Q1 2026 Caseys General Stores Inc Earnings Call

Operator: Good day, and welcome to the first quarter of fiscal year 2026 Casey's General Stores earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. Instructions will be given at that time. As a reminder, this call may be recorded. I would like to turn the call over to Brian Johnson, Senior Vice President, Investor Relations and Business Development. Please go ahead.

Good day and welcome to the first quarter of fiscal year 2026 Casey's General Store earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. Instructions will be given at that time. As a reminder, this call may be recorded. I would like to turn the call over to 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, 2025. I am Brian Johnson, Senior Vice President, Investor Relations and Business Development. With me today are Darren Rebelez, Chairman, President, and Chief Executive Officer, as well as Stephen Bramlage, Chief Financial Officer. Before we begin, I'll remind you that certain statements made by us during this investor call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include any statements relating to the potential impact of a Fikes transaction, expectations for future periods, possible or assumed future results of operations, financial conditions, liquidity, and related sources or needs, the company's supply chain, business and integration strategies, plans and synergies, growth opportunities, and performance at our stores.

Good morning, and thank you for joining us to discuss the results from our first quarter ended. July 31 2025, I am Brian Johnson, Senior vice president, and best relations. And Business Development with me today, are Darren rebeles chairman president and chief executive officer as well as Steve bramage Chief Financial Officer.

Brian Johnson: There are a number of known and unknown risks, uncertainties, and other factors that may cause our actual results to differ materially from any future results expressed or implied by those forward-looking statements, including but not limited to the integration of the recent acquisitions, our ability to execute on our strategic plan or to realize benefits from the strategic plan, the impact and duration of conflicts in oil-producing regions 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, as filed with the SEC and available on our website.

Before we begin, I will remind you that certain statements made by US. During this investor call May constitute forward-looking statements within the meaning of the private Securities. Litigation Reform, Act of 1995, these forward-looking statements include any statements relating to the potential impact of the fees. Transaction expectations for future periods possible or assumed future. Results of operations Financial conditions, liquidity, and related sources, or needs the company's supply chain business and integration strategies plans and synergies growth opportunities and performance at our stores.

Brian Johnson: 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. 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 quarter, can be found on our website at www.caseys.com under the Investor Relations link. With that said, I would now like to turn the call over to Darren to discuss our first quarter results. Darren.

There are a number of known and unknown risks uncertainties and other factors that may cause our actual results to defer materially from any future results Express or implied by those forward-looking statements, including but not limited to the integration of the recent acquisitions our ability to execute on our strategic plan or to realize benefits from the Strategic plan, the impact, and duration, of conflicts, and oil producing regions and related, government governmental actions as well as other risks, uncertainties and factors which are described in our most recent and report on form 10K. In quarterly reports on form 10q as filed with the FCC and available on our website.

Any forward-looking statements made during this call can reflect our current fuse as of today with respect to future future events and Casey's disclaims any intention or obligation to update or revise for looking statements. Whether as a result of new information, Fe future events or otherwise

Can be found on our website at www.ky.com under the Investor Relations link.

Darren Rebelez: Thanks, Brian, and good morning, everyone. Before we dive into our strong first quarter performance, I'd like to congratulate the entire Casey's team for executing an outstanding summer plan at a high level and delivering a terrific guest experience across Casey's country. I'd also like to highlight the positive impact Casey's is making on our communities. As students head back to school, Casey's is excited to see the impact of our Cash for Classrooms grants come to life. Last year, we awarded $900,000 to schools throughout our communities. Thanks to the generosity of our guests and team members, along with the support from our supplier partner, Coca-Cola, this August's campaign raised over $1 million, fueling our continued commitment to supporting education and enriching the lives of children across our footprint. Now let's discuss the results from the quarter.

With that said, I would now like to turn the call over to Darren to discuss our first quarter results. Darren

Thanks Brian and good morning everyone.

Before we dive into our strong first quarter performance, I'd like to congratulate the entire Casey's team for executing an outstanding summer plan at a high level in delivering a terrific guest experience across Casey's country.

I'd also like to highlight the positive impact cases is making on our communities.

The students head back to school cases. Is excited to see the impact of our cash for classrooms grants come to life.

Last year we awarded 900,000 dollars to schools throughout our communities.

Thanks to the generosity of our guests and team members along with the support from our supplier partner, Coca-Cola.

This August, the campaign raised over $1 million.

Fueling our continued commitment to supporting education and enriching the lives of children across our footprint.

Darren Rebelez: Diluted EPS finished at $5.77 per share, a 19% increase from the prior year. The company generated $215 million in net income and $414 million in EBITDA, both of which are an increase of 20% from the prior year. Inside the store, we saw positive traffic growth as guests responded well to our innovation and promotional activity in the prepared food and dispensed beverage category. We also experienced margin expansion driven primarily by the grocery and general merchandise category. Our fuel team is doing an excellent job balancing fuel volume and margin, achieving positive same-store gallons and margins above $0.40 per gallon. As we work through the last year of our three-year strategic plan, I'm extremely confident in our team's ability to execute at a high level and continue to grow the business.

Now, let's discuss the results from the quarter.

Diluted EPS finished at 5.77 cents per share a 19% increase from the prior year.

The company generated 215 million in net income and 414 million in ibida both of which are an increase of 20% from a per year.

Inside the store, we saw positive traffic growth as guests responded well to our innovation and promotional activity in the prepared food and dispense beverage category.

We also experienced margin expansion, driven primarily by the Grocery and General Merchandise category.

Our fuel team is doing an excellent job balancing fuel volume and margin, achieving positive same-store gallons and margins above 40 cents per gallon.

Darren Rebelez: I would now like to go over the results and share some of the details in each of the categories. Inside same-store sales, we're up 4.3% for the first quarter, or 6.7% on a two-year stack basis, with an average margin of 41.9%. Same-store prepared food and dispensed beverage led the way, as sales were up 5.6%, or 10.2% on a two-year stack basis, with an average margin of 58%. Pizza and bakery performed well in the quarter. Margin was down approximately 30 basis points from the prior year, as the lower margins from the recently acquired Sethco stores were partially offset by modest retail price adjustments, primarily in bakery and cost of goods management.

As we work through the last year of our three-year strategic plan, I'm extremely confident in our team's ability to execute at a high level and continue to grow the business.

I've now like to go over the results and share some of the details in each of the categories.

Inside the same store, sales were up 4.3% for the first quarter and 6.7% on a 2-year stacked basis.

With an average margin of 41.9%.

Same store, prepared, food, and dispensed. Beverage led the way at sales rock 5.6% or 10.2% on a 2-year stack basis with an average margin of 58%.

Pies and bakery performed well in the quarter.

Margin was down at approximately 30 basis points from the prior year as a lower margin from the recently acquired. South Coast stores was partially offset by Modest retail price adjustments, primarily in Bakery and cost of goods management.

Darren Rebelez: Same-store grocery and general merchandise sales were up 3.8%, or 5.4% on a two-year stack basis, with an average margin of 35.9%, an increase of approximately 50 basis points from the prior year, primarily due to favorable mix shift to higher margin items such as energy drinks and nicotine alternatives within their categories. Turning to fuel, same-store gallons sold were up 1.7%, with a fuel margin of $0.41 per gallon. According to OPIS fuel gallon sold data, the mid-continent region saw an approximate 3% decline this quarter, suggesting we continue to grow market share. The fuel team is successfully balancing volume and margin, and the performance shows it. We continue to be judicious managing operating expense with an increase of 3% on a same-store excluding credit card fee basis, lapping a 0.7% increase in the prior year.

Same store, Grocery and General Merchandise sales are up 3.8%, or 5.4%, on a 2-year stack basis with an average margin of 35.9%. An increase of approximately 50 basis points. From the prior year, primarily due to favorable, mixed shift to higher margin items, such as energy, drinks and nicotine Alternatives within their categories.

Turning to fuel. Same store, gallons sold were up 1.7% with a fuel margin of 41 cents per gallon.

According to Opus Fuel Gallon, sole data, the Mid-Continent region saw an approximate 3% decline in this quarter, suggesting we continue to grow market share.

the fuel team is successfully balancing volume and margin in the performance. Shows it

Darren Rebelez: Our focus on simplifying the operations once again resulted in reduced training and overtime hours, yielding an overall decrease of 1% in same-store labor. I would now like to turn the call over to Steve to discuss the financial results from the first quarter. Steve.

We continue to be judicious managing operating expense with an increase of 3%. On the same store, excluding credit card fee basis lapping up 0.7% increase in the prior year.

Our focus on simplifying operations once again resulted in reduced training and overtime hours, building an overall decrease of 1%.

Stephen Bramlage: Thank you, Darren, and good morning. We're clearly starting the third year of our three-year strategic plan on a really strong note, and I'm extremely proud of the hard work of the team during the quarter. Total revenue for the quarter was $4.6 billion. That's an increase of $469 million, or 11.5% from the prior year. That's due primarily to higher inside sales, as well as higher fuel gallons sold, partially offset by a lower retail fuel price. Results were also favorably impacted by operating approximately 8% more stores on a year-over-year basis. Total inside sales for the quarter were $1.68 billion, an increase of $210 million, or 14.2% from the prior year. For the quarter, prepared food and dispensed beverage sales rose by $53 million to $458 million, an increase of 13.2%, and grocery and general merchandise sales increased by $156 million to $1.23 billion.

I would now like to turn the call over to Steve to discuss the financial results from the first Steve. Thank you, Darren and good morning. We're clearly starting the third year of our 3 year, strategic plan on a really strong note and I'm extremely proud of the hard work of the team during the quarter.

Total revenue for the quarter was $4.6 billion. That's an increase of $469 million, or 11.5%, from the prior year. This increase is primarily due to higher inside sales as well as higher fuel gallons sold, partially offset by a lower retail fuel price.

Results were also favorably impacted by operating, approximately 8% more stores on a year-over-year basis.

An increase of 13.2%.

And Grocery and General Merchandise sales.

Stephen Bramlage: That's an increase of 14.6%. Retail fuel sales were up $178 million in the quarter, as an 18% increase in fuel gallons sold was partially offset by a 9% decline in the average retail price. The average retail price of fuel during this period was $3.00 a gallon, and that compares to $3.31 a year ago. We define gross profit as revenue less cost of goods sold, but excluding depreciation and amortization. Casey's had gross profit of $1.11 billion in the quarter, an increase of $157 million, or 16.5% from the prior year. This is driven by both higher inside gross profit of $91.1 million, or 14.8%, as well as higher fuel gross profit of $59 million, or 18.8%. Inside gross profit margin was 41.9%, up 20 basis points from a year ago. Prepared food and dispensed beverage margin was 58%, down 30 basis points from prior year.

Increased by 156 million to 1.23 billion dollars. That's an increase of 14.6%.

Retail fuel sales were up 178 million in the quarter, as an 18% increase in fuel gallons sold was partially offset by a 9% decline in the average retail price of fuel. During this period, the average retail price of fuel was $3 a gallon, which compares to $3 a year ago.

We define gross profit as revenue less cost of goods sold, but excluding depreciation and amortization.

Casey said gross profit of 1.111 billion dollars in the quarter and increase of 157 million or 16 and a half percent from the prior year.

This is driven by both higher inside gross profit of 91.1 million, or 14.8%, as well as higher fuel growth, profit of 59 million were 18.8%.

Stephen Bramlage: Cheese was $2.11 per pound for the quarter, compared to $2.09 per pound last year. That's an increase of 1% or less than 10 basis points. There was an approximately 110 basis point headwind from the Sethco stores that was partially offset by modest retail price adjustments, as well as strong cost of goods management. The grocery and general merchandise margin was 35.9%, an increase of 50 basis points from the prior year, and the change is primarily due to favorable mixed shift within the category. Fuel margin for the quarter was $0.41 per gallon, up $0.003 per gallon from prior year. This is inclusive of an approximately $0.015 per gallon drag due to the Sethco stores. Total operating expenses were up 14.6%, or $88.7 million in the quarter.

Inside gross profit margin was 41.9%. It's up 20 basis points from a year ago, prepared, food, and dispensed, beverage margin was 58% that's down 30 basis points from prior year.

Cheese was $2.11 per pound for the quarter compared to $2.99 per pound last year. That's an increase of 1% or less than 10 basis points.

There was an approximately 110 basis point headwind from the Sefco stores that was partially offset by modest retail price adjustments, as well as strong cost of goods management.

The Grocery and General Merchandise margin was 35.9%. It's an increase of 50 basis points from the prior year, and the changes are primarily due to a favorable mixed shift within the category. Fuel margin for the quarter was $0.41 per gallon, which is up $0.003 per gallon from the prior year. This is inclusive of an approximately $0.015 per gallon drag due to the SEFCO stores.

Stephen Bramlage: Approximately 10% of the total operating expense increase is due to unit growth, as we operated 221 more stores than in the prior year. Same-store employee expense accounted for approximately 1.5% of the increase, as modest increases in wage rates were partially offset by the reduction in same-store hours. Higher insurance and property taxes contributed to approximately 1% of the increase. Net interest expense was $26.9 million in the quarter. That's up $12.8 million versus the prior year, which is primarily due to the financing associated with the Fikes Wholesale transaction. Depreciation in the quarter was $109 million. That's up nearly $15 million versus the prior year, primarily due to operating more stores. The effective tax rate for the quarter was 22.7%. That's compared to 24.1% in the prior year. The decrease was driven by an increase in tax benefits that we recognized on share-based awards.

Total operating expenses were up 14.6%, or $88.7 million, in the quarter.

Approximately 10% of the total operating expense increase is due to unit growth. As we operated 221, more stores than in the prior year.

Same store employee expense accounted for approximately 1 and a half percent of the increase as modest increases in wage rates were partially offset by the reduction in the same store hours.

Higher insurance and property taxes contributed to approximately 1% of the increase.

Net interest expense was 26.9 million in the quarter and that's up 12.8 million versus the prior year, which is primarily due to the financing associated with the fees transaction.

To appreciation in the quarter was 109 million. And that's up nearly 15 million versus the prior year. Primarily due to operating more stores,

Stephen Bramlage: Additionally, as part of the One Big Beautiful Bill Act, our cash taxes will be reduced by approximately $90 million related to capital spending over the course of the fiscal year. This will not impact the tax rate for EPS purposes. Net income was up versus the prior year to $215.4 million, an increase of 19.5%. EBITDA for the quarter was $414.3 million. That's an increase of 19.8%. Our balance sheet remains in excellent condition, and we have more than ample financial flexibility. On July 31, we had total available liquidity of $1.4 billion. Also, on July 31, our debt-to-EBITDA ratio was 1.8 times as calculated under the covenants in our credit facilities.

The effective tax rate for the quarter was 22.7%, compared to 24.1% in the prior year. The decrease was driven by an increase in tax benefits that we recognized on share-based awards.

Additionally, as part of the $1 big beautiful Bill acts, our cash taxes would be reduced by approximately $90 million related to capital spending over the course of the fiscal year. This will not impact the tax rate for EPS purposes.

Net income was up versus the prior year to $215.4 million, an increase of 19.5%.

IBA for the quarter was 414.3 Million.

That's an increase of 19.8%.

Our balance sheet remains, an excellent condition and we have more than ample Financial flexibility.

On July 31st, we had total available liquidity of $1.4 billion.

Stephen Bramlage: For the quarter, net cash generated by operating activities of $372 million, plus purchases of property and equipment of $110 million, resulted in the company generating $262 million of free cash flow, and that compares to $181 million generated in the prior year. At the September meeting, the board voted to maintain the quarterly dividend at $0.57 per share. During the first quarter, we repurchased approximately $31 million in shares, and we have approximately $264 million remaining on our existing share repurchase authorization. As a reminder, investing in EBITDA and ROIC-accretive growth investments remains our primary capital allocation priority, but consistent with our fiscal year 2026 outlook, and given our modest leverage levels and strong cash flows, we repurchased shares during the quarter, and we expect to continue to do so for the remainder of the fiscal year.

Also, on July 31st, our debt to evaa ratio was 1.8 times as calculated under the covenants in our credit facilities.

For the quarter, net cash generated by operating activities of $372 million, plus purchases of property and equipment of $110 million, resulted in the company generating $262 million in free cash flow. This compares to $181 million generated in the prior year.

At the September meeting the board voted to maintain the quarterly dividend at 57 cents per share.

Approximately 31 million shares are outstanding, and we have approximately $264 million remaining on our existing share repurchase authorization.

Stephen Bramlage: Consistent with our past practice, we plan to update annual guidance on our second quarter earnings call when we're through the seasonally largest time of the year. Now, our results for August were as follows. Same-store volumes, both inside and outside the store, are consistent with our annual guidance expectations. Fuel CPG was near $0.40 per gallon, and current chief costs are slightly favorable versus the prior year. As a reminder, the second quarter is the final quarter where we're going to be comping non-ownership of Fikes Wholesale in the prior year. With this in mind, we expect the second quarter operating expense to be up mid-teens, as we had previously communicated. I'm now turning the call back over to Darren.

As a reminder investing in ebitda and roic, a creative growth Investments remains our primary Capital allocation priority, but consistent with our fiscal year 2026 Outlook and given our modest leverage levels of strong cash flows. We repurchase shares during the quarter and we expect to continue to do so for the remainder of the fiscal year,

Consistent with our past practice. We plan to update annual guidance on our second quarter earnings call when we're through the seasonally largest time of the year

Now our results for August were as follows: same-store volumes both inside and outside. The stores are consistent with our annual guidance expectations.

Fuel cpg was near 40 cents per gallon.

And current Chiefs costs are slightly favorable versus the prior year.

As a reminder, the second quarter is the final quarter, but we're going to be comping non-ownership of fights in the prior year.

Darren Rebelez: Thanks, Steve. I'd like to thank the entire Casey's team for an outstanding first quarter. We started our fiscal year off strong and are doing an excellent job of executing on the three-year strategic plan. The summer months are the busiest inside the store, and our team met guest expectations extremely well. Our merchandising plan for the summer was executed at a high level throughout the organization, from those that created the plan to those that the stores carry out the plan, to our supply chain and fuel teams and every team member in between. This team effort resulted in positive traffic to our stores and strong performance across the entire business. We also brought back our most popular LTO with the barbecue brisket pizza, and whole pies were a growth driver for the category.

With this in mind we expect a second quarter, operating expense to be up mid teens, as we had previously communicated. I'll now turn the call back over to Darren.

Thanks Steve.

I'd like to thank the entire thesis team for an outstanding first quarter.

We started our fiscal year off strong, and are doing an excellent job of executing on the 3 year, strategic plan.

The summer months were the busiest inside the store, and our team met guests' expectations extremely well.

Our merchandising plan for the summer was executed at a high level throughout the organization.

from those that created the plan to those at the stores, carrying out the plan, to our supply chain and fuel teams, and every team member in between

This team effort, resulted in positive traffic to our stores and strong performance across the entire business.

Darren Rebelez: Using guest insights and data gathered from our nearly 9.5 million Casey's Rewards members helps us get the right products on the shelves at competitive prices for our guests. All of this resulted in strong same-store results that were primarily driven by positive units and traffic. At the pump, we continue to gain market share as our same-store gallons growth outpaced OPIS data in our region. We believe our robust inside offering and competitive fuel pricing gives guests the reasons for Casey's to be the one-stop shop for prepared food, grocery items, and fuel. Overall, we're extremely excited about the Casey's business model and have high confidence in our ability to carry this momentum into the future. We'll now take your questions.

We also brought back our most popular lto with the barbecue, brisket, pizza and whole pies were a growth driver for the category.

Using guest insights and data gathered from our nearly 9.5 million Casey's Rewards members helps us get the right products on the shelves at competitive prices for our guests.

All of this resulted in strong same-store results that were primarily driven by positive units in traffic.

At the pump, we continue to gain market share as our same-store gallon growth outpaced U.S. data in our region.

We believe our robust inside offering in competitive fuel pricing gives guests a reason for cases. To be the 1 Stop Shop for prepared food, grocery items, and fuel.

Overall, we're extremely excited about the Casey's business model and have high confidence in our ability to carry this momentum into the future.

We will now take your questions.

Operator: Thank you. If you'd like to ask a question, please press star one. If your question has been answered and you'd like to remove yourself from the queue, please press star one again. We ask that you please limit yourselves to one question and a follow-up. One moment while we compile the Q&A roster. Our first question comes from Pooran Sharma with Stephens Inc. Your line is open.

Thank you. If you'd like to ask a question. Please. Press star 1, 1 1. If your question has an answered and you'd like to move yourself in the queue, please press star 1 on 1. Again, we ask that you please limit yourselves to 1 question and a follow-up 1 moment while we compile the Q&A roster.

And our first question comes from Piran Sharma with Steven Zinc. Your line is open.

Pooran Sharma: Good morning, and congrats on a strong quarter here.

Darren Rebelez: Morning, Pooran. Thank you.

Good morning and, um, and congrats on the on the strong quarter here.

Pooran Sharma: Thanks, guys. I just want to start off with maybe understanding fees cost. You mentioned they're slightly favorable versus the prior year. I was just maybe wondering if you could help us unpack that benefit a little bit, and if you could help us understand how much of your needs you have booked for the year.

Thank you.

Thanks guys. Um just I just want to start off with uh maybe understanding um, these cost you you mentioned. Um, there there are slightly favorable versus the prior year, um, was just maybe wondering if you could help us unpack that benefit a little bit and um and if if you could help us understand how much of your your needs, you you have booked for the year.

Darren Rebelez: Arnie, you kind of broke up on that question. Could you repeat that, please?

Or you, you kind of broke up.

Pooran Sharma: Yeah, just wondering if you could help us unpack the benefit from lower cheese cost and help us understand how much of your needs you have booked for the year.

On that question. Could you repeat that please?

Darren Rebelez: Yeah. In the quarter, it was obviously really close to prior year. We were a little less than 10 basis points difference on a year-over-year basis from a cheese cost perspective. As we sit here today, we are about 70% locked on our forward cheese requirements for the remainder of this fiscal year. Q2, three, and four are all right around 70% locked. We only lock if we can lock it at comparable or generally slightly favorable rates on a year-over-year basis. We feel pretty good about the certainty of cheese costs going forward. With the 30% of the strip that's open for us in the second quarter and the 70% we have hedged, that's why we're sitting here today. We're just a little bit ahead on a year-over-year basis.

Yeah. Uh, just wondering if you could help us unpack the benefit from a lower cheese cost and help us understand, uh, how much of your needs you have booked for the year.

Yeah. Um, so in the in the quarter uh it was It was obviously really close to Prior year. I mean we were

Or generally, slightly favorable rates on a year-over-year basis. And, and so, uh, we feel pretty good about the certainty of cheese costs going forward and, you know, with the 30% of the strip that's open for us in the second quarter. And the 70% we have hedge. That's why we're sitting here today, we're just a little bit ahead on a year-over-year basis.

Pooran Sharma: Okay. Appreciate that caller there. I just wanted to understand kind of the strength behind the fuel business. You mentioned it in your prepared comments. You know you're outpacing the region. You have a strong offering that drives traffic inside the store. I was wondering if you could talk about Fuel 3.0. Last quarter, I think you said about 3% of your supply was coming in from this initiative. I was wondering if you could provide us with an update on that initiative.

Okay, uh, appreciate that. Caller there.

And um, I just wanted to understand kind of the strength uh, behind the, the the fuel business. I mean, you you, you mentioned it in in, in your prepared comments. Uh, you, you know, your your outpacing the region, uh, you have a strong offering that that drives traffic, uh, inside the store. Um, but maybe it was wondering. Um, if you could talk about fuel 3.0 last quarter, I think you said about 3% of your supply was coming in from uh from this initiative. So uh, was wondering if you could provide us with an update, uh, on that initiative.

Darren Rebelez: Yeah, Farhan. With respect to Fuel 3.0, we continue to procure more of our fuel through that vehicle. For the combined business, it's about 8.8% of our total fuel procured. I would say that the majority of that is coming from the Fikes acquisition. As you recall, there's a fuel terminal we picked up, and they had been shipping fuel like this for a while. The bulk of it is there. We're about 3% of our fuel on the base business being procured through Fuel 3.0. Making good progress. The team's still integrating, but we like what we see so far on that.

Yeah. With respect to Fuel 3.0, we continue to, uh,

To procure more of our fuel, uh, through that vehicle.

You know, for the, uh, the combined business.

It's about 8.8% of our total fuel for Q1.

And I would say that the majority of that is coming from the Fikes acquisition. As you recall, there's a fuel terminal we picked up, and they had been.

Shipping fuel like this for a while. So the bulk of it is there were about 3%.

Of our fuel on the base business is being procured through fuel 3.0. So making good progress, the teams still integrating, uh, but we like what we see so far on that.

Operator: Thank you. Our next question comes from Charles Cerankosky with Northcoast Research Partners. Your line is open.

Greg Korder: Good morning, everyone. Greg Korder. Could you go into a little more detail on price versus volume in-store, please? You mentioned bakery, but how about some of the other categories?

Thank you. Our next question comes from Chuck Synkowski with North Coast Research. Your line is open.

Good morning everyone. Greg quarter. Uh, could could you go into a little more detail on price versus volume in store please? You mentioned Bakery, but how about some of the other categories?

Darren Rebelez: Overall, Chuck, you know we have about a 1.5% traffic increase, and then about 3% coming from price overall. That's what gets you to roughly your 4.5%. The majority of that price is coming through the tobacco category with cigarettes. As has been our practice for years, as those manufacturers pass on cost increases, we pass those on to the guests. That's what's driving the tobacco side of it. Outside of that, there's very modest price increases at all in the quarter, and a little bit on candy, just passing on cost increases, but very little. Really, what we're seeing is just more units purchased in the basket, which is really helping to drive the sales as well.

Well, this overall uh, Chuck, you know, we had about a percent and a half in traffic increase.

and then,

About 3%, um, coming from Price overall, so that will get you roughly your 4 and a half percent. You know? The majority of that that price is coming through the tobacco category with cigarettes.

And so as has been our practice for years, as those manufacturers pass on cost increases, we pass this on to the guests and that's

Greg Korder: Darren, would that increase in units be true of both prepared foods and the grocery/merchandise?

that's what's driving the uh tobacco side of it outside of that. There's very modest pricing increases at all in the quarter and a little bit on Candy, just passing on cost increases. But, but, um, very little in, in really, what we're seeing is, is more units purchased in the basket, which is really helping to drive the sales as well.

Darren Rebelez: Yeah, it is. It is, Chuck. I mean, more so in the prepared food than in the grocery, but I mean, we're seeing really good strength in non-alcoholic beverages in the grocery category and in snacks as well.

Darren, would that increase in units be true of both prepared foods in the grocery and merchandise?

Yeah, it is. It is Chuck. I mean more so in the prepared foods than in the grocery. But I mean we're seeing really good strength in non-alcoholic beverages.

Um, in the grocery category and in snacks as well.

Greg Korder: Thanks a lot. Have a great rest of the year.

Darren Rebelez: Thank you. You too.

Thanks a lot. Have a great rest of the year.

Thank you, you too.

Operator: Thank you. Our next question comes from Charles Grom with Gordon Haskett Research Advisors. Your line is open.

Stephen Bramlage: Hey, thanks, Greg Korder. I'm just wondering if you could speak to the overall health of your consumer across income cohorts, any incremental evidence of trade down, and then regionally, seeing the note in the border stores, Texas region?

Thank you. Our next question comes from Chuck Grom with Gordon Haskett. Your line is open.

Hey, thanks. Um, great quarter. I'm just wondering if you could speak to the overall health of your consumer across income cohorts, any incremental evidence of trade down. And then, uh, regionally, I’m sending the note in the Border Stores, Texas region.

Darren Rebelez: Yeah. I'll first talk about guest strengths from an income cohort standpoint. For the rewards members that we have where we can really track their behavior and have full visibility, we're really seeing relatively strong performance across all income cohorts. The way we break that down is $50,000 or less in income, $50,000 to $100,000, and then everybody above $100,000. The lower income group, that $50,000 and under, are still shopping the stores and still buying at a fairly healthy clip, just not as much as the other income cohorts, about 160 basis points lower than the higher income cohorts, but still coming to the store, still buying. Really, where we're seeing the most strength inside of that is in our prepared food business.

yeah, I'll I'll first talk about um,

guest strength from income cohort standpoint, you know, for the rewards members that we have where we can.

Really track their behavior and see full visibility. We're really seeing.

Relatively strong performance, across all income cohorts. And the way we break that down is

$50,000 or less in income, $50,000 to $100,000, and then everybody above $100,000. And so the lower income group is that $50,000 under.

We're still shopping in the stores and still, um, buying at a fairly healthy clip—just not as much.

as the other income cohorts are about 160 basis points lower than

Darren Rebelez: I think that value proposition for the quantity and quality of the food that you're getting is really resonating with that group, as well as the others. Probably on the other side, the category most pressured by lower income consumers is cigarettes, but again, our cigarette mix is lower than most of the industry. I think we're a bit insulated from that perspective.

Buying and and really where we're seeing the most strength inside of that is in our prepared foods business. I think that value proposition for the quantity and quality of the food that you're getting is really resonating with that group as well as the others.

Um, probably on the other side, the category most pressured by lower-income consumers is cigarettes. But again, our cigarette mix is lower than most of the industry. So I think we're a bit insulated from that perspective.

Stephen Bramlage: Did you have anything regionally?

Darren Rebelez: Yeah, it's about the Texas stores. You know, there's a little bit more pressure down there than there is with the base business. Keep in mind also, those Sethco stores are still Sethco stores right now. They're not Casey's stores. We've converted three proof of concept stores, but we haven't converted anything else. They don't have the food proposition that we have in our base business. As we start to remodel those stores, we'll start to change the trajectory of those businesses. It's a bit under a bit more pressure than our base business at the moment.

and then, you have anything recently originally

Yeah.

Yeah, you asked about the, the Texas stores, you know, um, there's a little bit more pressure down there than there is um, with the the base business. But keep in mind also those sefco stores are still Seth Co stores right now. They're not Casey stores. We've we've converted 3.

Stephen Bramlage: Okay. Appreciate that. My follow-up question is just on the Sethco business, the drag on the prepared food line in particular. I believe in the back half of last year was around 150, 160 basis points. You called out about 110 basis points this quarter, which is a really nice improvement. Can we dive into that? What are you guys making progress on, and how should we think about that drag on the total business in the coming quarters?

Proof of concept stores, but we haven't converted anything else so they don't have the food proposition that we have in our base business. And so, um, as we start to remodel those stores, we'll start to change a trajectory of that those businesses. But it it's a bit it's under a bit more pressure than than our base business at the moment.

Darren Rebelez: Yeah, we've made a few adjustments to the assortment, really just kind of some basic stuff, just cleaning up some things where maybe some items weren't selling very well. We've eliminated those items, and that's definitely helped. They've adopted a little bit more of our promotional approach, not 100% yet because they don't have all the assortment, but we're evolving in that direction. We're starting to see a little bit of benefit. We won't see the biggest benefit until we convert the kitchens and start selling the full assortment. At the moment, their prepared foods business runs at a margin rate just slightly greater than half of the margin rate of a Casey's General Stores location. There's going to be that drag until we get those stores converted and fully up to speed.

Okay, appreciate that. And then my followup question is just on the, on the sethco business. Um, the drag on the prepared foods, um, line in particular, um, I believe in the back half of last year was around 150, 160 basis points, you called out about 110 basis points. This quarter which is, which is a really nice Improvement. Can we, can we dive into that? What do you guys making progress on and how should we think about that drag on the total business in the coming quarters?

Yeah, you know? Um,

We've made it. We've made a few adjustments to the assortment, um, really just kind of some basic stuff.

Just clean up some things where maybe some items weren't selling very well. So we've eliminated those items and and so that's, that's definitely helped. Um, they've adopted a little bit more of our promotional approach not 100% yet because they don't have all the assortment, but we're evolving in that direction. And so we're starting to see a little bit of benefit. We won't see the the biggest benefit until we are convert the kitchens and start selling the full assortment so

You know, at the moment, you know, they're prepared foods business.

Stephen Bramlage: Realistically, we don't expect significant synergy capture from, you know, remodeling the stores until, you know, a year plus from now. That's a function of just timing of us being able to get permitting and construction, etc., finished.

Runs at a margin rate, just slightly greater than half of the margin rate of a Casey store. So there's there's going to be that drag until we get those stores converted and, and fully up to speed, you know, and just as a reminder realistically we don't expect significant Synergy capture from, you know, remodeling the stores and until

You know a year plus from now. And that's a function of just timing of us, being able to get permitting and and construction Etc. Finished

Operator: Thank you. Our next question comes from Robert Griffin with Raymond James & Associates. Your line is open.

Anthony Bonadio: Hey, guys. Thanks for taking the questions and a great start to the fiscal year.

Thank you. Our next question comes from. Bobby Griffith with Raymond James, your line is open.

Yes, thanks for taking the questions. Uh, great start to the fiscal year.

Darren Rebelez: Thanks, Bobby.

Anthony Bonadio: I guess, Darren, first, I just wanted to maybe touch on the wings test if there's anything more you can share there. I know you guys are still in kind of very early learnings, but we touched on it last quarter. I was just curious, anything incremental over the last couple of months?

Thanks Bobby, I guess Darren first. I just wanted to maybe touch on the wings test. If there's anything more, you can share their. Um, I know you guys are still in kind of very early learning but uh, we touched on it. Last course, was just curious anything incremental over the last couple months.

Darren Rebelez: Not too much. The team is definitely working on it. We're taking the approach on this that we have with a lot of other product innovations, and I think it's worked to our benefit. We'll continue to work it, continue to evolve it until we get it right, and it'll roll out when it's ready to roll out. We've identified a few opportunities with some flavor profiles, with some builds. We're still tweaking some equipment needs, but we like what we're seeing. We're making progress. As soon as we feel confident we have it completely dialed in, that's when we'll start to expand.

Uh, not too much. I mean, the team is definitely working on it and.

you know, we're we're taking the approach on this that we have with a lot of other

Product innovations, I think, have worked to our benefit. Is that correct?

We'll continue to work on it, continue to evolve it, until we get it right, and it'll roll out when it's ready to roll out. We have identified a few opportunities with some flavor profiles and some builds.

Oh, we're still tweaking some equipment needs, but um,

But we we like what we're seeing. We're making progress. And um you know as soon as we we feel confident we have it.

Anthony Bonadio: Fair enough. Yeah, I appreciate those details. I guess secondly, it does seem the last couple of quarters, the core prepared food business out of Casey's has really found some nice momentum on the margin side, enough so to even offset the Fikes dilution. Can you maybe unpack that a little bit more? I mean, I think you guys mentioned Fikes was a 110 basis point drag, so it implies the core was up nicely. How much is left there? What do you think, does that create a better pricing opportunity for you guys to even push harder on competition? How do you think about that if this core margin improvement is sustainable?

Completely dialed in, that's when we'll start to expand.

Fair enough and appreciate those details and then I guess, secondly, it does seem the last couple quarters, the core prepared Food business. Out of cases is really found some nice momentum on the margin side, you know, enough so that even offset the Fikes solution. Can you maybe unpack that a little bit more? I mean, I think you guys mentioned fights is 110 basis point drag so it implies the core was up nicely. You know, how much you know is left there and kind of, what do you think that does that create a? A better pricing opportunity for you guys to even push harder on competition? Or how do you think about that? Uh, if if this core margin Improvement is sustainable,

Darren Rebelez: With our prepared food margin, I think we've got a couple of things. One is, we've made some progress on the procurement side from a cost of goods standpoint, so that's certainly helped, particularly on dispensed beverages. I think the other big piece of it is the acceleration of our whole pie business. Our whole pie business is the highest margin subcategory within prepared foods, and it's the largest. When that starts to grow, everything gets better in our prepared food business when that's growing, and that's what we're experiencing right now. We like what we see and are hoping for that momentum to continue.

So we've we've made some progress on the procurement side from a cost of good standpoint so that's certainly helped particularly on dispense beverages the I I think the other the other big piece of it is um the acceleration of our whole pie business, our whole pie.

Um, business is the largest or the highest margin subcategory within prepared foods, and it's the largest. And so when that starts to grow, everything gets better in our prepared Food business when when that's growing and and that's what we're experiencing right now. So, um, we like what we see and um, hoping for that momentum to continue.

Operator: Thank you. Our next question comes from Anthony Bonadio with Wells Fargo Securities. Your line is open.

Anthony Bonadio: Yeah. Hey, guys. Good morning. Thanks for taking our question.

Thank you. Our next question comes from, Anthony bonadio with Wells, Fargo. Your line is open.

Darren Rebelez: Morning.

Anthony Bonadio: To dig in a little bit on that earlier fuel question, a lot of your peers are sort of struggling to just tread water on fuel gross profit dollars, and you guys managed to grow both same-store gallons and fuel margins with a Fikes headwind in there. Can you just talk a little bit more about what you think is driving that dispersion, and then what you're seeing out there competitively, just given some of the commentary we're hearing from your peers?

Yeah, hey guys, uh, good morning, thanks for taking our question. Um, so just to dig in a little bit, um, on that earlier fuel question. Um, a lot of your peers are sort of struggling to just, uh, tread water on fuel growth profit dollars. And you guys managed to grow, uh, both in store gallons and seal margins, um, with a flex headwind in there. So can you just talk a little bit more about what you think? Uh, is driving that dispersion. And then what you're seeing out there competitively uh just give them some of the commentary we're hearing from your peers.

Darren Rebelez: Yeah, I'd say there's really three things that we think are helping out our fuel volume. The first is really our prepared foods offer. As we talked about before, Anthony, you fill up your tank once a week or so, but you eat three, four, five times a day. I think with our food proposition really resonating with people, it's driving more traffic to the store. We just simply have more shots on goal from a fuel standpoint once you're already on the lot, and perhaps some of our competitors do. The second piece is our value perception. In the research we do with our guest insights team, when we ask guests to compare us to our largest competitors, we score the highest on offering low prices and on good value for the money.

Yeah, I’d say there’s really...

3 things that we we think are are helping out our fuel volume. The first, the first is really, our prepared foods offer and because we talked about before Anthony. Um, you fill up your tank once a week or so.

Um, but you eat 3, 4, or 5 times a day, and I think with our food proposition really resonating with people, it's driving more traffic to the store. So we just simply have more shots on goal.

Um, from a fuel standpoint, once you're already on the lot, then perhaps some of our competitors do.

The second piece is our is our value, uh, perception. And, you know, in the research, we do with our guests insights team.

Darren Rebelez: I think there's a perception people are coming to the store anyway for prepared foods, but we also have a great value perception overall with the store. There's not a lot of incentive to go shopping around for fuel price. Great credit to our fuel team. Over the last number of years, they've been able to very consistently execute our pricing strategy. Over time, guests built some confidence around the idea that we're always going to be competitively priced. If you're already at the store anyway, and you know we're going to be competitively priced, there's just not a good reason to shop around. I think that consistency has helped our fuel business. We haven't had to get overly aggressive from a margin standpoint because we've been always competitive and consistently so.

When we ask guests to compare us to our largest competitors, we score the highest on offering low prices and on good value for the money. And so I think.

There's a perception that people are coming to the store anyway for prepared foods, but we also have a great value perception overall with the store. So, there's not a lot of incentive to go shopping around.

Um, for fuel price and our and, you know, great credit to our fuel team.

oh, over the last number of years, they've been able to very consistently execute our pricing strategy and so over Time guest build some confidence around the idea that we're always going to be competitively priced if you're already at the store anyway and you know, we're going to be competitively priced, there's just not a good reason to shop around and so I think that that consistency has helped our fuel business and it and we haven't had to get overly aggressive from a margin standpoint because we've been always competitive

Um, and consistently. So

Operator: Thank you. Our next question comes from Michael Montani with Evercore ISI. Your line is open.

Michael Montani: Yes. Hi. Good morning. Thanks for taking the question. I just wanted to ask a two-parter. First off, I was wondering if you could comment a little bit about the M&A backdrop that you're seeing out there, you know, both in terms of smaller deals and then also potentially the larger kind of 50-plus store deals. That was one thing. The other one was just on seasonality. I understand you don't want to update the full-year guide, but in the past, you know, Q2 earnings power is usually pretty similar to Q1, and then you get maybe a 40% to 50% step down in the back half of the year. Just wanted to understand if there's any puts or takes on the timing side or otherwise, you know, we need to keep in mind when we're thinking about kind of the sequential earnings cadence through the year.

Thank you. Our next question comes from. Michael montani with evercore isi. Your line is open.

Uh, yes. Hi, good morning. Thanks for taking the question. I just wanted to ask a two-part question. First off, I was wondering if you could comment a little bit about the M&A backdrop that you're seeing out there, you know, both in terms of smaller deals and then also potentially the larger kind of 50-plus store deals. Um, so that was one thing. And then the other one was just on seasonality. I understand you don't want to update the full year guide, but in the past, you know, Q2 earnings have usually been pretty similar to Q1, and then you get maybe a 40-50% step down in the back half of the year. So, I just wanted to understand if there are any puts or takes on the timing side or otherwise, you know, we need to keep in mind when we're thinking about.

Kind of the sequential earnings Cadence through the year.

Darren Rebelez: All right, Michael. With respect to M&A, I'll let Steve talk about seasonality, but on the M&A front, I would say on the small deal M&A, it's kind of business as usual. Our team is out in the market. We're seeing a lot of interest from sellers. We think that's a good environment. I'd say it's nothing different than normal. On the larger deal M&A, we're having some conversations with folks. We haven't had anything active at the moment, but we're in the market, and we'll see how things evolve as we get through the year. On the seasonality, no changes in our view of how seasonality works. We believe that by the time we get to the second quarter earnings call, we've got visibility really the first seven months of the year at that point.

all right, Michael um you know with respect to m&a and I I'll let Steve talked about seasonality but um on the m&a front,

I would say on the small deal m&a, it's kind of business as usual. Our, our team is out in the market. We're seeing a lot of interest from sellers. Um,

You know, we we think that's a good environment. I I, I'd say it's nothing different than normal on the larger deal m&a. Um, we're having some conversations with folks, um, we haven't had anything active at the moment, but, um, we're in the market and we'll see how things evolve as we, um, get through the year.

Darren Rebelez: I think those are seven of the eight largest months we have in our fiscal year, and it just allows us to have a pretty high degree of confidence dialing in a refined view of the full year. We feel like we've had a good start for sure to the beginning of this year, but we've got a lot of work in front of us and a long way to go. We'll stick with the play that we've worked for so far around managing expectations.

Second quarter earnings call. You know, we've got visibility really the first 7 months of the year at that point and I think those are 7 of the 8 largest months

We have in our in our fiscal year and it just allows us to have a you know, pretty high degree of confidence.

Um dialing in a refined view of of the full year. Um we feel like we've had a good start for sure to the beginning of this year but you know we got a lot of work in front of us and a long way to go and so we'll we'll stick with the play that we feel is worked for so far around, its kind of managing expectations.

Operator: Thank you. Our next question comes from Bonnie Herzog with Goldman Sachs. Your line is open.

Bonnie Herzog: All right. Thank you. Good morning, everyone. Maybe just a quick question.

Thank you. Our next question comes from Bonnie hock, with Goldman Sachs. Your line is open.

Darren Rebelez: Good morning.

Bonnie Herzog: Good morning. Just a quick follow-up on this topic, just in terms of phasing, because I know you guys mentioned previously that you expected this fiscal year to be more, you know, second-half weighted given the timing of the Fikes acquisition. I'm just thinking about in the context, you know, the strength in Q1. First, love to hear, you know, how the quarter came in, maybe relative to your internal expectations. I guess if it was a little bit stronger, does it suggest maybe some conservatism, you know, to your guidance this year?

All right, thank you. Good morning, everyone. Maybe just a quick good morning. Just a quick follow-up on on this topic just in terms of phasing, because I know you guys mentioned previously, that you expected this fiscal year to be more, you know, second half weighted given the timing of the fees, you know, acquisition. So I'm just thinking about the context, you know, the strength in q1, first love to hear you know how the quarter came in, maybe relative to your internal expectations and then I guess if it was a little bit stronger, does it suggest maybe some conservatism you know to your guys this year?

Darren Rebelez: Bonnie, what I tell you is I kind of reiterate what Steve said. You know, we had a great first quarter. We think we're off to a good start from August results we just shared, and you know, we'll update everybody at the end of the second quarter when we have a little bit more visibility into the balance of the year.

What I what I tell you is is I kind of reiterate what Steve said, you know, we had a, we had a great first quarter. Um, we think we're off to a good start from August results. We just shared and um,

Stephen Bramlage: I mean, the one thing I would reiterate, Bonnie, is the seasonality dynamic has not changed. I mean, as far as I know in the business, I do think I'd reiterate for everybody the way the comping on a year-over-year basis, right, Fikes heavily influences that, right? We are going to have pretty big total changes in the first half of the year because we didn't have Fikes in a comparable period. If you get to the second half of the year, we obviously have Fikes in that prior year period, and the total change numbers will look a little bit different because it's just not quite as stark of a difference. That has not changed from any of our guidance expectations either.

you know, we'll update everybody at the end of second quarter when we have a little bit more visibility into the balance of the year. I mean, the 1 thing I would reiterate Bonnie, is that the seasonality dynamic has not

changed. I mean, as far as I know,

The business. I do think I'd reiterate for everybody the way the comping on a year-over-year basis, right? It is heavily influenced by that, right? So we're going to have.

Bonnie Herzog: Okay. Just one other quick question on promos. You did mention that that really helped drive traffic and strength inside the store in the quarter. Could you maybe quantify your spend levels this quarter versus the prior quarter, then maybe year-over-year? I guess I'm just hoping to understand maybe how much your promo spend has increased, either sequentially or year-over-year. Thank you.

Total changes in the first half of the year because we didn't have fights in a comparable period. But you get to the second half of the year. We obviously have fights in in that prior year period. And, and so that, the total change numbers will look a little bit different because it's just not quite as Stark of a, of a difference. And and that has not changed from any of our guides expectations either.

Darren Rebelez: Yeah. I guess the first thing I would point out is a large amount of the promotional activity that you see in a store from us is in conjunction with our vendor partners, right? BOGOs and that sort of thing are very often funded completely or at least partially, certainly within the grocery category, by our vendor partners. That spend per se doesn't show up directly in our financials. The absolute level of promotion for sure has continued to increase as the absolute level of business and the number of stores that we have has increased. The majority of the promotional spending is really not directly being funded by the company.

Okay. And then just 1 other quick question on promos. You did mention that that really helped drive you know, traffic and strength inside the store in the quarter. So could you maybe quantify your spend levels? This quarter versus, you know, the prior quarter, then maybe year over year. I guess I'm you know, just hoping to to understand maybe how much your promo spend is increased either sequentially or year over year. Thank you.

Yeah, well, um, you know, I guess the first thing I would point out is...

A, a large amount of the promotional activity, that, that you see in a store from us is in conjunction with our vendor Partners, right? And and so, um, you know, bogos and and that sort of thing are

Very often funded completely or or at least partially um certainly within the grocery category by by our vendor Partners. Um, and so that spend per se doesn't doesn't show up uh directly in in our financials. The, the absolute level of promotion for sure has continued to increase as the absolute level of of business. And the number of stores that we have has has increased, but but the majority of the promotional spending um is really not directly being funded uh by the company.

Operator: Thank you. Our next question comes from Kelly Bania with BMO Capital Markets. Your line is open.

Thank you. Our next question comes from Kelly Baena with BMO Capital Markets. Your line is open.

Bonnie Herzog: Good morning. Thanks for taking our questions. I just wanted to go back to Sethco now, coming up almost on a year, I guess 10 months. Just curious if there's any more learnings that you can share or even refinements to that original plan for the $45 million in synergies. It sounds like there's some very basic changes that you've been able to make on the inside of the store that's helping margins, just as you kind of step back big picture. Can you give us a little more color about how Sethco stores are comping and the competitive environment that they're facing?

Good morning. Uh, thanks for taking our questions. Uh, just wanted to go back to to sethco now. Um, coming up, almost almost on a year. I guess, ten months.

And just curious if there's any more learnings that you can share or even refinements to that original plan for the 45 million in synergies, sounds like, there's some very basic changes that you've been able to make on the inside of the store. That's helping margins. Um, but just as you kind of step back, big picture and and and can you give us a little more color about how Stefko stores are comping? Um, and and the competitive environment that they're, um,

Facing.

Darren Rebelez: Yeah. I would say that, broadly speaking, Kelly, that the Sethco integration is on track with what we expected. I think we described earlier, in the early stages of really any integration, this one's no different. We expect to get more synergy early on from fuel, and in this case, some G&A synergies because we acquired the entire business with a back office and that sort of thing. That is tracking as we would have expected. The biggest synergies come from putting our prepared foods in, and to get that done, we have to remodel stores and put kitchens in. There is a longer lead time on that. We really haven't got that work started in earnest yet, but the team is fully engaged on developing those plans and getting those permits executed so that we can begin that work. I would say, generally speaking, that it's on track.

Um, yeah, I would say that broadly speaking, Kelly, that the SEFCO integration is on track with what we expected.

Really any integration this 1's. No different. We expect to get more Synergy early on from Fuel. And in this case, some GNA synergies because we, we acquired the entire, the entire business with a, with a back office and that sort of thing, and that is tracking as we would have expected. Um, the but the biggest synergies come from putting our prepared foods in. And to, to get that done, we have to remodel stores and put kitchens in and and so there's there's a longer lead time on that. We really haven't gotten that work. Started in an Earnest yet, but but the team is fully engaged on, developing those plans and getting those permits executed, so that we can begin that work.

But I would say, generally speaking, that,

Darren Rebelez: In terms of how we're comping with, there's a lot of noise in those numbers. There are some changes in behavior that have occurred as we've taken over the operation, particularly on the fuel side. You may recall that they had one person pricing fuel for the entire company. That was their CEO. We're probably taking a little different approach on that. We're seeing some different results, both on the volume and margin side. There are puts and takes to that. I think overall, it's working as we would expect. As we start the actual integrations and conversions, we're confident that that performance will accelerate. Steve, do you have anything you want to add to that?

Uh, it's on track in terms of how we're comping. There's a lot of noise in those numbers. There's some...

uh, changes in, um, in behavior that that, um, have occurred as we've taken over the operation particularly on the fuel side, you may recall that um,

They had 1 person pricing fuel for the entire company that was their CEO. And I'm so we're probably taking a little different approach on that, and so, we're seeing some different results, both on the volume and margin side. So there's puts and takes to to that, but, um, but I think overall it's, um, working as we would expect and uh, as we start the actual Integrations and conversions, we're we're confident that.

Stephen Bramlage: I think we're sitting here today, we're ahead on fuel for the reasons Darren said. Expectations were ahead on SG&A from what we had originally set out. I think 45 is still a good number, but I think we feel very good that, you know, the prospects, once we remodel the kitchens, we probably will land the plane above that. Because the bulk of the synergies are coming from kitchens, we really haven't started too soon to provide a different number.

That performance will accelerate. Steve, do you have anything you want to add to that? We're sitting here today, and we're ahead on fuel for the reasons Darren mentioned. Expectations are ahead on SG&A.

Um, for from what we had originally set out, I think 45 still a good number, but I I think we feel very good that, you know, the prospects. Once we remodel the kitchens, we we probably will land the plane above that but um, because the bulk of the synergies are coming from kitchens, we really haven't started too too soon to provide a different number.

Operator: Thank you. Our next question comes from Jacob Aiken-Phillips with Melius Research. Your line is open.

Stephen Bramlage: Good morning. I wanted to start with thinking about store growth in the outer years past the three-year target, especially in the context of some larger public competitors making bigger acquisitions, as well as some private players with good prepared food offerings aggressively expanding geographically.

Thank you. Our next question comes from Jacob. Akin Phillips with Melius research. Your line is open.

Hi, good morning.

um, so I wanted to start with um,

Thinking about store growth like in in the outer years past the the 3 year Target and especially in the context of there's some larger public competitors, making some bigger Acquisitions as well as some private playables private players with good prepared, food, offerings, kind of aggressively expanding geographically.

Darren Rebelez: I'm sorry, Jacob, was there a question in there?

Stephen Bramlage: How should we think about store growth in outer years in the context of the competition and where you'll expand geographically?

So is there I'm sorry. Jake was there a question in there? How should we think about store growth and like outer years?

Darren Rebelez: Yeah. You know, with respect to store growth broadly, I mean, we haven't obviously issued our next three-year plan, which we will do in June of next year, and we'll share those numbers. If I step back, our fundamental growth algorithm is, you know, trying to drive 8 to 10% EBITDA growth. To get to that 8%, we typically get half of that from growing the base business through all of our merchandising and operational initiatives, and then half of that through store growth. Think about 4 to 5% unit growth per year. About half of that will come from NTIs that we build and source the real estate for, and the other half directionally comes from M&A, typically small deal M&A. We don't typically build in any sort of assumptions on larger scale M&A because those are more opportunistic as sellers become sellers.

In the context of the competition and, like, where you'll expand geographically?

Yeah. Um,

You know, with respect to store growth broadly, I mean, we haven't...

Obviously, we issued our next three-year plan, which we will do in June of next year, and so we'll share those numbers. But if I step back, our fundamental growth algorithm...

Is uh, you know, trying to drive 8 to 10 percent above growth and to get to that 8%. We typically get half of that from

Um, we are growing the base business through all of our merchandising and operational initiatives, and then half of that through store growth. So think about 4% to 5% unit growth per year.

About half of that will come from NTI that we build and source the real estate for. And the other half directionally comes from M&A, typically small deal M&A; we don't typically build in.

Any sort of assumptions on larger scale M&A, because those are more opportunistic as.

Sellers. Um,

Darren Rebelez: That's how I would think about it more broadly. You know, our geography that we operate in today can support a large number of new stores in it. There's a lot of towns and a lot of white space that do not have Casey's that would benefit from one. We see a really unlimited runway for unit development just within our geography, let alone, you know, in the adjacent states to that.

You know, become sellers.

So that's how I would think about, more broadly, um, you know, our geography.

That we operate in today can support a large number of new stores in it, but there's a lot of towns and a lot of white space that do not have cases that that would benefit from 1. So, um, we we see a, a really unlimited runway for unit development, just within our geography, let alone, you know, in the, the adjacent states to that.

Stephen Bramlage: Got it. You've been pretty explicit in benchmarking Casey's against QSRs, both on valuation and on just innovation. How do you measure success on the front, and what KPIs should we be looking at to track or gauge the progress there?

Got it. And then, so you've been pretty explicit in advanced marketing cases against QSRs.

Darren Rebelez: To me, success would be looking at how our same-store sales performance measures up to theirs. I would say even more specifically on prepared food and dispensed beverage. If you look at this quarter as an example, we were up 5.6% same-store or a little over 10% two-year stack. I think that compares really favorably, and that's in prepared foods. That compares really favorably to just about any QSR or pizza concept that's out there that we have visibility to. I would say that the consistency of our results and the absolute magnitude of them would put us in pretty good shape right now relative to those peers.

Kpis, should we be looking at the track or engage the progress there?

0 2.

To me, success, would be looking it out how our same store sales performance measures up to theirs. And I would say even more specifically on prepared food dispense, beverage. And if you look at this quarters, an example, we were up 5.6%, same store, or a little over 10% 2 year stack.

I think that compares really favorably, and that's in prepared foods. That compares really favorably to just about any QSR or pizza concept that's out there that we have visibility to. So, I would say that, um, to the consistency of our results and the absolute magnitude of them would put us in pretty good shape right now relative to those peers.

Operator: Thank you. Our last question comes from Corey Tarlow with Jefferies. Your line is open.

Anthony Bonadio: Great. Thanks. Darren and Steve, I wanted to ask about the grocery and general merchandise category. What's driving the growth? I'm assuming energy drinks is helping. On the margin for the category, I think this is the best gross margin that you've had for the category in a really long time in the first quarter. Could you talk a little bit about the drivers of that and maybe what helped? As we think about what's ahead, maybe what stays in and what comes out, any color you could provide, that would be really helpful. Thanks so much.

Thank you. And our last question comes from Corey tarlow with Jeffries. Your line is open.

Great. Thanks. And I guess Darren and Steve.

I wanted to ask about the grocery and, and General Merchandise category.

um,

What's driving the growth? I'm assuming energy drinks is helping. Um, and then second on the margin for the category.

I think this is the best gross margin that you've had for the category and a really long time in the first quarter.

Uh, could you talk a little bit about the drivers of that? And

Maybe what? Helped?

Uh, what?

Uh, as we think about what's ahead, maybe what stays in and what comes out.

Any color you could provide would be really helpful. Thanks so much.

Darren Rebelez: Yeah, Corey. I would say the growth driver in grocery and general merchandise has clearly been non-alcoholic beverages. That's been the strongest growth area, a little over 8%. There's some puts and takes on the rest, modest increases here and there. I would say that is the big driver. As you mentioned, energy drinks being the strongest contributor to that grocery and to the non-alcoholic beverage growth. Really, from the margin standpoint, there are two things going on. I think our team has done a great job in terms of joint business planning and keeping the cost of goods in check and managing retail pricing. We've had good margin management there. You also have a mix dynamic that's really having an impact. If you think about what's going on, the tobacco category or nicotine overall, that mix is dropping.

Yeah, Corey. Um, yeah, I would say the growth driver in um, you know, in Grocery and General Merchandise is clearly been non-alcoholic beverage. That's been the strong recruit stronger, growth area a little over 8%.

Um, you know there's some some puts and takes on the rest. Um,

You know, modest increases here and there. But I I would say that that is the Big Driver. And as you mentioned, energy drinks, being the strongest contributor to that Grocery and or to the non-alcoholic beverage growth, really from the margin standpoint. There's 2 things going on. I I think our our team has done a great job in terms of joint business planning and keeping uh, cost of goods in check and managing retail pricing and so we've had good um margin management there but you also have a mixed Dynamic that's it's really having an impact and so if you think

Darren Rebelez: It's about 130 basis points lower this year than it was last year from a mix perspective. That margin is increasing as the share of combustible cigarettes goes down and the share of nicotine alternatives goes up. You're seeing a little bit higher margin, although in a lower mix. You go to non-alcoholic beverages, which is the highest margin subcategory inside of grocery and general merchandise. That had about a 120 basis point improvement in margin rate, but it's also growing in share by about 120 basis points. You combine those two, and you're just seeing a natural inflation of the margin via the mix. That's really what's going on there.

About what’s going on. The tobacco category, or nicotine overall, that mix is dropping.

It's about 130 basis points lower this year than it was last year from a mixed perspective, but that margin is increasing. As

The the share of combustible cigarettes goes down and the share of Nick Alternatives goes up. So you're seeing a little bit higher margin although on a lower mix.

Then you go to non-alcoholic beverages, which is the highest margin subcategory inside grocery general merchandise.

that had about a 120 basis point improvement in margin rate.

But it's also growing in share by about 120, basis points. So you combine those 2 and you're just seeing a natural

Inflation of the of the margin just via the mix. So that that's really what's going on there.

Anthony Bonadio: Got it. That's really helpful. Is there a way to put into context maybe what that could look like more going forward for the gross margin for that category?

Got it. That's really helpful. Is there a way to put in the context? Maybe, what that

Could look like more going forward for the gross, margin for that category.

Darren Rebelez: Yeah, I'd be careful about that.

Anthony Bonadio: Should we expect something close to 36%? I mean, the category has historically been in the low 30%. I'm just curious, how do you think about the trajectory there? Thanks so much.

Darren Rebelez: Yeah, I'd be careful of doing that, right? I'd remind you of what we're not trying to optimize the margin of either grocery or prepared food. We're trying to, you know, deliver the best inside the store gross profit velocity outcome that we can. At times, we will lean into grocery to help provide something in prepared foods or vice versa. It may make a lot more sense for us to reinvest excess margin, as an example, from a grocery momentum into something that drives more prepared food units because that's the highest margin stuff we have in the store. I'd just be real cautious about trying to define kind of the endpoint of where margins are because we're trying to manage the whole thing and improve inside margin and inside gross profit velocity in total.

Expect something close to 36%. I mean the categories historically been in the low 30s, so I'm just curious. How do you think about the trajectory there? Thanks so much.

Yeah, I I'd be careful of doing that, right? I I'd remind you what we're, we're not trying to optimize the margin of either grocery or prepare food. We're trying to, you know, deliver the best inside the store. Gross profit, velocity outcome that we can. And, and so we, we

At times, will lean into grocery to, to help Drive something prepared foods or or vice versa. And, um, you know, it may make a lot more sense for us to reinvest excess margin as an example for, from a grocery momentum into something that drives

More prepared food units because that's the highest margin stuff we have in the store. And and so I just be real cautious about

Of where margins are, because we're trying to manage the whole thing and improve inside margin and inside gross profit, velocity, and total.

Operator: Thank you. There are no further questions at this time. I'd like to turn the call back over to Mr. Rebelez for closing remarks.

Thank you. There are no further questions at this time. I'd like to turn the call back over to Mr. Rubella for closing remarks.

Darren Rebelez: Okay. Thank you for taking the time today to join us on our call. Before we go, I want to once again express my gratitude to our team members for all their hard work this quarter. Have a great rest of the week.

Operator: Thank you for your participation. You may now disconnect. Good day.

Okay, thank you for taking time today to join us on our call, uh, before we go. I want to. Once again, express my gratitude to our team members for all their hard work. This quarter have a great rest of the week,

thank you for your participation. You may now disconnect good day.