Shares of Casey's General Stores (CASY, Financial) have appreciated by 24.3% in the last year. Increased consumer spending, driven by lower gas prices and higher income of the people, has further helped the company in attracting more customers and boosting its revenue. The retailer was able to beat the Street's estimates in three out of four reported quarters, and its recently reported second quarter numbers were not an exception. The results were good enough to please the investors, enabling its share prices to move north.
Detailed insights
Revenue for the quarter jumped 6.7% to $2.15 billion, over last year. The top line was, however, lower than the analysts' estimate of $2.18 billion. Nonetheless, the company did manage to register growth when many other retailers were finding it difficult to attract customers and post higher sales. The addition of 21 new stores contributed to the top line. Also, the company acquired 29 stores during the quarter.
Revenue was also driven by various factors, including growth in sales at the existing stores. The fresh food category was one of the bright spots. Same store sales of this category rose 11.1%. Also, the grocery segment performed well, with same store sales growth of 5.6%. The growing demand for packaged beverages helped sales grow. This is also because the company expanded the cooler sets in new and remodelled stores. However, increase in meat and cheese costs affected revenue partially.
The earnings of the company were up 27% to $1.28 per share, over last year. The bottom line was higher than the analysts' estimate of $1.17 per share. Also, margins were strong due to a decline in the wholesale costs of the company.
The fuel program
Sharp decline in fuel prices has been quite helpful for Casey's. This is mainly because Casey's is not only a food chain, but also a gas station. Therefore, although lower fuel prices resulted in lower revenue, but led to higher profits for the company. Total gallons sold grew 8.7% over last year. Also, inside sales increased 13.6%. Furthermore, the retailer's fuel saver program attracted more and more customers, leading to higher sales.
Also, lower fuel prices made customers save on their fuel bill, which was used to shop other discretionary items at the Casey's stores.
The future looks bright
The food and fuel retailer has also taken various measures to attract more customers and grow its business. Firstly, it is remodelling its stores which drive customers. Also, it has turned some of the stores in 24-hour operations, which makes it convenient for the customers for their urgent needs at any part of the day.
In addition, the company plans to acquire or build 72 to 108 stores during the current year. These new stores will add to the revenue base of the company.
My take
Casey's, which is known for its baked pizzas in stores, is doing a great job of maintaining demand for its products. Thus, it is able to register a great quarter as well as provide dividend of $0.20 per share. Its focus on expanding the store network and remodel its existing stores should be beneficial. Moreover, lower fuel costs have been an added advantage. Thus, this retailer should be your next pick.
