: Good morning, everyone great quarter.
Speaker Change: You look at.
Speaker Change: This period ahead of closing on the <unk> acquisition.
Speaker Change: is working hard on that process of tearing out our private label offering. We're not ready for prime time yet, so that's still working progress, but we're not.
Chuck Cerankosky: Will you be looking at any other deals.
Yeah.
Chuck Cerankosky: Well, Chuck I'd say, we're always looking at deals.
Speaker Change: So this wouldn't preclude us from looking at others just practically speaking.
Speaker Change: We're still on that trajectory and we will get that done here in the not so distant future. And Brian had probably add just from a...
Speaker Change: If were talking about larger deals comparable in size to what this one is.
Darren Rebelez: And once they just a data point for you, if you were to look over the last four years since COVID had, you know, about 23% over that time period, and our grocery and general merchandise pricing is up only 16%. And some of that is the impact of private label, mixing into that and having lower retail. Some of that is just us being conservative on passing those prices on the consumer. And I think it reflects in our same source sales performance relative to others in the industry that we have visibility to. That's helpful. And then just as a follow-up, I know your geographies have a bit different competition, but you know, one of your larger dollars of peers announced some pricing actions that they're taking in order to be more price competitive.
Brian Johnson: and Contrubies standpoint. You know, the private label business for sure has contributed to mixing out the overall margin and the inside of the store and specifically in grocery you know, worked.
Speaker Change: We probably have to think really hard about going down that path just to <unk>.
Speaker Change: From a balance sheet perspective, we have a capacity to do it.
Brian Johnson: Probably a hundred basis points to good on the grocery margin because of the penetration of, you know, we got over 300. And there are 25 skews I think at this point on private label and that's worth over a hundred basis points of margin to us in that category.
Speaker Change: It's whether we want to take on that that amount of leverage to do available to do it but aside from that the the M&A team will continue their work on the small acquisitions that we always do.
Speaker Change: Well also continue our organic growth on our new to industry stores.
Speaker Change: Thank you one moment for our next question.
Speaker Change: We'll pull back a little bit just to help us manage the balance sheet, a little bit but aside from that.
John: Hello, I'm John.
Speaker Change: and next question comes from Chuck Surrenkovsky with North Coast Researcher Liners Open.
We're going to continue on the trajectory in.
You know deals take time and you have to be in the market to be in the market. So so to speak. So we will continue to be looking in and see what's out there.
Chuck Surrenkovsky: Good morning, everyone. Great quarter. When you look at this period ahead of closing on the flight's acquisition, when you be looking at any other deals.
Darrin: As a follow up Darrin.
Darrin: What kind of Capex will flex need to update kitchens et cetera.
Darren Rebelez: So how do you see promotions and work downs playing out in the food and consumables industry, and how do you think that is potentially going to impact Casey, if at all. Thank you. Yeah, you know, like I think as consumers get a little more pinched, and some of these other retailers have been more aggressive on taking price over the last couple of years, I think they're starting to pull back a little bit. I'm not as concerned about that, frankly, at least from the dollar store perspective. We do sell some similar items, but usually different pack sizes; a lot of different categories that we don't sell.
Chuck Surrenkovsky: On.
Speaker Change: Well, Chuck, I'd say we're always looking at deals, you know, so this wouldn't include us from looking at others, they're just practically speaking.
Speaker Change: We had oh I'll answer that Chuck we had and we anticipate about $145 million.
Speaker Change: Specifically to renovate slash retro.
Chuck Surrenkovsky: You know, if we're talking about larger deals comparable in size to what this one is, we'd probably have to think really hard about going down that path just to...
Speaker Change: Yeah.
Speaker Change: The five stores that are going to get kitchen is the majority of them will end up with a casey's.
Speaker Change: And then it will that will be spread over three to four years realistically kind of from closing just because of the permitting.
Chuck Surrenkovsky: Just from a balance sheet perspective, but we have a capacity to do it. Whether we want to take on that amount of leverage to do it, but aside from that, the M&A team will continue their work on the small acquisitions that we always do.
Speaker Change: Timeline, but a 140 $550 million kind of a true incremental capex as our current beliefs.
Darren Rebelez: We sell some things that they don't sell. So, we track pretty closely how we perform when we're next to some of those other competitors. And in our businesses, really perform well and independent of how they're doing. So, you know, if they get more aggressive on price, I'm not so sure that that's going to make a big difference to our business. Just given the diversity of assortment that we have, please.
Speaker Change: Great. Thank you.
Speaker Change: One moment for our next question.
Chuck Surrenkovsky: We'll also continue our organic growth, our new industry stores. We'll pull back a little bit, just to help us manage the balance sheet a little bit, but aside from that, we're going to continue on the trajectory.
Speaker Change: Okay.
Yeah.
Cristina <unk>: Our next question comes from Cristina <unk> with Deutsche Bank. Your line is open.
Cristina <unk>: Hi, Good morning, Thank you for taking my question.
Speaker Change: I wanted to ask about some of the recent retail price adjustments that you took in grocery and general merchandise.
Chuck Surrenkovsky: You know, the ill take time and you have to be in the market to be in the market so so to speak. So we will continue to be looking and see what's out there.
Speaker Change: Consumers are increasingly gravitating towards value just how do you see Casey position pricing product wise today to continue that positive traffic both to stores and how are you leveraging the loyalty program and then increasingly private label to help reinforce that value proposition.
Corey Tarlowe: Thank you one more. One moment for our next question. Our next question comes from Corey Tarlowe with Jefferies. Your line is open. Great. Thanks, Darren. I was keen to get your perspective just on the broader M&A that we've seen in the industry. Obviously, you recently, and it's the Fikes Wholesale and CEPCO acquisition. But I'm curious as to hear your perspective on sort of the runway here for acquisitions in the space, why you think we've been seeing so much recently. And any other color you can provide on what you're seeing largely as it relates to M&A.
Chuck Surrenkovsky: and the follow-up, Darren, would kind of cap-ups, will flakes need to update kitchens, etc.
Speaker Change: We had all the answers that took, we had, and we anticipate about $145 million.
Kristina: Yes Kristina.
Speaker Change: We're trying to be prudent on our on our pricing for sure I mean, you've got to.
Speaker Change: specifically to kind of renovate slash retro.
Speaker Change: Couple of different things going on we're still.
Speaker Change: <unk> those quarterly price increases or cost increases being passed on by the tobacco manufacturers and so.
Speaker Change: Fit. The flight stores that are going to get catch ins the majority of them will end up with a case these pitch and in them it'll, that'll be spread over three to four years, realistically, kind of from close and just because of the permitting.
Speaker Change: As been our practice, we continue to pass those on to.
Speaker Change: So the consumer that that's probably the bulk of the pricing actions, we've been taking in grocery and general merchandize Theres been a couple of other categories.
Speaker Change: Timeline, but $145 million, kind of a true incremental cat-tox is our current belief.
Darren Rebelez: Yeah, sure, Corey. You know, I think it's a variety of things, you know, in the case of Fikes in CEPCO. I think it was a well-run business. They were doing a great job. I think it's just simply a matter of having a family business. They've been in the business for a very long time. And they just decided it was time to monetize that business and to move on to other things. So I don't think it's anything more complicated than that. And given that our industry is comprised largely of businesses like Fikes, just smaller scale typically, but family-owned independent operators.
Speaker Change: Candy in particular.
Speaker Change: Some snacks.
Speaker Change: Had some cost increases.
Speaker Change: Great, thank you.
Speaker Change: And we've had to pass that on but by and large we're trying to keep.
Speaker Change: One moment for our next question.
Speaker Change: [inaudible]
Speaker Change: And next question comes from Kristina Katai with Deutsche Banker Line as well as my next.
Speaker Change: Retail pricing consistent.
Speaker Change: The merchandising team has done a fantastic job working with our suppliers to manage the cost of goods and let's say just.
Kristina Katai: Hi and good morning, thank you for taking my question.
Kristina Katai: I wanted to ask about some of the recent retail price adjustments that you took in grocery and general merchandise. As consumers are increasingly gravitating towards value, just how do you see KC, position, crisis and product-wise today to continue that positive traffic growth to stores, and how are you leveraging the Voluntary Program and then increasingly private label to help reinforce that value proposition.
Speaker Change: Just a data point for you if you were to look over the last four.
Speaker Change: Four years since Covid hit CPI is up about 23% over that time period end.
Speaker Change: Sure.
Speaker Change: Our grocery and general merchandise pricing is up only 16% and some of that is the impact of private label.
Darren Rebelez: There's always going to be that opportunity. The other component and probably the thing is driving a lot of the M&A activity is just simply the challenging environment that we're operating in. And it's been going on ever since COVID. It's just been harder and harder to run a really good and profitable convenience for business, and scale is mattering more than it ever has. And so, with the fragmented nature of the industry and much smaller players, those smaller players are under a lot of pressure. You know, if we look at industry break evens according to Max, you know, break even since for gallon is 15 cents a gallon right now.
Speaker Change: We're trying to be prudent on our pricing, for sure, and you've got a couple of different things going on. We're still experiencing those quarterly pricing, creases, or cost increases being passed on by the tobacco manufacturers and so forth.
Speaker Change: Mixing into that and having lower retail some of that is just us being conservative on passing those prices on consumer and I think it reflects in our.
Speaker Change: Same store sales performance relative to others.
Speaker Change: Others in the industry that we have visibility to.
Speaker Change: Got it Thats helpful. And then just as a follow up I don't know your geographies have a bit different competition, but.
Speaker Change: As has been our practice, we continue to pass those on.
Speaker Change: That's probably the bulk of the pricing action we've been taking grocery in general merchandise. There's been a couple other categories.
Speaker Change: One of the one of your larger dollar dollar some.
Speaker Change: Peers announce some pricing actions that you're taking in Oregon. It can be more price competitive how do you see promotions and markdowns playing out in the food and consumables industry and how do you think that is potentially going to impact Casey if at all thank you.
Speaker Change: Candy in particular, some snacks that we've had some cost increases.
Speaker Change: and we've had to pass that on, but by and large, we are trying to keep.
Steve Bramlage: And at the bottom desial, it's closer to 40 cents a gallon. So, you know, there's a lot of operators out there. They're just really struggling to survive. And that creates a great opportunity from an M&A perspective for folks like us who have the. You know, capacity and the ability to acquire and integrate those businesses. Services. Great. Thanks. That's very helpful. Then just on labor, I wanted to ask about your perspective there as well. I know you've mentioned some wage inflation yet continued reduction in, I believe, labor hours. Curious what you've seen from a wage inflation perspective.
Speaker Change: Um...
Speaker Change: retail pricing consistent in our merchandise and teams, so a fantastic job working with our suppliers.
Speaker Change: Yes, I think.
Speaker Change: Bob.
Bob: As as consumers get a little more pension and some of these other retailers have taken had been more aggressive on taking price over the last couple of years I think they are starting to pull back a little bit.
Speaker Change: to manage the cost of goods and what they just a data point for you. If you were to look over the last...
Speaker Change: 4 years since COVID had CPI is up about 23% over that time period.
Speaker Change: <unk>.
Speaker Change: I am not as concerned about that frankly at least from the dollar store perspective, we do sell some similar items, but they're usually different pack sizes, a lot of different categories that we don't sell we sell some things that they don't sell.
Speaker Change: are a grocery and general merchandise pricing is up only 16 percent and some of that is the impact of private label mixing into that and having lower retail so that is just us being conservative on passing those prices on the consumer and I think it reflects in our
Speaker Change: We track pretty closely how we perform when we're next to some of those other competitors and in our businesses really performed well and independent of how theyre doing so.
Speaker Change: Same source sales performance relative to others in the industry that we have visibility to.
Steve Bramlage: And if you expect that to moderate as we go forward. You know, hey, Corey, this is Steve. I'll try that one. We're running three to four percent wage rate inflation across our footprint now. And you know, I think we would, we would all agree that that is consistent with kind of our historical experience, excluding the period of time. Obviously, when COVID drove that number much higher, so it feels like a more normal wage rate environment. You know, we're certainly benefiting from more applications; generally fewer openings. Generally, there's all kinds of benefits for us as that rolls through to less over time in the stores, less training costs in the stores because turnover generally has improved.
Speaker Change: They get more aggressive on price I'm not so sure that that's going to make a big difference to our business just given the diversity of assortment that we have released them.
Speaker Change: I did that helpful, and then just as a fellow, I know your geographies have a bit different competition, but
Speaker Change: Thank you one more.
Speaker Change: You know, one of your larger dollars or peers announced some pricing actions that they're taking in order to be more price competitive. How do you see promotions and more down?
Speaker Change: One moment for our next question.
Speaker Change: Our next question comes from Cory <unk> with Jefferies. Your line is open.
Speaker Change #100: Great. Thanks, Darren I was keen to get your perspective, just on the broader M&A that we've seen in the industry.
Speaker Change: Playing out in the food and consumables industry and how do you think that is potentially going to impact Casey, if at all, thank you.
Speaker Change: Obviously.
Speaker Change: You know what, it's eight.
Speaker Change #101: You recently announced the fixed wholesale and <unk> acquisition.
Speaker Change: As consumers go a little more pinched in some of these other retailers that have been more aggressive on taking price over the last couple years. I think they're starting to pull back a little bit. You know that?
Speaker Change #101: But I'm curious as to.
Speaker Change #102: To hear your perspective on sort of the runway here for.
Speaker Change #103: Acquisitions in this space why do you think what we've been seeing so much recently.
Speaker Change: I'm not as concerned about that, frankly, at least from the dollar store and perspective. We do sell some similar items, but they're usually different pack sizes. A lot of different categories that we don't sell, we sell some things that they don't sell.
Steve Bramlage: And we would attribute for sure a large portion of the turnover improvements to all of the store simplification initiatives we have to make, make those jobs better and easier for people. But there's an element of the labor markets a little bit friendlier as well. So we don't see any impending change from kind of that three to four percent wage rate increase in our geography at this point.
Speaker Change #103: Other color you can provide on what you're seeing largely as it relates to M&A.
Corey: Yes sure Corey.
Corey: I think it's a variety of things.
Speaker Change: So, we track pretty closely how we perform when we're next to some of those other competitors and our businesses really perform well and independent of how they're doing.
Speaker Change #105: In the case of <unk>.
Speaker Change #106: <unk> and <unk> I think as it.
Speaker Change #106: It is a well run business there they're doing a great job I think it was just simply.
Speaker Change #106: As a matter of having a family business had been in the business for a very long time and they just decided it was time to <unk>.
Speaker Change: So, you know, they get more of a rest of all in price. I'm not so sure that that's going to make a big difference to our business, just given the diversity of the sort that we have, please do that.
Jacob: Great. Thank you very much. One moment for our next question. Our next question comes from Karen Short with Melius Research. The line is open. Hi, everyone. This is Jacob baking for who's on for Karen. So we have two questions. The first is on the fuel supply chain. Any update or color you can give on the upstream pipeline and capabilities you've been developing and maybe how the type of theme of order to that. And then the second is any update you can give on pound of cheese using the prepared food business. Yeah, I'll go ahead and take the fuel supply.
Speaker Change #107: Monetize that business and to move on to other things.
Speaker Change: Thank you very much.
Speaker Change #108: Anything more complicated than that and given that our industry is comprised largely of businesses like Fox just smaller scale typically but <unk>.
Speaker Change: Our next question comes from Quarry Tarlo with Jeff Recher line is open.
Speaker Change #108: Family owned and independent operators, Theres always going to be that opportunity.
Quarry Tarlo: Great thanks!
Quarry Tarlo: I was keen to get your perspective to some of the broader M&A that we've seen in the industry.
Speaker Change #108: The other component and probably the thing that's driving a lot of the M&A activity.
Speaker Change #108: Is just simply the challenging environment that we're operating in.
Speaker Change: Obviously, you recently announced the...
Speaker Change #109: And that's been going on ever since Covid, it's just been harder and harder to do.
Speaker Change: Fikes wholesale and stuff go our acquisition but I'm curious.
Darren Rebelez: He said again, the second question. Update on pound of cheese in the prepared food business that you use. Okay. Thanks. Yeah, on the fuel supply, we had said that we would begin with our what we call fuel 3.0, where we begin to supply product further upstream into the supply chain and supply that ship of a type into dedicated space. We did execute on that in the first quarter. We we took baby steps to be completely honest to make sure everything went according to plan, and happy to report that it did. So we're continuing to grow into that capability.
Speaker Change: As to hear your perspective on sort of the runway here for acquisitions in the space. Why do you think we've been seeing so much recently and any other color you can provide on what you're seeing largely as it relates to M&A?
Speaker Change #109: So Ron I really good and profitable convenience store business.
Speaker Change #110: Scale is mattering more than it ever has and so with the fragmented nature of the industry and much smaller players. The smaller players are under a lot of pressure.
Speaker Change #110: If we look at industry breakeven according to Max.
Speaker Change: and I'm sure for eight thumbs.
Speaker Change: You know, I think it's a variety of things, you know, in the case of
Max: Breakeven cents per gallon.
Speaker Change #112: 15 cents, a gallon right now and at the bottom decile.
Speaker Change: 5th in South Carolina at Diggas.
Speaker Change #112: Closer to <unk> 40, a gallon.
Speaker Change #100: It's a well-run business, they're doing a great job, I think it's just simply
Speaker Change #114: There's a lot of operators out there. They are just really struggling to survive and that that creates a great opportunity from an M&A perspective for folks like us who have the.
Speaker Change #101: A matter of having a family business had been the business for a very long time and they just...
Speaker Change #101: Decided it was time to...
Speaker Change #101: Monatize that business in to move on to other things, so I don't think there's anything more complicated than that, and given that our industry
Speaker Change #114: Capacity and the ability to acquire.
Speaker Change #114: Acquire and integrate those businesses.
Speaker Change #114: Okay.
Steve Bramlage: One of the exciting things about the fights transaction is that this comes with a fuel terminal and they have a team who's been doing this for 10 or so years. So we're actually acquiring some expertise in this area and a different asset that we can leverage our benefits. So very excited about the additional benefit that we benefit that we pick up with. With the fights transaction. Yeah, for for cheese. Cheese is the single largest commodity that we consume and prepare for business. I think most folks are familiar with that. We you know, we used a little over 40 million pounds of cheese for perspective in the last fiscal year.
Speaker Change #114: Great. Thanks, that's very helpful.
Speaker Change #101: is comprised largely of businesses like five shifts.
Speaker Change #114: Just on labor wanted to ask you about your perspective, there as well.
Speaker Change #101: Smaller scale typically, but family owned, independent operators, there's always going to be that opportunity. The other component and probably the thing is driving a lot of the M&A activity is just simply the challenging environment that we're operating in.
You had mentioned some wage inflation, yet continued reduction in I believe labor hours.
Speaker Change #115: Curious what you've seen from a wage inflation perspective, and if you expect that to moderate as we go forward.
Speaker Change #101: and it's been going on ever since COVID. It's just been harder and harder to run a really good and profitable convenience or business.
Speaker Change #115: Yeah, Hey, Corey this is Steve ill try that one.
Speaker Change #116: And 3% to 4%.
Each rate inflation.
Speaker Change #117: Cross our footprint now and.
Speaker Change #101: Scale is mattering more than it ever has and so with a fragment in nature, the industry and much smaller players, those smaller players are under a lot of pressure.
Speaker Change #118: I think we would we would all agree that that is consistent.
Speaker Change #119: With kind of our historical experience excluding the period of time, obviously, when COVID-19 drove that number much higher so it feels like a more normal wage rates environment.
Max: You know, if we look at industry-brake events according to Max.
Anthony Bonadio: Obviously, you know, goes up as store count goes up, but we're also trying to manage ways to offset some of that. And so, you know, we spent a little over $100 million in total, in aggregate, on cheese in the last fiscal year for some perspective. One moment for our next question. Our next question comes from Anthony Bonadio with Wells Fargo; your line is open. Hey, good morning, guys. So, sort of piggybacking on the labor questions. I noticed that our office has continued to trend pretty strongly, but I didn't want to ask about the Department of Labor overtime rule.
Speaker Change #103: You know, right even since for gallon is a 15 cents a gallon right now and at the bottom desk aisle, you know, closer to 40 cents a gallon.
Speaker Change #120: We're certainly benefiting from more applications generally fewer openings generally there is all kinds of benefits for us as that rolls through to less overtime in the stores less training costs in the stores because turnover generally has improved and we would attribute for sure or a large portion of the term.
Speaker Change #104: So, you know, there's a lot of operators out there. They're just really struggling to survive and that creates a great opportunity from an M&A perspective for folks like us who have the capacity and the ability to acquire and integrate those businesses.
Speaker Change #120: Over improvement to all of.
Speaker Change #121: Store simplification initiatives, we have to make those jobs better and easier for people, but there is an element of the labor market's a little bit from there as well so we don't see any.
Speaker Change #105: Great thanks, it's very helpful. And then just some labor wanted to ask about your perspective there as well. I know you've mentioned some wage inflation yet continued reduction in, I believe, labor hours.
Steve Bramlage: I believe that set the step up in January. I know there's a lot of uncertainty still around what that ultimately looks like, but just maybe some thoughts on possible impact your business, if that does go into effect, and how you're thinking about mitigating. Yeah, maybe I'll start with that. This is Steve. So you the depending step up in January should have a diminimus impact for us at the current wage level that they've talked about. It would be a couple of million dollars on an annual basis to us. Most of our most of our impacted team members are already above that threshold.
Speaker Change #121: Impending change from kind of that 3% to 4% wage.
Speaker Change #121: Wage rate increase in our geography at this point.
Terrius: Terrius, what you've seen from a wage-inflation perspective, and if you expect that to moderate as we go forward.
Speaker Change #122: Great. Thank you very much and best of luck.
Speaker Change #123: One moment for our next question.
Karen short: Our next question comes from Karen short with Melius Research Your line is open.
Terrius: You know, hey, Corey, this is Stephen. I'll try that one. We're running three to four percent.
Terrius: Wage, rate, inflation, the cross are footprint now and I think we would all agree that that is consistent.
Speaker Change #123: Yeah.
Speaker Change #123: Hi, everyone. This is Jacob.
Jacob: For Karen So we just have two questions. The first is on.
Speaker Change #126: The fuel supply chain.
Speaker Change #107: with kind of our historical experience, excluding the period of time, obviously when COVID drove that number much higher. So it feels like a more normal wage rate environment.
Speaker Change #127: Or color you can give on the upstream pipeline and capabilities <unk> been developing and maybe how the flex team reporting to them.
Steve Bramlage: So, you know, the first certainly year and I would say would all be kind of washed out in our normal course: three to four percent wage, wage increases that we had talked about earlier. Got it.
Speaker Change #128: Then the second is any update you can give on pounds, which is using the prepared foods business.
Speaker Change #107: You know, we're certainly benefiting from more applications, generally fewer openings.
Speaker Change #129: Yes, I'll go ahead and take that fuel supply can you say again.
Steve Bramlage: That's helpful. And just on gallon trends, obviously, guys continue to underperform or outperform versus what we've seen in a lot of your peers. Just maybe some more thoughts on what's driving that and how you think about maybe the halo effect from like the strong insights or propagation driving traffic to the pump. Yeah. Anthony, I think I think you hit it on the head. You know, all things being equal. I think guests are going to choose where they shop based on the inside offer, and you've got to be competitive on fuel. I think our fuel team does a really good job of having a consistent approach to pricing.
Speaker Change #108: Generally, there's all kinds of benefits for us as that rolls through to less over time and the store's less training costs and the store's because turn over.
Speaker Change #129: Second question.
Speaker Change #130: So update on pounds of cheese in the prepared foods business that you use.
Speaker Change #108: Generally his improved and we would attribute for sure a large portion of the turnover improvement to all of the store simplification initiatives we have to make make those jobs better and easier for people. But there's an element of the labor markets a little bit front mirror as well, so we don't see any.
Speaker Change #130: Okay.
Speaker Change #130: Yeah.
Speaker Change #130: Okay. Thanks, Yeah on the fuel supply.
We had said that we would.
Speaker Change #131: We will begin with our what we call a fuel 3.0, where we begin to Dubai.
Byproduct further upstream into the supply chain and.
Speaker Change #108: Independent Change from kind of that three to four percent, way to rate increase in our geography at this point.
Speaker Change #131: And supply that ship of a pipe into dedicated space, we did execute on that in the first quarter.
Speaker Change #131: We took baby steps to be completely honest to make sure everything went according to plan and <unk>.
Speaker Change #109: Great, thank you very much and best of luck.
Darren Rebelez: So, over time, consumers can trust that they know what they're going to get when they're going to get. They come to cases for fuel from a pricing perspective, and so they don't have to shop around as intensely as maybe with some other brands. And then there's the added benefit of coming into the store for all the other offers, and it is a convenience store after all. Into the extent that you can combine trips, that just makes it even more convenient. And so, just as a reminder, about three quarters of our transactions are non-fuel related, so people are coming to our stores all the time for the store offer, and when they need fuel, it just becomes much more convenient to get their fuel while they're there. And, like I said, we have a consistency in pricing that allows us to capture those sales.
Speaker Change #110: One moment for our next question.
Speaker Change #131: Happy to report that it did so we're continuing to grow into that capability.
Speaker Change #111: Next question comes from Karen Short with Amelia's Research, your line is open.
Speaker Change #131: One of the exciting things about the fix.
Speaker Change #112: Hi everyone, this is Jacobic in Phillips on for caring. So we have two questions, the first is on the fuel supply chain. Any update or color you can give on the upstream pipeline and capabilities you've been developing and maybe how the types team will fall into that.
Speaker Change #131: Transaction is that this comes with a fuel terminal and they have a team who has been doing this for 10 or so years. So we're actually acquiring some expertise in this area.
Speaker Change #131: A different asset that we can leverage to our benefit so very excited about the additional.
Speaker Change #113: and then the second is any update you can give on pound of cheese using the prepared food business.
Speaker Change #131: Additional benefit benefit that we pick up with.
Speaker Change #113: I'll go ahead and take the fuel supply. He's saying again, the second question.
Speaker Change #131: With the <unk> transaction, Steve laid out.
Speaker Change #132: Just for cheese cheese.
Speaker Change #133: Cheese is the single largest commodity that we consume in our prepared food business I think most folks are familiar with that.
Speaker Change #115: of day on time to choose and to prepare to introduce business that you use.
Speaker Change #134: We used a little over 40 million pounds of cheese for perspective in the lab.
Speaker Change #115: Okay.
Speaker Change #116: Okay, thanks. Yeah, I'm on the fuel supply, you know, we just said that we would.
Darren Rebelez: A couple of thanks, guys. I'm not showing any further questions to turn the call back over to Darren for the closing remarks. Right. Thank you and thanks for taking the time today to join us on the call. Before we sign off, I just want to once again thank our team members for all their hard work this quarter. Great job. Oh, ladies and gentlemen, that concludes today's presentation. You may now disconnect and have a wonderful day.
Speaker Change #134: Last fiscal year that obviously.
Speaker Change #117: We would begin with our, what we call fuel 3.0, where we begin to buy product for the upstream into the supply chain and, uh,
Speaker Change #135: It goes up as store count goes up but we're also trying to manage waste to offset some of that and so we spent a little over $100 billion in total in aggregate.
Speaker Change #135: On cheese on the last fiscal year for some perspective.
Speaker Change #117: and supply that ship of a pipe into dedicated space. We did execute on that in the first quarter.
Speaker Change #136: One moment for our next question.
Speaker Change #117: We took baby steps to be completely honest to make sure everything went according to plan and happy to report that it did. So we're continuing to grow into that capability. One of the exciting things about the fights.
Speaker Change #137: Our next question comes from Anthony <unk> with Wells Fargo. Your line is open.
Speaker Change #138: Hey, good morning, guys, so sort of piggybacking on the labor question.
Anthony <unk>: Since our Opex has continued to trend pretty strongly but I did want to ask about the department of labor overtime rule.
Speaker Change #140: I believe that set the step up in January I know Theres, a lot of uncertainty still around what that ultimately looks like but just maybe some thoughts on possible impact your business. If that does go into effect and how youre thinking about mitigating.
Speaker Change #140: Yeah, maybe I'll start with that this is Steve so.
Speaker Change #140: Pending step up in January.
Speaker Change #141: You should have a de minimis impact for us.
Speaker Change #142: At the current wage level that they've talked about it would it would be a couple of million dollars on an annual basis.
Speaker Change #143: To us most of our most of our impacted team members are already above.
Speaker Change #143: Above that threshold so the first certainly.
Speaker Change #118: It goes up as store count goes up but we're also trying to manage waste to offset some of that and so we spent a little over $100 billion in total in aggregate.
Year end I would say it would all be kind of washed out in our normal course, 3% to 4% wage.
Speaker Change #143: Wage increases that we had talked about earlier.
On cheese on the last fiscal year for some perspective.
Speaker Change #144: Got it that's helpful.
Speaker Change #145: And then just on gallon trends, obviously, you guys continue to underperform.
Speaker Change #119: One moment for our next question.
Speaker Change #146: Outperform versus what we've seen in a lot of your peers.
Speaker Change #147: Maybe some more thoughts on what's driving that and how you think about maybe the halo effect from the strong inside store proposition driving traffic to the pump.
Anthony <unk>: Our next question comes from Anthony <unk> with Wells Fargo. Your line is open.
Hey, good morning, guys.
Speaker Change #121: Sort of piggybacking on the labor question.
Speaker Change #147: Yes, Anthony I think I think you hit it on the head.
Anthony <unk>: I know since our Opex has continued to trend pretty strongly but I did want to ask about the department of labor overtime rule I.
Speaker Change #148: All things being equal.
Speaker Change #149: Guests are going to choose where they where they shop based on the inside offer in.
I believe that set the step up in January I know Theres, a lot of uncertainty still around what that ultimately looks like but just maybe some thoughts on possible impact your business. If that does go into effect and how youre thinking about mitigating.
Speaker Change #150: You've got to be competitive on fuel.
Speaker Change #151: Our field team does a really good job of having a consistent approach to pricing so overtime consumers.
Anthony <unk>: Yeah, maybe I'll start with that this is Steve so.
Speaker Change #151: Can trust that they know what theyre going to get when they come to Casey's for fuel from a pricing perspective, and so they don't have to shop around as intensely as maybe with some other brands.
Anthony <unk>: The pending step up in January.
Speaker Change #122: It should have a de minimis impact for us.
At the current wage level that they've talked about it would it would be a couple of million dollars on an annual basis.
Speaker Change #151: Then.
Speaker Change #151: There is the added benefit of coming into the store for all of the other offers and it is.
Speaker Change #122: To us most of our most of our impacted team members are already above.
Speaker Change #152: <unk> store after all and to the extent that you can combine trips.
Speaker Change #122: Above that threshold so the first certainly.
Speaker Change #152: That just makes it even more convenient.
Year end I would say it would all be kind of washed out in our normal course, 3% to 4% wage.
Speaker Change #153: And so just as a reminder, about three quarters of our transactions are non fuel related so people are coming to our stores all the time for the store offer and when they need fuel. It just becomes that much more convenient to get their fuel while they're there.
Speaker Change #122: Wage increases that we had talked about earlier.
Speaker Change #123: Got it that's helpful.
Speaker Change #124: And then just on gallon trends, obviously, you guys continue to underperform.
Speaker Change #153: Like I said, we have a consistency in pricing that allows us to to capture those sales.
Speaker Change #125: Outperformed versus what we've seen in a lot of your peers.
Speaker Change #126: Maybe some more thoughts on what's driving that and how you think about maybe the halo effect from the strong inside store proposition driving traffic to the pump.
Speaker Change #154: Helpful. Thanks, guys.
Speaker Change #155: I'm not showing any further question at this time I'd like to turn the call back over to Darren for any closing remarks.
Darren: Alright, Thank you and thanks for taking the time today to join US on the call before we sign off I just want to once again, thank our team members for all their hard work this quarter great job.
Speaker Change #126: Yes, Anthony I think I think you hit it on the head.
Speaker Change #127: All things being equal.
Guests are going to choose where they where they shop based on the inside offer in.
Speaker Change #156: Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.
Speaker Change #128: <unk> got to be competitive on fuel.
Speaker Change #127: Our field team does a really good job of.
Speaker Change #127: Having a consistent approach to pricing so overtime consumers.
Speaker Change #127: Can trust that they know what theyre going to get when they come to Casey's for fuel from a pricing perspective, and so they don't have to shop around as intensely as maybe with some other brands.
Speaker Change #127: Then there's the added benefit of coming into the store for all of the other offers and it is a convenience store after all.
Speaker Change #127: The extent that you can combine trips.
Speaker Change #129: That just makes it even more convenient.
Speaker Change #130: And so just as a reminder, about three quarters of our transactions are non fuel related so people are coming to our stores all the time for the store offering.
Speaker Change #130: When they need fuel it just becomes that much more convenient to get their fuel while they're there.
Like I said, we have a consistency in pricing that allows us to to capture those sales.
Helpful. Thanks, guys.
Speaker Change #130: And I'm not showing any further questions I'd like to turn the call back over to Darren for any closing remarks.
Darren: Alright, Thank you and thanks for taking the time today to join US on the call before we sign off I just want to once again, thank our team members for all their hard work this quarter great job.
Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.
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Speaker Change #131: Good day, and thank you for standing by and welcome to the first quarter FY 2025, Casey's General stores earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question during the session need to press star one on your telephone you will then hear an automated message advising your hand is raised to withdraw your question. Please press star one again.
Speaker Change #131: Please be advised today's conference is being recorded I would now like to turn the conference over to your Speaker today, Brian Johnson Senior Vice President Investor Relations and business development. Please go ahead.
Brian Johnson: Good morning, and thank you for joining us to discuss the results from our first quarter ended July 31, 2024, I'm, Brian Johnson Senior Vice President Investor Relations and business development with me today are Dan rebellious Board Chair, President and Chief Executive Officer, and Steve Bramlage, Chief Financial Officer.
Speaker Change #132: 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 1095.
These forward looking statements include any statements relating to the ability to consummate the <unk> transaction the potential impact of the consummation of the <unk> transaction on relationships with third parties expectations for future periods possible or assumed future results of operations financial conditions liquidity and related sources our needs.
Speaker Change #132: The company's supply chain business, and integration strategies plans and synergies and growth opportunities and performance at our stores. 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.
Speaker Change #132: The integration of the recent acquisitions, our ability to execute on our strategic plan or to realize benefits from our strategic plan the impact 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 Form 10-Q.
Speaker Change #133: Q as filed with the SEC and available on our website.
Speaker Change #133: 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.
Speaker Change #134: A reconciliation of non-GAAP to GAAP financial measures referenced in this call as well as the detailed breakdown of the operating expense increase for the first quarter can be found on our website at www Dot cases dot com under the Investor Relations link.
Speaker Change #134: But that said I would now like to turn the call over to Darren to discuss our first quarter results Dan.
Darren: Thanks, Brian and good morning, everyone. We're excited to discuss the first quarter results in a moment first however, I want to thank our team for their hard work and dedication, which enable us to start the fiscal year off strong.
Also look forward to welcoming the <unk> team to the Casey's family and we will discuss that later in the call.
Speaker Change #135: As the school year begins tenancies is proud to see projects funded by its cash for classrooms grants and action.
Speaker Change #135: Last year, we donated over $1 million in grants to schools across our footprint.
Speaker Change #135: We are grateful to our team members and guests for raising nearly $600000 in this August campaign.
Speaker Change #135: This will allow us to continue to have a positive impact on schools and children in our community.
Speaker Change #136: Now, let's discuss the results from the quarter.
Speaker Change #137: Diluted EPS finished at $4 83 per share a 7% increase from the prior year.
Speaker Change #137: The company generated $180 million of net income an increase of 6% and $346 million in EBITDA, an increase of 9% from the prior year.
Speaker Change #138: The first quarter was another great example of the strength and resiliency of the cases business model as we were able to expand gross profit dollars, while growing the store base.
Speaker Change #138: Inside the store, we saw continued strength with our prepared food innovation as well as margin expansion driven primarily by the grocery and general merchandise category.
Speaker Change #139: On the fuel side. The team is doing a tremendous job balancing volume and margin with positive same store gallons combined fuel margins over 40 per gallon.
Speaker Change #139: We continue to show their three year strategic plan is credible and achievable and our team is doing a great job both inside and outside the store.
Speaker Change #140: I would now like to go over our results and share some of the details in each of the categories.
Speaker Change #140: Inside same store sales were up two 3% for the first quarter or seven 9% on two year stack basis with an average margin of 41, 7%.
Speaker Change #140: Same store prepared food and dispense beverage led the way.
Speaker Change #140: <unk> were up four 4% or 10, 6% on a two year stack basis with an average margin of 58, 3%.
Speaker Change #140: Hot sandwiches continued its momentum from the fourth quarter and bakery also performed well.
Speaker Change #140: Margin was comparable to the prior year as favorability in waste was offset by a modest cheese headwind.
Same store grocery and general merchandise sales were up one 6% or six 9% on a two year stack basis.
Speaker Change #140: Average margin of 35, 4% an increase of approximately 130 basis points from the prior year, primarily due to good cost of goods management.
Speaker Change #141: We saw positive momentum in the category globally in both non alcoholic alcoholic beverages specifically.
Speaker Change #141: Our 500 liquor licenses continue to be a strategic advantage for cases.
Speaker Change #142: For fuel same store gallons sold were up <unk>, 7% with a fuel margin of 47 cents per gallon.
Speaker Change #142: We continue to outperform our geographic region on volume.
Speaker Change #143: As opus fuel gallon sold.
Speaker Change #143: Data shows the mid continent region down approximately 5% in the quarter.
Speaker Change #143: Indicating that we are taking share in the category.
Speaker Change #143: Our field team is doing a tremendous job balancing volume growth and margin and the results continue to show it.
Speaker Change #143: We prudently managed operating expenses was an increase of just <unk>, 7% on a same store excluding credit card fee basis.
Speaker Change #143: Our continuous improvement team is doing a great job identifying areas to be more efficient and it shows the same store labor hours were down 2%.
Speaker Change #143: I'd now like to turn the call over to Steve to discuss the financial results from the first quarter Steve.
Steve: Thank you Darren and good morning, I'm very grateful for the hard work of our team during the quarter. It's been a great start to the second year in our three year strategic plan in our first quarter results bode well for very solid fiscal 2025.
Steve: Total revenue for the quarter was $4 1 billion, an increase of $228 million or five 9% from the prior year due primarily to higher inside sales as well as higher fuel gallons sold partially offset by lower retail fuel price.
Speaker Change #144: <unk> were also favorably impacted by operating approximately 5% more stores on a year over year basis.
Speaker Change #144: Total inside sales for the quarter were $1 $47 billion, an increase of $104 million or seven 6% from the prior year.
Speaker Change #144: For the quarter prepared food and dispensed beverage sales rose by $32 million to $405 million, an increase of eight 7% in grocery and general merchandise sales increased by $72 million to one 7 billion an increase of seven 2%.
Speaker Change #144: As a reminder, we are lapping a $4 $9 million, one time benefit related to an adjustment we made to the Casey's rewards program in the prior year.
Speaker Change #144: In the quarter this negatively impacted both prepared food and dispensed beverage same store sales by approximately 140 basis points in margin by approximately 60 basis points.
Retail fuel sales were up $128 million in the quarter as an 8% increase in fuel gallons sold was partially offset by a 3% decline in the average retail price.
Speaker Change #144: Average retail price of fuel during this period was $3.31 a gallon compared to $3 40, a year ago.
Speaker Change #144: We define gross profit as revenue less cost of goods sold but excluding depreciation and amortization.
Speaker Change #144: <unk> gross profit of $955 million in the quarter, an increase of $78 million or eight 8% from the prior year.
Speaker Change #144: This is driven by both higher inside gross profit of $57 9 million or 10, 4% as well as higher fuel gross profit of $17 6 million or five 9%.
Speaker Change #144: <unk> gross profit margin was 41, 7% up 110 basis points from a year ago.
Speaker Change #144: Prepared food and dispense beverage margin was 58, 3% up 10 basis points from prior year.
Speaker Change #144: The category margin benefited from lower waste, but did experience a modest headwind on cheese, which was $2 nine per pound in the quarter compared to $2.04 per pound last year, that's an increase of 2% or approximately 13 basis points.
Speaker Change #144: The grocery and general merchandise margin was 35, 4%.
Speaker Change #144: An increase of 130 basis points from the prior year.
Speaker Change #144: And the change was primarily due to proactive cost of goods management.
Speaker Change #144: Fuel margin for the quarter was <unk> 47 per gallon down about a penny per gallon from the prior year.
Speaker Change #144: Fuel gross profit benefited by $4 8 million from the sale of brands.
Speaker Change #144: Down $15 4 million from the same quarter in the prior year.
Speaker Change #144: Total operating expenses were up eight 7% or $48 $6 million in the quarter, which was lower than we expected it to be due to strong operating performance in the stores.
Speaker Change #144: Approximately 5% of the total operating expense increase is due to unit growth as we operate at the 138 more stores than the prior year.
Speaker Change #144: Approximately 1% is related to one time deal costs pertaining to the previously disclosed <unk> acquisition.
Speaker Change #144: Higher insurance expense, including health property, and casualty worker's compensation and others contributed approximately 2% of the increase.
Speaker Change #144: Same store employee expense accounted for approximately 1% of the increase is modest increases in wage rates were partially offset by the reduction in same store hours.
Depreciation in the quarter was $94 4 million, that's up 11 $5 million versus the prior year, primarily due to operating more stores.
Speaker Change #144: Net interest expense was $14 1 million in the quarter Thats up $1 $6 million versus the prior year, primarily due to lower interest income as we funded several acquisitions out of cash on hand, and we have purchased shares in the prior year.
Speaker Change #144: The effective tax rate for the quarter was 24, 1% compared to 23, 6% in the prior year.
Speaker Change #144: The increase was driven by what was driven by a onetime benefit in the prior year that was recorded due to an income tax rate reduction in Nebraska.
Speaker Change #144: Net income was up versus the prior year to $182 million, an increase of six 5% EBITDA for the quarter was $345 $8 million compared to $316 $9 million a year ago, and that's an increase of nine 1%.
Our balance sheet is in excellent condition, and it's given us the ability to seamlessly make depending acquisition effects.
Speaker Change #144: On July 31, we had total available liquidity of $1 2 billion and our leverage ratio calculated in accordance with our senior notes is one five times.
Speaker Change #144: For the quarter net cash generated by operating activities of $281 million less purchases of property and equipment of $100 million resulted in the company generating $181 million of free cash flow.
Speaker Change #144: This compares to generating $160 million in the prior year.
Speaker Change #144: At the August meeting the board of directors voted to maintain the quarterly dividend at <unk> 50 per share.
Speaker Change #144: Investing in EBITDA and ROIC accretive growth investments remains our primary capital allocation priority.
Speaker Change #145: And with the pending acquisition of <unk>, we do not expect to repurchase shares until the leverage ratio was in line with our long term target of two times.
Speaker Change #145: We are not updating our previously communicated fiscal year guidance until after the Pfizer transaction closes with the exception of our store growth target.
Speaker Change #145: We now expect store growth to be approximately 270 units for the fiscal year and Thats up.
Speaker Change #145: From our previously disclosed 100 units.
Speaker Change #145: We will make some modest adjustments to our current newbuild schedule to ensure that we can expeditiously capture the expected synergies from this transaction fee and remodeling projects.
Speaker Change #145: As a reminder, the FX transaction has a gross purchase price of $1 145 billion.
Speaker Change #145: With approximately $165 million and acquire tax benefits for a net purchase price of $988 million and that transaction will be financed through a combination of balance sheet cash and external financing.
Speaker Change #145: The transaction includes a 198 stefko convenience stores with 148 of them being in Texas, and the remaining 50 in Alabama, Florida and Mississippi.
Speaker Change #145: The financial performance includes approximately $400 million of fuel gallons sold approximately $400 million in inside sales and have generated a 2023 pro forma adjusted EBITDA of $89 million.