CASY - Earnings call transcript Q2 2020 | Casey's General Stores, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Q2 Fiscal 2020 Casey's General Stores' Earnings Conference Call. At this time, all participant lines are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]

to Walljasper, conference Chief like speaker to now Bill today Financial would hand over the your I Officer. Thank you. Please go ahead, sir.

William Walljasper

thank the XX. here. and Casey's Rebelez, Chief Chief morning you is us Darren joining Good also Officer to Financial results Officer. for am quarter I October Executive ended Bill Walljasper, for discuss

XXXX. this meaning I'll constitute of our forward-looking may business stores. begin, certain forward-looking of performance we Reform and call Private These you Before Litigation statements improvements made of growth strategies, any to within the include investor that remind by the Securities at opportunities assumed operations, us statements during possible our statements statements future Act related results or

that any creation may other materially our as our website. to from a differ results benefits recent on realize to quarterly statements, those on our in results future the Form cause are the value plan of our XX-Q filed SEC unknown XX-K number risks, factors There actual on are reports from or Annual with and to execute including forward-looking or known as that implied and available and expressed ability most by uncertainties Report other as and creation plan factors, which Form described on well risks, value and uncertainties

revise future or made and update Casey's those call then open few as second and forward-looking as of intention statements to reflect to obligation questions results a This about summarize this with the during or otherwise. morning, we’ll to result respect new minutes results. take events, a Any of disclaims events of information, statements future quarter our for whether current today views or any forward-looking the

results Darren call like to of now discuss the would the over quarter. the I to turn to

Darren Rebelez

Thanks, good morning, everyone. Bill, and

diluted margin the the by compared were last share to store. second stronger As fuel year, continued year-ago. earnings you've the $X.XX were control quarter XX% versus and to a in results driven inside press for primarily gains $X.XX up operating expense second per a release, the seen The quarter sales

earnings period of up diluted XX% per year ago. the over same Year-to-date, $X.XX, share from a

impact to quarter marks of compared quarters. reform, one-time the prior share double-digit the sixth quarter year growth earnings from per Excluding consecutive this tax

elements quarter, execute us key well long-term plan this continued We of future growth. to our on positioning past for

would the I like categories. to results each and the in now of go of our over details some

During in fuel an leverage margin us enable a to the fuel to fuel up factors of from fuel margin category, last period nearly These we per environment PriceAdvantage, is per the price of year. average same with achieve the our implementation quarter, $X.XXX experienced tool. favorable which our ability combined the gallon optimization $X.XX gallon,

As dollars the increased a in result, category. profit quarter XX% in fuel nearly gross the

to in a period to gallon growth fuel efforts Same-store of down price primarily the quarter. optimize this average X.X% gallons the was retail sold were compared due year striking This gallon and by appropriate margin. $X.XX fuel gross the our profit category dollars ago. during was in to a $X.XX balance between The

the first same are up with ago. of per category quarter were compared fuel sold the X.X% fuel a gallons an dollars period X% contribution in strong to $X.XXX gallon. months. gallons, up gross year due last for the down were average profit opened year-to-date the stores the total the Same-store decline new gallons margin Through XXX months, the Despite to in XX.X% same-store six gallons in to sold XX the million from

of gains. at our PriceAdvantage have the of end fuel this Our effort with quarter, our positive anticipate By margin a the integrated stores price on optimization sale in we tool. effect all continues to point the of to have fully

XXX sign. without price approximately have stores currently digital also We a

sign and allow of end have fuel schedule increase more to flexibility digital This a changing on to the these environment. format the to integration react the prices by us retail quickly in adjusting will to are conversion fiscal to converted We year.

with been quarter. make we've second pleased also in are the able We progress to in procurement fuel the

XX% our fuel represents of volume. total Currently, our contracted volume fuel about

out fuel team, As continue fiscal half approximately year. build to we contract expect the to under the our of volume of have this we end by overall

we Lastly, gain in continue fleet the fuel traction category, in our to card program.

types date, of have now program going cardholders. X% with additional added cards in This new quarter, in combined of XX,XXX We universal course all second we optimistic potential of the X,XXX Over driven about second the have initiatives the accounts these remain efforts we and the over forward. X,XXX cardholders. other our fleet the quarter. fleet To

As the gallon. guidance to range to and moved annual X% gallon fiscal our fuel downward a our same-store margin to opportunity we a optimization of guidance per result minus and expected our X.X% up year positive $X.XX $X.XX efforts procurement, to fuel with range to adjusted price

the range. currently guidance annual Same-store of are is upper gallons toward annual while current trending the current margin our below trending guidance, average end fuel our

the grocery to Moving sales in guidance. and second X.X% during Same-store were with million the category sales up X.X% up quarter, merchandise annual our to the were inside other line quarter. the store. in Total $XXX.X in

were a same-store up cigarettes, to higher Gross nearly to X.X%. favorable items. was profit the product quarter The average quarter up sales $XXX.X for margin the category XX.X%, XX the XX% basis were due up primarily margin million. mix in points Excluding in dollars to shift

the X.X% For same-store six first margin with sales an of months, XX.X%. up average were

dollars margin gross in first $X.X the occurred by million have recall, $XXX to XX.X% currently trending adjustment over annual been Without As Same-store would for the six one-time guidance. you our have up adversely X% of ahead that may that impacted million. the would first are a quarter. sales adjustment, margin months the and was profit year-to-date been

our in products the stages quarter, During of currently second beer continued rollout are completed the center adding inside final the We categories. the store our platform integrate to we and price alcohol the of optimization and store.

as prepared year, integrate the look well promotion and will we as half As analytics. of platform we fiscal move cigarettes into the this onto back to foods

limited should position the from With call. this at point to any at share, we update rollout, data you do in earnings amount have the not be the early our and next results to of we

with the In a guidance, for for below the X.X% of million the acceleration in and stack sales total our X.X%. comps resulting were this sales sequential month our we in was in back annual up fountain strong two-year the our toward the category, and were of pleased quarter. though October quarter, the quarter. Same-store were up prepared to the food increase comps for Even half $XXX.X

guests. We continue to gain traction digital engagement with our in our

new engagement, the year. month. beginning soft program launch completed start the of have We a our at of loyalty part we calendar planned of program this employee recently currently pilot digital an of this and out a As the of launch global at the rolled

create their guests or allow at a through We will the of communities day. and points can community purchases Casey's in members redeemed guests spirit believe mind, that The accumulate for heart partnership be for every with that is at that serve with purpose our wanted opportunity every our better life to we discounts. fuel for With program. purchases being to the we loyalty program make in-store Casey's to

This that our our Unique into a convert well to they will differentiate schools. with concept allows points guests to their tested Casey's, also local we rewards guests rewards program can competitors. extremely believe our cash from and our donate to program this their

allow to learn size to opportunity will the about suite that excited us believe preferences, which of them We traffic. of even more about are guests’ increase drive the the additional our digital and platforms basket serve combination will We new better. our

primarily $X.XX $X.XX quarter year. compared was in the in food in for prepared was second same the for quarter to the average cost due versus of pound cheese XX.X% to down The the a margin year-ago, average to quarter costs. quarter The cost trending basis rise is up. points currently per last Cheese the XXX cheese second

buying We this market are the monitor purchasing for spot and opportunities. currently on closely

dollars the million. rose quarter, gross profit to prepared $XXX.X In X.X% food

As you've currently X%. for Same-store to are press release, seen we foods guidance our downwards annual X.X% prepared our sales within same-store trending adjusted to annual range the sales guidance. in

new industries. many who we of as Chief had you've the to and a seen Casey's He's already, Merchandising Tom recently experience on-boarded As Officer, store brings our of and restaurant management, help convenience program leadership and Brennan and us track development in overall will of in food prepared operations, strategy. merchandising this our merchandising, success, that accelerate broad know record I background category with wealth and roles store

a for searching currently Service to that acceleration. Head also of with help new We're Food

this With category of the moving addition upcoming of about our continued program, traction in these the new the digital forward. leaders, optimistic our we're loyalty including platform, launch

the to turn the expenses operating to now and financial statements. like call discuss Bill to I'd Bill? over

William Walljasper

Darren. Thanks, Yes.

We continue focused on expenses. to operating controlling stay

XX quarter mainly more X.X% total the $XXX.X than to year-ago. increased a operating by quarter, million. driven For this stores operating The increase was expenses

as leadership our Year-to-date, operating impact X.X%. operating new we bring X.X%, were talent. on includes senior were Same-store costs the of which up expenses expenses up transition

an year, of impact million share. fiscal we costs the For per anticipate $X to or adverse earnings $X.XX on have these approximately

On offset the year-ago, sales store. more period billion, in and statement, by quarter the compared operating was lower from a down due slightly same year-ago total $X.X the primarily to the fuel income retail revenue gains prices stores to to a inside

primarily to in XX.X% effective in the tax guidance related Depreciation range a in to reduction one-time a down from appreciation of X.X%. some the activity. the positive The unfavorable quarter was differences. the annual due change underground deferral due the up The tanks the of useful the was and of impact storage store primarily replacement was lives for from quarter permanent year-ago, the adjustment to rate

rate XX.X% We the year expect to be our XX.X%. and effective tax fiscal XXXX between for

continues moved $XXX $XX down current million. million sheet were as August net cash $XXX balance bullet to due payment million cash maturities October At and current Our be our Long-term a to next to liability. strong. XX, debt, equivalents was of

this move reporting a debt. interest ability our of down, not this refinance to do As rates to were all debt. We risk refinance anticipate looking and we

XXXX downwards net XX trailing We on month us fiscal operating as execute continue was ratio we EBITDA to anticipate our X.Xx. moving Our debt plan. to

For to the and expenditure the $XXX in million same the a at EBITDA were six estimate XX.X% for we million. million capital period. our period a $XXX year-ago, in $XXX XXXX months, compared expenditures cash million in compared from operations remains same grew Adjusted flow $XXX.X the to quarter year-ago capital fiscal generated

like update unit to now on back growth. call turn to the Darren to would you I our

Darren Rebelez

Thanks, Bill.

stores. for in opened build Through Our we second purchase. including five us under XX target approximately sites future to additional which the we new quarter, XX acquire have stores XX agreement XX this growth. construction, well have XX stores, additional year have positions pipeline, stores to and is Currently, our acquired stores fiscal and XX under

in mentioned this this later ground from in As month our efficiently network pressure which we're distribution and stores be off completion, the announce XXX earlier date to of approximately ability located third Joplin, alleviate an on to with give Missouri. also new excited center serve completion breaking immediately in plan release, center, will XXXX. our to more our markets. an press spring We efficiently Upon so into plan current we of us to to operate allow centers, distribution expand the estimated

the In define planning the business closing, we process to comprehensive direction a three clearly completed of more years. the recently strategic have next over

to opportunity instead to enhance current we the we will our that business performance. time, We way. capabilities have execute initiatives believe current under capabilities At new same tremendous continue we of will on accelerate have a

We this in in Day announce more will be Investor plan and January strategic an hosting to detail. discuss

enhance steps store deliver profitable continue transformational long-term and take growth. to to We performance

add continue will driving to successfully review on execute long-term value. skill sets significant We to shareholder and

questions. your take now will we that, With

Operator

Casey Instructions] And our from Barclays. [Operator from is question first Short

Your now line is open.

Karen Short

How Karen are all? Short. Hi. you

Darren Rebelez

Karen? you are How

Karen Short

Good.

for Just about second. a prepared food wanted to talk

you appreciate to I that. sequentially of mean quantify food But talked call last characterize be than I lower didn't end I trends August that the on about accelerated have So would pretty I the expected. and you strong, kind prepared to the guess fact

So, what are, terms real you there little the points maybe guess? color pain in a think of I

Darren Rebelez

Darren. is this Karen, Yes,

that how momentum nice the think you months and a We quarter, with momentum, moving through quarter this forward. we then couple look strong the of characterize did quarter, carry one, and some I we're had if guess end one bad I'd good I into is seeing quarter. second

think I through the out the months sequence So quarter although well as didn't did second of had we hoped work the accelerate. as we of again, cadence or quite

the And impact launch program then have to prepared forward, foods. an as expecting we're rewards the we of on move

that that year pushing in planned we you then to ended and If earlier up had launch program originally we the out. recall,

So, soften the as move we food year. through comps prepared somewhat expected to the that we

Karen Short

the comp? app to think impact the the also would specifically, color any But help because you I app, also the accelerate prepared that thought food

Darren Rebelez

and in whole are Yes. that through so, the coming this positive an XX% The impact. impact, actually orders app app at is and point, about of a is having our piece having

a offsetting that. inside seeing store little softness somewhat that's are We bit of the

will that app, to optimistic So the along build with that help the continue we're loyalty still program momentum.

Karen Short

you last in general, function Is said it terms maybe lift, the every you then versus margin little guess of impacted similar that of And you of of the so think of raise item and that price I bit. a maybe but sales, little sales in zones fact that number the have have Okay. I to more call in the can lift clarify less that a that the for a was this quarter? you you have lift just quarter can a that a but that how you think clarification could it's SKU prices, lower on a

Darren Rebelez

the balance retail that or depending but optimizing strike price we think right on to the not to us it's we're cause between may on and those about so prices, depending margin, strike about on When volume the category up about Yes. that increases It's to price geography move the price balance. and right trying optimization, down right necessarily.

prices price optimize so, It prices. gross be into profit always of a the optimization to And won't more will increased retail of rightsizing dollars. translate

William Walljasper

this Karen, Bill. is Yes.

add some on pits Just of those couple color couple of a questions here. maybe to of

just of that transformation understand, understand cadence First undergoing. digital of we're all, I your first sure question. make we the the

that fiscal pieces but off of So, that being the of kicked platform we platform the the e-commerce just Darren spoke currently underway two at with the there's program the loyalty beginning year. have third about,

end first the the quarter. we actually roughly The towards mobile integrated referenced, of you that app

really only operational one have this and up we quarter point. for So, that at

we comments prepared reflected relative what by thus that's movement in a encouraged have the on so, has continued of traction in food. seen to And of which fronts, I far certainly comps we're sequential number think Darren's and

better rates this so better traffic continue to each customer our far over continuing basket at and And quarter-to-date, into least Darren forward, inside forward, seeing to get then, move as conversion month. see that improvement. continued We rings we're move to mentioned,

we're So, think I encouraged that traction. by

little So I a adds that hope more color.

Karen Short

lastly thanks, I comp exactly And comp? JUUL on I've then would was the specifically. like lot questions – then that's be if Can you just gave maybe And more what gotten Yes. ex-tobacco, And just ex-tobacco, question, a grocery or that what do would parse to there renewal, you impact JUUL? but last from a out helpful. the just is Okay. on so of feel the just broad-based

Darren Rebelez

that erosion Well, growth small we sales, our a It's and of about merchandise sales. JUUL of overall in what been of while haven't seen everybody changes. it keep the us, a And with mix. our our X.X% other category have grocery recent lot a relatively it's I’d JUUL, X.X% in of mind for a overall about has is merchandise part

one positive large growth, large not as So while it shown or it's has impact a an as really category expect. might

add anything want I Bill, to know if to you else that. don't

William Walljasper

Yes.

question, up our due first between comps direct second if XXX of JUUL the points to we've to able to acceleration your to put been I of the the here add product. look and and color quarter in more roughly that you to think quarter, is you're that only I'd the basis XXX maybe that at

equation that, small have of to with the want that and reiterate over Darren's very grocery continues overall popular But cycled merchandise. comments, a to to a We to rollout general very I it to piece the and it's product, product. be respect

Karen Short

in back queue. the get I'll helpful. That's Okay. Thanks.

Darren Rebelez

You bet.

Operator

Thank you.

is Chris Jefferies. from next from Our question Mandeville

Your now open. line is

Christopher Mandeville

just that XXXX you I'm points cheese, compression. magnitude Hey, bit based a not pricing morning. of and quite on prep getting margin of good little that XXX to if Bill, impact that food erosion basis more, for

be of? provide you Whether promos it something that So was greater can color else we shrink or or should be anything on? some aware there increased there

William Walljasper

Yes.

differential. components So there's really biggest major make two Obviously, differential. one that the cost is would up that cheese the

And promotion of that so get remaining point we XX way of adverse cheese swing per reminder, from about in cost digital $X.XX our impact prepared basis be if and is margin, question activity you going the piece that your – about additional team. just food are to of to overall of every fountain with pound roughly is to doing the by

obviously, seen a the XX here albeit, last landscape landscape So we it's a in competitive over know, any haven't competitive been you as months, acceleration increased the quarter. XX in to

opportunities be obviously and more value of our guests continue rest We to promotional provide centered for to around and trying the that. would be that

Christopher Mandeville

to moderated Okay. suppose. extend Is much nonetheless a there more risen on guess pricing input, it's has the anything I coffee front, recently. I some but

well? So just to in I as was if it anything trying think had points

William Walljasper

But new we a introduce to did Yes, of as obviously November launch profiles, some not in new promotions new our quarter. quarter, program, in have and did head coffee guests. we the product into we pricing to first special the second that packaging new month flavor

more will and be the And that QX that we'll so in about playing talk results.

Christopher Mandeville

the can't be maybe were reference to just that then and the there card guidance? hit we And thinking about? And turning you that Okay. believe manage reason study? can based I necessarily on motion Or is any time you anything in performance. end on year-to-date quarter mean any update just there and real is to of the just can should you the low your provide to what OpEx, credit that fees

William Walljasper

Yes.

quarter. your card So was $XX to cost the fee second to million X.X%. the first With the answer second quarter, part, credit respect in up

range we You did for obviously expenses. not operating the noticed change

an So we acceleration. anticipate

We store openings. are to QX behind new in slightly with respect

are half that activity. expenses we so will so have back to up in catching intuitively, more And that, relative operating we on the

do for costs higher little that. company so roughly a manager is due that's of previous have into other and QX of bonus store mentioned new out was year. about the the would bit call-outs, course a the the bonus the little from in transition second that We leadership than OpEx. the quarters, million the $X throughout quarter So the couple a a spread senior came year, say there’s on I we had We performance to for program. the This

there. couple a of Just call-outs

study So time forward and we motion the move on mentioned. you continue to that

fiscal might to we're of at quarter, of have QX year. from so next year Right are this tailwind They necessarily QX, or impact impact. that fourth now, rolling a that But looking the some impact see that and quarter completed you fiscal with not in next tremendous this so out, track on would in Chris. I more right a probably see

Christopher Mandeville

for line since greater emphasis those controls the stores relative maybe to there profile that how become cost any the opened XX-hour And over is really the looking eliminated some then one or with item, that with greater on newer last the year respect me, just look When how the have returns last vintages? returns at have are is delivery Okay. of the of on been stores update And older that a focus and/or you trended likes model? if the to so.

William Walljasper

mean, right. sub in of All I questions lot – the we I there. of had the get all a

try gather So of to all those. I'll

question relative obviously that, up And that's might they Darren think to line the some if continues would alluded how or kind contribution I we've and be your ramping store I our built previous expectations. So perform in new is and that say to of general. new above stores and ultimate of the to stores in question, the

have. the us certainly helping currently that results we And so that's

the further of returns this path have with optimization say open and I opportunity procurement, of maturation as path increase I the that stores. price to those the ultimately we down would fuel transformation, the stores the cycle and think further get we then of Now, digital we an new shrink down the

all of about excited those going we're opportunities forward. So

Christopher Mandeville

guys. Thanks I'll great. there. Okay, leave it

William Walljasper

Thanks.

Darren Rebelez

Thanks.

Operator

Thank you.

from next is from James. Raymond Our Bobby Griffin question

open. is line now Your

Alessandra Jimenez

questions. is you on our Griffin. morning. Alessandra This Bobby for for Good Thank Jimenez taking

William Walljasper

welcome. You're

Alessandra Jimenez

First, contract fuel procurement on strategy of a the did margins moving the during purchasing more quarter? toward have fuel impact noticeable

William Walljasper

Yes.

when you price from it fuel would predominant to the that So comes initiatives fuel predominant to have roll say, procurement. the we're quarter, margin I the came it – opposed – impact when would optimization undertaking. The for the as up

gallons second the quarter under the balanced have So back those those of executed, in of of year. nature But more of of during and we by the number course successful half timing through just were the the the increase our will contract. been when be fuel

Alessandra Jimenez

Is second Okay, flat that's half of environment higher the starting of then the midpoint pricing implies helpful. slow your industry relatively guidance, guidance the the to And to are margins down? at modestly year-over-year.

William Walljasper

we would characterize I Well, say would that.

our that structural and our category. year the If dynamics every see look at back have fuel of a you'll years. in margins, fuel you probably particular historical QX in go and function in It's that typically QX XX a of last the we margins drop fiscal

and have it's the with some we necessarily So offset that of of degree, to going think now. not with some we procurement. opportunity we To on have have that price I initiatives optimization

Alessandra Jimenez

you on then for initiatives me. labor labor on and you And of much opportunity allocation? Okay. lastly from you're more how an of working see Can some the do expand

William Walljasper

it's Great study, question. this that I have to motion kind a a reputable what many and area. in little XX-state of the time of as cash is, touched all with answer we last reflect and – our are across our bit reminder, really, on just

the with to out And that can opportunity is, certainly the be say, take that, provide an garbage takes same store. pizza to have to a in time it so wherever every should make the it we

will able assist will tool store the we their that layer operations to they be of the on the their so stores. that better And scheduling have of individuals with schedule top move movement to which

ability vice scheduling the the So increase to have as increases, traffic we versa. and

in have store So in down. But store, primarily to I to the as always be emphasis into same along we looking at continue labor hours next about on that year. those our labor we we're an lines, excited think opportunity the hours headed our fiscal continue

QX last year. over took significant that QX labor QX, some cycling in are reductions here hours and We we

an to continue So it area be focus. of will

Alessandra Jimenez

good of year. And the balance luck on you. Thank Okay. the

William Walljasper

you. Thank

Darren Rebelez

Thanks.

Operator

you. Thank

from Trussell Our next Paul from is Bank. question Deutsche

Your line is now open.

Paul Trussell

Good morning.

Darren Rebelez

Good morning, Paul.

Paul Trussell

just let's grocery touch on for question. taking my Maybe the Thanks category.

of about ex-cigarettes, little shift the category with and margin mix bit and there performance maybe to the puts along nearly you're a that kind X% think of comp takes had that gain? talk just year-over-year seeing drive a what You I

William Walljasper

call-outs Yes. sales We and same-store popular. general There’s those popular vapor the a from of merchandise. the the couple and continues on JUUL be to grocery product, being touched early one with of specifically very perspective very in

some And categories some to of significant are lift. continue so there that that's gain pretty other part the traction. But also

That like packaged would a the with drink, be in the energy category, of and Bang advent the beverage instance, Rain. for

well So those beer And doing well. of the very two strides category make categories then and to great are to continues things and call as Apple there there. is a couple out

a of changes well are resets us We consumer. store intuitively be resets as law that those with resonating state that and to content line seems looking but additional allowed beer alcohol we're very as stronger had alcohol, forward, doing of well at to sell additional few a our which moving also

the see also those Now that items the margin. reason products, a shift the that recall, Illinois you back you higher product first increase of had that's just quarter. predominant I But that margin tax side as mix cigarette mentioned the all we of Paul, as margin in are State and certainly a make may

the on And now did we with sales that the not currently tax the through inventory a in aspect second is funneling and our have quarter. that they hand, warehouse so in inventory

points. roughly there XX is about margin benefit And that's basis to a so through of there running the

Paul Trussell

cardholders, seeing? Got on it, update maybe just that's give potential optimistic or you touch lot just the Then of remained what there fleet you're a program, an about helpful. maybe adding the

William Walljasper

a our had continue of made card our be you're on very of quarter. referring got to card, traction fleet think great to Paul – accounts here, more but Yes. We've bringing couple larger last accounts is is and specific probably new at and program to diligent some on we've that I component Yes, fleet to. fleet bigger probably way looking the universal that, come story

of on overall to the we'll the back program, be we'll program year, to competitive some roughly changes some that fiscal – the but in I'm about we're the bit maybe us made even beginning gain card offering. So fleet traction to to in allow confident sorry quarter, the a of we of universe fourth the little fleet more that continue discounts continue

three increase consequence, averaging about gallons periods. respective those in X% universal a quarters, the roughly as And fleet X% we're over to last quarter-over-quarter an in

to us intersection So more we continue as and into launched points that store customers loyalty more program. the traction a brings gain allows we

that you customers on to get loyalty So program. those on our – as well

Paul Trussell

Thanks luck. for the color. Best of

William Walljasper

Thanks, Paul.

Darren Rebelez

Thanks.

Operator

question is next from Our Instructions] [Operator from Ben Stephens. Bienvenu you. Thank

open. is line Your now

Benjamin Bienvenu

Thanks, good morning. Hey.

Darren Rebelez

Ben. Hi,

Benjamin Bienvenu

of I the earlier what fuel ask want think with the about us is more year, XX% mix impactful that of touched made and by under first procurement? of, of should procured to of the you mix that's watermark procured referenced end still to fuel be had would half to of and be on changes, on in terms and I based of get the previously that the for via on the you contract wanted progress those about think I mix some sense a contract back procurement the that ultimately fiscal year. of reasonable is been a at percentage your

Darren Rebelez

This Ben. is Darren. Yes,

overall where the second second contract building actually through quarter, look our you was If throughout that at point this volume of at that is under and quarter. XX%

to fiscal contract under XX% as by the roughly year, end of to the overall volume get expecting year. the look our balance we we're So of of the

Benjamin Bienvenu

to Okay, to be this peers is thinking environment? the great. increases. of in that, this should versus prepared at commodity margin what you make continue or on point waiting response And the are majority along if pricing it obviously price we then to expect navigate before following higher How some competitive you'd all how prices? you causing that that up handle cheese, among like of is to you a your chosen about It passing looks passing see inflation Is not how food. absorb the along decision you around pressure

Darren Rebelez

the again. and Darren, is looking We're environment as of balance. to at market looking trying and that competitive commodity to well the taking that This strike be Yes. at kind day-by-day right frank,

We a well, expect in ourselves at competitive we put come don't point, that down the cheese cost to and will from standpoint. value a want start disadvantage some proposition so to

it looking opportunities pass price. the how see elected go. opportunistically we're point, procure we'll consumer or on and that this monitor to But continuing the to not to and we're we've more advantageous for So that to at cheese

Benjamin Bienvenu

that distribution one a in I Okay, addition that opening there contiguous some geographies up And and mile helpful. Congratulations stem benefits it stem the could about build much of in efficiencies the continued us geographies a then to on you think for you be kind reduction announcement. new transportation guys great. Joplin significant center you of facility facility, Terre how me. could one last you if built Haute south versus reduction and into, westerly? more of That'd miles know provides, the when give when sense up this opening was is

Darren Rebelez

would efficiency now Yes, Haute, that serviced geography within of is is southwestern part I bulk that Right sure. really our Indiana. out Terre our of it being improved and distribution Iowa Ankeny, network. the say of from

service So distribution facility that to of and that's up spring size infrastructure of be open a stores. in right cost stores start reduce pretty long haul. XXXX, really our When will to XXX the to about those the we'll overall able we immediately facility, out which serve that

in. new reach being does expand geographies it said, into currently That not our to that some we're ability

a So efficiency impact development the would on immediate perhaps side. longer-term be would side on the the and little be bit

Benjamin Bienvenu

year. Best of luck of rest with the thanks. Okay, the

Darren Rebelez

Thanks.

William Walljasper

Ben. Thanks,

Operator

you. Thank

next Our line from question from Capital. BMO of the Bania comes Kelly

Your line is now open.

Kelly Bania

my morning. for taking questions. Good Thanks

you you but and help was sequentially mentioned Just seeing? us understand to have it can ask may what where just think I lies about you're that that traffic, Bill, improving, wanted

here in help on rests understand the program, test, loyalty foods largely loyalty the that the in what of hoping experienced program. us kind you you're the can like acceleration it sounds then on And for prepared you

with seen just us far you've test so understand there? the help what maybe So

William Walljasper

Yes. and that. gather want we all answered, questions I'll make I to to get that those sure but try to Darren

start well, So with on cases the loyalty side, loyalty in in a we that – that, I'll we respect we have the believe take on to see position back. – now are step we that a that some certainly

a program seven success The fuel we've how that's so to they obviously believe saver out of us. consumers with be so now that programs program. seen a six, regional that's is think loyalty larger our and for coming I resonate probably We years our many see have positive been we have of and board. going that form impact a certainly this loyalty on the players for

– that's prepared to But thing going the away I be thinking forward. you that's come this want miss driving from to don't only that going have foods call

So of drive Darren so are loyalty mentioned January Day we'll forward, up Investor think years number next more have fiscal in having an we be that a outside to in here as of other and play on that come to that coming opportunities in the there that. program we

you me? can for Kelly, The first of part repeat that question,

Kelly Bania

curious I was just the traffic. about

William Walljasper

count. traffic Yes,

the the So quarters increase right we negative the or probably gradual for have an here now roughly been we prior a four count have to and inside actually last is store improvement flat three actually slightly and we have traffic been that's – as quarters. seeing

there? So I some we digital respect encouraged by we're that. the we with anything Did believe doing the are are miss that, of to that things transformation helping

Kelly Bania

just happening what to guess another some different more had from it to I characterized the from guess was food where you're you're some, Thank from there you categories. impact differences so promotions what's about shift categories? seems kind a the environment, the and and any tougher side cigarette be if it just helpful. like prepared on still thoughts the two just some curious And very margin you. higher favorable mix that favorable talking of in in be was mix doing one, in seems that about as I I real tax, think shift as but grocery, No, sounds

Darren Rebelez

this Kelly, Yes. is Darren.

you of prepared got foods mix we have and a of and a that the categories, think single cheese our product big our being biggest category, at look goods. mean, two on we've reliance obviously, in high that those I I component of pizza if cost

And markets now. so when you of the see are right whack like get commodity they out

So that's pressure fact margins. to they that the it. doesn't direct still a to pizza buy the put That guest our on obviously going impact and wants continue

going the products, people than see shifting drinks. at soft be grocery shifting energy and margin carbonated drinks that's a and carbonated higher comparison, among have to look you while that's so they're while over now the If by on soft been energy drink you trend a the drinks, category a to for been declining tend

cigarettes, category, people electronic smoking margins. at are moving over which have If the the you to look cigarettes less combustible higher cigarette and

pricing they're away those seeing out you're pressures, are So consumer wave of preference naturally behaviors with they're margin. that products but shifting because not where of to shifting the higher the

and shifts earlier, growing, the standpoint. is our margin a of Bill of liquor liquor development mentioned beers those premium starting from all and are growing, are to wine categories beers favorable again decline, are wine craft

accretion margin So there. some there natural is

Kelly Bania

And That's what DCs the general more maybe update a you're I seeing Thanks. Thanks. just just at on both levels turnover on and in there? and store guess just one retention – helpful. the

William Walljasper

It's Obviously, of fast store be lack seen level, second to it landscape retail. a that it we rate of always expense earlier. going in that you're question quarter and pressure. the anytime to Well, have the part mean in I an entry-level be competitive that's operating continues

very markets our our With Midwest have generally the here experienced that offices continue the to rate there. unemployment sure we corporate turnover that on it's very rates throughout tend here. the we're low competitive but we to have challenging, or the and So to evaluate respect still – low distribution, make especially low, to with we

really there's point. this to at So nothing out call

Kelly Bania

you. Thank

Operator

you. Thank

Our from from next Chuck Northcoast Cerankosky question is Research.

open. now is line Your

Charles Cerankosky

questions, start-up? the A the XXX have everyone. of total couple at initial be radius, to center, what's morning, and after support number kind to expect Good operating you Missouri that Joplin, it of distribution the what stores will looking able of

Darren Rebelez

We mile Yes. Chuck, centers this operate is XXX Darren. with radius. distribution a our typically

of broad that we stores can swath us gives So that a pretty service.

a currently efficiency optimal but support XXX range stores within bit there. mile radius that, of Our is little south we a

Charles Cerankosky

time. support Is And than how X,XXX that? over it it or could many more

Darren Rebelez

be count our of stores could mean that push on will centers. of I service store XXX, out Yes. distribution upwards we but X,XXX initial

designing to perhaps grow. addition I to more the distribution be we centers. other that our have – than to facility designing and room efficient thing two of plenty So in automated existing we're that out guess this other point and I'd that the more we're is

We also have additional land adjacent to the site that we could expand, if we need to.

a levers of couple we've So in there. got

Charles Cerankosky

And yes. great,

high, I release, acreage the press so purchase I that. a the in think that sounded covers remember little

led I Can that a to reduction. store Bill little talk the the mentioned bit? projects you deferred that – D&A you've that were On some about think,

William Walljasper

Yes, absolutely.

year. fiscal we replace the that many over certainly we the have an stores year, can into idea how course coming candidates of So feel of our

it the we to And that replace so useful stores, once to the changes make accelerate so very we depreciation decision its life had of that, quickly.

were next four defer for in a of of through year at testing. consequently those and than as and made so that's we we our plan about to appreciate planned year, coming the not roughly the And decision accelerate fiscal about was sites part appreciation looking fiscal halfway we through that

Charles Cerankosky

much. Thank very you All right.

William Walljasper

Chuck. Thanks,

Operator

you. Thank

Royall from Our next JPMorgan. John is question from

Your line now is open.

John Royall

good guys. my Thanks taking morning, Hey, question. for

Darren Rebelez

Good morning.

John Royall

cash sitting have X% on pay is free one the low in some in uses flow leverage had of enough debt First right down and on first guys to the you now. cash, half you're

thought any the in So this to at utilizing near buyback point future? the

Darren Rebelez

keep John, we that option to us. always available

think million we know you share I authorization have $XXX those a for buybacks.

we opportunity so for make sense we'll can and we take to and at opportunities it. an extra look you'll cash opportunistically deploy if it is some our see we'll do look balance that a cash, there we continue that those see always So when

William Walljasper

we would debt accelerate right have. that to lies Hope we all that's provision, certainly of look Also penalties or made debt. any is on portion – to look that the Yes. will that upcoming have refinance certainly But helps. an now, payments we opportunity the debt make the comment whole for that that our so in we us to to as a we that prepayment refinance current there and be John, on

John Royall

on a in Thank for number is does. guys it or can it with much the how this is budget not? at you you. there if And share us cost then distribution total all maybe Yes, center, year's

Darren Rebelez

million Yes. facility. $XX construction about that of the budgeted We've for

John Royall

sequencing, Okay. XXXX. you then the starting said in you're maybe And

So next how should year? much we expect maybe

William Walljasper

Yes.

Just give breaking later XX to take – ground to clarify, month on this that months and about build. be take facility, they'll we'll or

So facility of to we're XXXX fully targeting somewhere operational. have that spring late

John Royall

Thank understood. you. Okay,

William Walljasper

Thanks, John.

Darren Rebelez

Thanks.

Operator

Thank you.

Karen from is Barclays. question next Our Short from

now is line open. Your

Karen Short

on gave I test respect sorry. you that, just loyalty Hi, program, that With follow-ups. to how I of the a employees if them? missed many had the couple have you did

William Walljasper

Yes.

around – Day. centered – was loyalty launch put then we'll the get – Darren the it roughly then when program, we just So tested really we cadence month, a at details of this the here and the facility as did here global then launch, the more a soft corporate on we and at Analyst you'll first go mentioned, to beginning out beginning and that

Darren Rebelez

in ultimately entire program now test open about beta Yes. to the it's Karen it is X,XXX on system. employees our were that and the

William Walljasper

was the making that being the sure the to were behind clarify employees And be discounts mechanics to the properly, program for intended just that done. testing were loyalty working really the

that have so loyalty media experience not the the not of we And pushes get then it and media here value around nuance certainly the have occur so make – only that's – to a where sure, launch want want out poor to did global season. guests, maybe sure a and launch make with also you it's holiday a part of that put our around a

to holiday global a launch. season want the get we so pass And for

Karen Short

of the substance and test the initial mechanics, necessarily? more was functionality But Right. not

William Walljasper

That's correct.

Darren Rebelez

right. That's

Karen Short

little second that? then a to the that dollar generally? about of on comps pretty range in haven't be, maybe profit a think then really we think food half second in growth, And part color and And prepared versus terms context but Okay. wide necessarily grocery implied how the of range, you you growth it's comps, in terms some about maybe SG&A talked would how about can store gross more on give

William Walljasper

fiscal there like past, given year get was have the think the range into attainable from intact narrowed as so of results made I'll the know, ranges Yes. we what the Darren upper unless those half far the end Well, year. We guidance not we mark. were in the keep further prepared range – as six-month we back a at we the you food range something just and to the and were category, in the do the guidance start – decision as as

us, the the but increase, are we gross dollar we're to digits trying so category, profit gross anything I'm that to profit, single to drive relative there's far And read high digits we sure increases targets inside are store depending any gross And not than giving as for necessarily seeing the low-double profit to store other either or at. of looking short on as stop gross profit into we going that. inside

Karen Short

you're profit SG&A exceeding mean like gross growth credit seems depending to wondering does card or on be but and I fees things how growth. D&A Right, in and dollar including profit I'm gross that...?

William Walljasper

with credit operating same-store Yes. I'm gross when getting up We the confused to a might fees were not expense growth, look little over total with happen Yes, total operating profit, or operating we excluding up same-store X.X%. sure. reference our card at expense maybe the X%. we and you exceeding show so or be expense

growth So right with our that. would comparable inside be

Karen Short

yes, I'll maybe think I offline we're get because think I growth – Yes, looking at...

William Walljasper

both acceleration expect do we in And those. of

Karen Short

growth Like SG&A a profit widening you're and growth? dollar of the between gross saying gap,

William Walljasper

Correct.

Karen Short

Okay. Thanks.

Operator

Thank you. turn like I'm President time, back At would to I for further this Rebelez, to over and the questions. remarks. no Darren closing showing call CEO

Darren Rebelez

that designed under are the believe for continue long-term to call shareholder for and driving by Okay. forward outline build everyone this value. Casey's our and morning looking was profitability. long-term will accelerated thank We're our reiterating close position like we record and revenue key us I'd growth joining of plan upon everyone. initiatives improved new currently way you, track our to to Thank our initiatives you sharing with to

Operator

for you and participating. Ladies Thank call. today's gentlemen, conference this concludes

You may now disconnect.

Casey's General Stores (CASY) 10 Dec 192020 Q2 Earnings call transcript