Earnings call transcript Q3 2023

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Operator

Good day and thank you for standing by. Welcome to the third quarter ended January 31, 2023 Casey’s General Stores earnings conference call.

At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question and answer session. To ask a question during the session, you will need to press star-one-one on your telephone.

an advising hear raised. hand then will automated your message is You withdraw star-one-one press question, To please again. your

be Please advised that being is recorded. today’s conference

your and Business I conference Please go Senior to like Development. President speaker to Vice Relations would Johnson, today, Investor hand of ahead. Brian now over the

Brian Johnson

me discuss Business Vice January Chief are morning I XX, and today Good to am thank Development. President, our and from Brian Officer, for you results and Senior Investor Financial XXXX. and Relations third With us Johnson, President Executive Rebelez, joining the quarter Darren Officer. ended Chief Bramlage, Steve

relating Before Reform supply periods, to this future needs, that and investor stores. you of operations, statements forward-looking financial or Act sources business we liquidity the and statements at within results our certain during growth chain, constitute the may plans and of by assumed or expectations and of forward-looking XXXX. strategies, statements These synergies, us will begin, any related future call conditions, I company’s include the Litigation performance possible statements Securities for remind opportunities, meaning made integration Private

strategic most recent differ available results on our and may which on forward-looking are XX-Q, related with duration uncertainties factors known are other other actions, in as from that as the There website. risks, and or acquisitions, reports execute benefits on results but our as not realize risks, cause SEC plan strategic from including our materially conflict in impact statements, to the integration governmental quarterly recent Ukraine Form expressed future and the the of Form to plan, the uncertainties ability report our our and the and of unknown any or of factors filed XX-K annual implied described well actual those and a and number by on to limited to

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

financial for A this quarter the increase third www.caseys.com well measures found can referenced reconciliation at of as to Relations our operating be non-GAAP detailed the a as the expense breakdown under link. website of call, GAAP Investor in on

I’d to With quarter discuss Darren to results. that call to said, now the our over third like Darren? turn

Darren Rebelez

during in Brian to morning I in get operating everyone. Thanks and good continue first great show a their to resilience results dedication team They the We’ll moment, thank strong want quarter environment. but to quarter. our their third for challenging a a

here year’s last Our Kentucky communities in we team devastating continues Springs, as is Dawson community serve, storms. to also the tornadoes like the recover and for good from

youth of local sports Joining the forces in provided towards $XXX,XXX with rebuilding the we field town. Gatorade,

the forward make team guests to on better playing help make that next here who you initiatives We’re and seeing year. and communities these looking local that Thank support good. kids to for Casey’s our our

results the let’s Now the discuss from quarter.

first strong release, prior in further at a Diluted year. per finished the fiscal earnings we press share, share third had per excellent building of XX% half As quarter, you’ve an on the from a the increase seen year. $X.XX

a expense EPS one-time previously, approximately due legal a benefited of the $X.XX reduction per from to by resolution diluted million matter. communicated we share operating $XX As of

still diluted an up Excluding XX%. this adjustment, was impressive earnings per share

economic a can an in million. profit from succeed business our $XXX to conditions. and increase strong, an of variety over company up differentiated the Inside prior increase income, We $XXX of million The million EBITDA, XX% of $XXX gross year. XX% of inside sales know driving remain XX%, generated model in net

excellent execution implement merchandise, food and store operations. prepared general plan and fuel and outcomes continue dispensed our beverage, strategic We grocery with effectively from to across and

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

Inside same an XX.X%. two-year with margin or quarter, stacked store on of a third were X.X% basis the average XX.X% for up sales

team implementing our a pizza partners. strong Our job joint did in-stock we and and and as the as non-alcoholic slices well wonderful notably with vendor as developed plans We business saw managing mix performance alcoholic well levels, as the in bakery beverages. product

and sales the increase grocery basis store of margin Same points from XXX XX.X% were general an up XX%, prior two-year or X.X% a an approximately average with basis stacked merchandise on year. of

see sales as liquor The with quarter results X,XXX in momentum our positive third to great leveraging by we showed beverage stores licenses. alcoholic continue approximately

by towards label impacted and also We as sales. margin private as a private shift saw candy, like beverage and was mix from items well drinks non-alcoholic further Margin higher strong favorably level. product penetration in performances energy

and food continue or throughout due the to product an to sales better strong XX.X% XX% Same category. performance have we two-year bakery, with stacked on of X% up XX.X% up availability ago. a beverage dispensed versus pizza year prepared store as margin average were Sales a well and slices as basis were in

The margin third profit in versus and quarters, first to cheese sequential second but had pressure continue the quarter improvement margins. costs

decreased store same of a $X.XXX gallons sold fuel per X.X% margin fuel, with For gallon.

we go note take to while that volatile balancing we While compared in volume to another drive we slightly, for quarter we continue margin we relevant dollars. did to data profit geographic yet favorably OPIS should the gross see believe fuel, share and and back gallons

financial the turn discuss to from to results call quarter. over like the to third Steve the now Steve? I’d

Steve Bramlage

three and in fuel, their and of morning. drive our store environment. challenging crediting of of has model continued Darren performed the our execute to I’d to performance the the plan resilient merchandise strong in quarter on this well with teams and business. across facets proved you like start Each for be and the good areas business to all ability the Thank

$X.X $XX was an from X% billion, Total billion, an quarter year. X% increase the quarter were $XXX of the prior the prior or for of for revenue or sales inside Total million increase million year. from the $X.X

$XX million, million, an dispensed an to basis. of million Prepared increase stores more For the million X%. and food Results $XXX by merchandise $XXX quarter, year-over-year of by operating impacted sales sales grocery $XX increased to rose on increase X% were a and favorably general X.X%. approximately by beverage

sales the fuel $XXX increase in per retail second sold $X.XX as up year to fuel gallon average retail a in gallons XXX were to was compared for a gallon. the million, increase That X% in average for price million a during a to X.X% price well $X.XX ago. us as quarter period Retail this

gross cost of year. ago. in XX.X%, inside the We increase sold This as XX.X% an basis $XXX an profit define profit and $XX fuel higher prior less excluding by XX.X%, XX% as million but million from goods gross of revenue a had the of XXX from Casey’s third a amortization. was increase profit quarter, million or depreciation million profit gross or as $XX.X gross driven of increase well Inside in gross profit. or was year point $XX.X margin of

saw The XX%, has grocery XXX year. grocery offering from our We in was merchandising up lining packaged done with of job needs. and alcohol, merchandise of points and an guests’ increase an basis beverage margin and prior general team excellent our continued expansion margin the as wants

by smaller than points combination well of rebates. XX mix the In as basis LIFO expected shift, addition a higher year-over-year to the the margin achievement as approximately charge of from year a was calendar favorable vendor aided

year, and XX approximately XX.X%, commodity was the the costs, points specifically dispensed beverage second of dispensed entire pound was from Consistent to basis the last fiscal food category year by $X.XX margin margin negatively sequentially the with improving prior the impacted basis which for quarters. but impacted $X.XX points. year, down XXX cheese, beverage increase compared This was XX%. and margin per and food quarter negatively pound first by an per Prepared versus prepared nearly the

we strong protecting margins value Excluding the of our continued proposition margin delivering a have impact prior would as from for make to cheese difference our outperformed year to while actions both. inflation, a for balance our guests the

expenses from Fuel $X.XXX margin - million was of in profit operating prior operating and RINs. quarter $XX up business our the of gross quarter. $X.X There mentioned the one-time the expense fuel recent Darren and gallon benefited the gallon that per million update. that Total by in the was third year, or that’s from were up disclosed was reduction sale X% $X.XXX for approximately million per $XX

Over have due unit the operated prior total to the total year. X%. than Excluding stores this of more reduction, approximately by we XX operating expense is increased increase expense as growth operating would X%

store up by Same were reduction in excluding operating X%, only expenses expenses credit rose X.X%. from card employee store Same benefiting X% labor store a hours. fees same

was up efficiently liability X% of repair of costs. utilities team and operations compromising another store modestly. maintenance the store the and and continues insurance experience for increase same our operating to stores accounted is the contributors. health higher primarily the Our with non-employee do Approximately same Insurance expense to related in the quarter guests. Depreciation work operating our by expenses, largest general X% store of outstanding increase, more driven only without being

down year, versus million Net interest balances. expense the on by aided was $XX.X million the quarter, $X.X and cash prior interest our rising rates that’s in

a XX% of As floating rate. is debt our only reminder,

the effective in of update tax the Pilot increase stores. was to benefit XX.X% deferred the the year. following The was rate in a compared year prior for XX.X% by to tax acquisition one-time the The rate the driven quarter prior state

reduction. the the a of $XXX.X benefited increase EBITDA XX%. XX%. million versus the Each prior year $XXX.X compared million operating for an up was income $XX.X to ago, one-time to measures was expense Net of $XXX.X an year increase from quarter million of million, these

$XXX sheet condition. cash On fiscal our coming we in ample $XXX excellent no and capacity on equivalents significant giving credit, million remains January us liquidity balance maturities of of have $XXX we cash Our of remaining were and have million due XX, XXXX. available until Furthermore, million. lines

X.X Our longer our now term leverage preferred senior of generally with with in times. target is calculated X.X is in which our ratio line notes accordance times,

has themselves, capacity ROIC EBITDA and we sheet that accretive balance remain and make opportunistic to in Our doing investments and present so. of sound plenty will strategic

year, $XX generated of cash flow. in compares cash $XX operating of property activities net and million third $XXX in resulted to million by quarter, prior generation. of is million a the the the flow in a for a million and generating free quarter as of seasonally free the quarter cash For company reminder, purchases This use equipment less company in of $XXX terms the low

board dividend share. At to per voted at the the most maintain of $X.XX recent the board directors meeting,

balanced to forward. continue capital allocation remain will our We going in

did not though we this any million going remain our purchase shares repurchase related quarter. We’re to authorization, opportunistic $XXX to again share

X% same its versus performance The X%. far experience to up to to versus modifying is company now in expects fuel company quarter. also X% our prior and quarter our gallons increase same our X%. fiscal up increasing fourth through The outlook to sales of the based be three XXXX the down to The first inside our approximately store now store flat company X% to X% guidance guidance of X% expects prior so on

to not annual is outlook be following are operating near is end to of three-year be fiscal approximately signed our Based excluding expected the and the to one-time XXXX to and to the $XXX up still purchase expense our expected XX% approximately commitment our XX updating expected purchase million, of the on be is recently The million. year. in Depreciation and to X% inside rate to the low XX%. that to We $XXX construction this company approximately approximately on add stores expected one-time to $XXX million, property, stores. is and increase the expects expected of The the in our XXX and XX%. $XXX to tax benefit to plant costs units margin approximately store expected total continues to metrics: and for expect quarter expense for agreements, equipment received stated include XX% schedule amortization added. approximately is be approximately acquired Interest remodeling is million approximately $XX be million be exceed will

capital especially would and clearly chain openings due to our local inspection supply and ongoing initial spending note versus I construction end that timelines. licensing on are remodels store delays, weighted expectations back challenges,

XXs. our to and for will same near metrics. low expectations February expected guidance. expectations for these mid were operating annual and February quarter quarter, sales with for that annual of the in same be As deliver the store are still consistent CPGs in Fuel inside expenses results total our Fourth fuel levels end our gallons store current both our are the

that, With the turn call over I’ll back to Darren.

Darren Rebelez

thanks right, Steve. All

to again you quarter. congratulations another delivering the entire Casey’s say team to like would great I and thank for

hours team assortment year, driven The team especially three is our quarters by the business operations private During store operating merchandising while such job the optimizing same managing inside prices, label an our labor excellent X%. expenses store first has efficiently the at simplification store value program. by executing initiatives as on reduced doing we store as of

and guests. food and as both prepared while had commodity to other beverage proposition for in We growth continue prudently relative costs sequential have XXXX value quarter dispensed fiscal margin in holding our in manage every we

We well the of that a prepared bacon number we our our chicken pizza NCAA at securing products the pepperoni-pepperoni-pepperoni basketball continue ‘n now have a with are third launching time innovative a in standouts footprint. to food are launched three introduced quarter, as wing food we offering lean NIAL as of into mac cheese, different and refreshed Casey’s. just and college deals tournaments in while In

of All our occasion. and coupled robust with strengthen and a offerings food Casey’s prepared offerings. our favorites these general for products any existing guest merchandise one-stop our Add grocery is assortment shop new of best-in-class

and has remain stayed potential diligent business will to with team Our development evaluating and large both small, respect valuations. busy deals,

remain flexible. to Our approach two-pronged us growth to allows

strength and right itself. value maintain and cost for resilient the macroeconomic recessionary puts because the been is strong, for conveniently. our grow challenging landscape. quality in the industry of true when is Our Casey’s is operate, balance This to us as especially the guests business allows position the in presents in a historically model opportunity has find to sheet current which times

locations team we kitchens. and has job Bucky’s excellent have now kitchens the where executing on integration substantially Our adding acquisition Energy on at Buchanan we an planned done all

our One plan the to guest pillars experience. of strategic of the reinvent was

those satisfaction have guests year. the increasing of our with part As been satisfaction, to initiatives, to throughout evaluate surveying we fiscal try scores guest

have operate COVID-XX highest the experience; without a third that we scores The satisfaction fact, stores in results efficiently the quarter the we in pandemic. guest of reached show quality since guest more can onset sacrificing

another add the to to select continue for Casey’s checkout a more guests more in As environment, even ability our frictionless serve while options to industry towards continues and better our started to guests to convenient is self addition earn guests our The piloting trend checkout rewards we ability stores. communities. to promising allowing

members digital surpassed on X.X rapidly, a XX% as growing XX. hard we million stacked revenue Our work off as prior January the team’s rewards and versus is XX% continues to Digital pay two-year of up basis. year

Our products delivery guests types general and merchandise transaction general are as is digital deliver over-indexed versus to our grocery of ability as and other advantage merchandise taking grocery such pick-up.

the on of now mobile mobile as XX% We app continued growth side digital all orders orders. represent

of times model I’m to execute ahead and environments. As final to for with the we the and uncertain look of XXXX business beyond, the excited quarter challenging face capabilities fiscal the of talent outlook economic business in and Casey’s

to We arise. have they balance flexibility ample of attractive act strength when due to our on opportunities the sheet that allows us growth

forward the As holding. we the about hand we’re XXXX look strategic close fiscal and next years’ excited we’re three to plan,

We take your will now questions.

Operator

[Operator instructions]

analyst] question comes Goldman first from Sachs. Our [unknown from

open. line now Your is

Bonnie Herzog

sustainability about actually are from and understand the and and question it’s for your they margins talk a margins any of March the February you was such a color Bonnie Herzog player. margins be your maybe trends could seeing marginal debate the Hi, fuel margins. just on the how very monthly fuel and would curious for quarter, matter, I where have about Goldman. so had industry’s hoping just early Are over trended you I that moving the to possibly lower? guys about There’s helpful. breakeven big margins, then

you. Thank

Darren Rebelez

Bonnie, Hey take I’ll is this one. Darren. Yes, that

January volatility some lot bit and in but through the was margins squeezed $X.XX cost got quarter, through and the overall a strong saw so which rocky bit a went started January to up we costs really quarter, gallon the side December little of we resulted November, which gallon, side. about I of a translated we the cadence at rebounded margin As a on there. went $X.XX and this another to actually around up it get a little the saw a volatility we ride about little margins $X.XX in in a drop bit, $X.XX month to into guess on then margins, landed $X.XX so moderate look past and quarter, so of the but

where through volatility so of war that’s of the that’s of per where will representative marginal cadence at a now, to of higher looked about baseline go, bit operator, margins that had was of pressures more little we’re the we’ve prior so that the fall again expand lot with well, thing. the been expect mid continue to that seeing Ukraine continue $X.XX far. kind and as seen to breakevens, time We the then run we’ve about over has in but and margins February, gallon, that operator that’s sort we that a think gradually What rate cost about the as on a

Bonnie Herzog

on may. a helpful. on QX quick store your I maybe that more why ramp have ramp store your M&A, even touched the or really was take hit to aggressively of to that you wondering But about I super that’s you’re in a maybe white this, new Maybe did matter, and it’s strategic I pretty thinking about much year you’ve how space if question opportunity going your advantage guidance. follow-up, builds, builds, and Thanks. to just store of Okay, you for highlighted. more builds full curious aggressively couldn’t

Darren Rebelez

in Yes, field like us. of activity. optionality and is up sheet what playing certainly to the this the we’re have balance now potential seeing in giving tell sure. lot What direction, you to We ramp adapt really ability right the current I’d we acquisition to to have is environment, either that a

favorably get this and agreement Our number to we is now, and we’ll mentioned towards respect let the But before leaning frankly fiscal year, a also close pay deals will really, we more a to and, is a those to year, of deals, for moment, disciplined little number that valuations busy we’re that need with looking and our of a so development confident so have for under right at we now really we’re so we’re the right year. to the environment the out. M&A the deals. current team to as But way we’ll talking at end bit of folks, go process going business very lot remain play with number probably smaller either of what the we

Bonnie, new fruition, in that come also told down deals have to to real that any keep M&A our just we’ll store growth finding team slow on lean we the to I’d on so organic way what that If estate not accelerate development. tell But sites, optionality. we’ll and you, our don’t is heavier

Operator

by next our for stand Please question.

next from comes question Credit with Our Karen Short Suisse.

now line is Your open.

Karen Short

Hey, much, thanks talk good to and you. very to

I with If general and that to I want for of talk wondering wanted want that across in One, seems versus if around respect have out with a question--two about store lot into implied what excluding credit hours. that’s have relationship, I kind but D&A wages of your labor. operating questions. guess, been maybe wide like have but excluding X.X% there’s respect in to up your to also excluding an the just the talking to gross and ask A fees, meat, to to was little bit I a guidance, and up range reported, you store, respect deep I want of pressures. on so to if just too talk just you’re expense, profit little retailers realize about with can were card dollars be a XQ it separately parse implied XX%. guidance, cutting bit board a talk about and gas far again I many X%-plus wage retailers expenses increase to your opex in comments so about out, that in-store there to average

Steve Bramlage

then you morning. is to first the Darren It’s the I’ll address one from second let good Karen, hey and I’ll nice Steve. take again. one. Yes, This hear

guide of do for company’s Related given fourth opex, specifically like so reminder of are planned within irrespective adjustments of have going we happen strong on I to a maybe certainly fourth whatever think trajectory things the and the business. variety true-ups, continued kind would to above compensation, will quarter we the year-end we compensation quarter, to year, opex our going performance started have be etc., on just this the the a year, and incentive we may on when incentive what that’s

gross the as mid-XXs, the gross heavily gross in I sit you’re we think to and point it of profit is different any by fourth cadence the what to the fuel CPG comparing here kind just obviously cadence give now influenced of quarter that’s profit, at right in certainly so year-over-year-- going you is if a time, profit

Karen Short

fuel, excluding asking was in-store I - sorry only. Well,

Steve Bramlage

we’re--with food lap the the and going last the increases Yes, and store still taken would will of especially the over I we’ve category, a in the true-ups price on lapping the year-end year, XX us start of taken also that three you okay, those inside to lot then then have different we prepared we’ve price fourth the we’re tell course months increases that for of last quarter. most the over of during the

Karen Short

the store then hours and Okay, and labor question?

Darren Rebelez

Yes welcome Nice Darren. back! Karen, to again to you - this is talk

Karen Short

Thanks.

Darren Rebelez

decreases. our team perspective a didn’t was too from engagement concerted getting complexity years, anything turnover With meaning a a the digging was hard. and just--I’ll and a and new hours, our capabilities into the at our end started the we from causes simply year, that, looking the our away, do us root were and started that merchandising of stores. were This at when into a and really added prepared engagement that off, stores we made was the of a the to removing of bit turnover our I’ll members telling little just engagement from hour opex into respect really last stores, tell little lot store, of getting performance getting lot really to member how around our we’ve a had the food by over really job bit but effort so lot driven perspective started really to root last cause team of about take We of we’ve in and and a getting couple with the into and you we’re

turnover where of store training fact, is and up hours processes opportunities in can number year from quarter, store, in is reducing identifying over and impacting bottlenecks the without continuous course down what and the a hours reduced sole with experience. out complexity of those improvement hours their focus the have where we remove or team stood initiatives guest implemented and a We’ve the remove of we We’ve the hours reduced which in removing have turn we’ve about in - in the up just has we we training third and ended about overtime XX% overtime XX% that because turnover. were

All in of of pandemic. concert highest then, lo the satisfaction are been that the and working scores they’ve our is since guest the and behold, beginning

the as and so Everything added well, we’re cutting sustainability we really the we is we feel good working and it guest in good the way. that don’t fact, think and eliminating - as should, in it’s up right deeply showing hours, we’re satisfaction really so smart it we’re think doing because it, about cutting about we’re non-value of

Operator

question. next by our for stand Please

Fargo. question next Wells Bonadio comes Anthony from with Our

line Your now open. is

Anthony Bonadio

guys. good Hey, nice morning Congrats the quarter. on

margins ask about - very to there. obviously wanted a Just grocery strong result

can [indiscernible] ahead a years, talked how you of but think dig done then sustainable over lot in these You last obviously controllables? little and of running efforts about pre-COVID levels more a drove and you’ve on well are? that private as now but talk supportive, few levels, your you Then, you we’re in can non-controllables label about composition the strategically what

Darren Rebelez

that. crack at first this take Anthony, the Yes Darren. I’ll is

margin general that categories mix that categories. had some had of expansion and you within had shift, is with amount and grocery merch, then a We margin bit. to a that fair so With the do of some through favorable respect there little I’ll to shift that mix those a different couple on walk

in thing in cigarettes else and put about a I’d year, mix points that and category, the vaping it little so a basis the of margin when first out and goes overall The saw all mix and lower point than that bit lower. the and category, everything obviously fall-off that that we smokeless tobacco to is into mix the category of the benefit had category, that’s that from category, prior XXX a accrues lower been we

go? alcohol, non-alcoholic alcohol in mix that the to carries particular margin and highest did where to So went which It beverages went rate. increased,

fact, so in margin category rate those of XX impacted. back is double that moving beverages, you non-alcoholic up the points, when the forth, shifted In mix tobacco, shift that mix it parts is what was in so basis take and in all favorably about

in non-alcoholic that’s about concert beverages, was merchandising was team just piece lot allowed a with that to the XXX same at expand business us accelerate and grocery work margin in of same plans part say the on and that actual there’s year-over-year, basis margin up of in vendor done of same category, rate have improvement thing basis the joint really growth the up due partners time with XXX I’d margin. the the where within point that, points about second the to come thing. to good our really function has The a

was that general what and led of All grocery merchandise. the

trends sustainable, as expect are those because I say improvement that I’d is plans well. sustainable would and margin the

Anthony Bonadio

Got it, that’s you. Thank helpful.

getting it up higher margins. year-over-year thoughts but the refiners, as if you that earnings? of about through It’s Can outright, helpful. flows through dynamic guys RINs, talked easy the a buy priced retail Then that do headwind what know be on about some into it I to from ends so that to would math on Any you talk just comes in quickly I believe on you the million maybe flows through quarter. how obviously $X

Steve Bramlage

I’ll Yes, this Steve. hey a is that. shot at take Anthony,

any year a company, any with of out of quarter them year-over-year fewer than monetize the associated is third generate we or at have RINs, a last our quarter agnostic acquire value on the year, fuel this go team buy the for first when not view was until do with more and RIN less third cost RIN we and physically We we on RINs we fuel the sell should in ethanol did a fuel. mixing generation. RINs lowest we recognize not--we of generate particular do point in can, on fuel and blend in we’re clear generation at are--we of time, us transfer by-product of RINs a We positive issue. so that how basis. terminal timing a the that’s We how impact don’t place a The CPG task on the actually with we splash we’re and you point really

it our of buy the baked the view is is already we cost cost be pre-blended that so of going fuel. the the RIN and to into Sometimes net

transfer do some in of do we so or value we year timing have we RINs, the on year-over-year RIN choose the have a how point discretion transfer and to the a what’s chose and we on when function when is a this year. those, Now, the last market, do of generation them exercise of agnostic choose when on we versus we view delta and to

Operator

for next question. stand Please by our

Our Bobby with Raymond question Griffin comes next James. from

Your line now is open.

Bobby Griffin

questions everybody. quarter. the morning and congrats Thanks Good for taking a on very good

team industry the excluding the years, over any buying working first, a benefit the Darren, initiatives team’s guess volatility work next the know, last other the inside the underlying on there I you couple done Is years? that has pricing. margins of that of lot couple fuel could over nice well contract as as the

Darren Rebelez

in process, we’re that. forward years know, is a you in up that the gate grow our systems, step we’ve this different year pipelines and last solutions these procuring capability begin we to on that further and we last the of are is stabilized, refinery that, into fiscal as stood upstream needed now team those that up journey That’s at last to standing capabilities, the buying into, been for to technology the the process terminals. so fuel doing enable year few and really to looking Yes and shipping up that on Bobby, a going working next

security add an We that do believe opportunity that be of year. to and more incremental margin so some work throughout that’s that’s ongoing will next supply, the fiscal

Bobby Griffin

color, Okay, Then have on grocery us through there’s on food, you. the thank understand that guess any you flowing secondly pricing I trended? sides just guess, prepared and business. both for I I of me, how units on some give can

unit share on been what’s on Just the detail and there? any going

Darren Rebelez

statement, but significant broad to have units, say a I’d If Bobby, and concerning, going little I not of Yes of on bit softness little had a softness. a we’ve not bit we a was softness. little of had make bit

of in bounces in a lot being it bit, that had in then good energy slices, have all and had strength snacks, said, candy positive so a some within we’ve alcoholic any par and softness seen are really know, times pizza and in of a non-alcoholic of drinks differently, concerning offset of this bit but little been performing sub-categories, course you categories Now some donuts sort by nothing that little categories tends that’s movement a for point. it’s where softness. our be particular, around units, beverages, that other to the so at overly bit again different have But

Operator

question. by stand next our for Please

Irene comes Nattel RBC. question next from with Our

now Your open. line is

Irene Nattel

Thanks and good morning everyone.

ahead anticipating saw Was Just you mix grocery, impacted with something in as said seeing you’re is something element that to question that be sticking look the we you continuing temporary tobacco is we should around that fall whole just off. FXX? that QX, a that or and

Darren Rebelez

was something quarter. that’s wasn’t Irene, mix shift a really It Yes for while. in ongoing really the the anything been dramatic tobacco

starts the done bit growth we ix has in the non-alcoholic job categories, accelerating the on strategy non-tobacco the those, time, vaping their merchandising and of cigarettes important a people the over to this that of other is think to This growth like nice our is of tobacco. in tobacco velocity sort reduce that’s at to beverages, part options, of occurrence, in I own, and last of manufacturers, m so that shift a is alcohol the smokeless happening natural years. couple actually, a over in specifically combustible or as recognize shift smokeless accelerate but the its team it’s been and to really same

into anticipate of dynamic to that changing that decline, so really don’t a happen. to because mix continue lean we’ll other that changing, the categories, and those tobacco expect somewhat in category we’d itself is I shift non-tobacco then secular

Irene Nattel

That’s stronger should great, all that so to of support margin. continue

you can and this seller M&A, seeing in the of time larger I If point in for second just at what expectations, a operator smaller are the to topics valuations, at level some and both terms networks? of switch for notably

Darren Rebelez

Yes, of taking of and say at a different deals we’re look expectations. variety there’s a lot a I’d

don’t cases, We love fuel margins I sitting to that ongoing that is going and term of be, on year reflective at necessarily recent those are the high that historically discussions. some are those think are sellers that having to the trend we’re long in rate. there to most would at sell able be some believe margins so

rates, but But otherwise I think have think also because participants so if been than to I are environment the have we that. interest overall, at step would back that because obviously in high we trying a minute and fewer look have there’s of really process I the an maximize dynamic it’s sellers value, maybe interesting

of how going what midst is we’re the discussions, different I this see to lot of yet at so seeing to but have play in that’s point. out, We’re a this all

Operator

by question. for Please our stand next

Chuck with from comes Northcoast Cerankosky Research. question next Our

now line Your open. is

Chuck Cerankosky

Good Great morning quarter. everyone.

When pricing do the category with how I and you rest taking the into inflation does know vendors. about the further course you’re of year, you’ve trends negotiated the assortment the that the shelf feel your over place and looking grocery inflation mix? over the and at How merchandise of work year,

Darren Rebelez

Yes Chuck, Darren. this is

we we where was were increases the to supplier cost the little and the agreements across-the-board were correct prior cost where there most moderation calendar of advance targeted this in locked. What negotiate a in bit - from fairly typically it year little of increases. of sub-categories a saw versus the to increases, we year, of is You’re so opposed beginning more the certain as that is those year,

from having inflation, again were has think to the we’re as our bit and While the in X% I so adjustments time we nice at for relative that. those team and needed, what experiencing inflation, We price that experiencing the category job protecting make has year and same and moderated about the trying it a guests between before. balance a done balancing maintain value margin, the we’re still

recent the striking the a the strong that been the to really that. sales at and balance have margin perspective get where to blend but rate. saw continue to able we’ll a at time right You strong now the quarter, we’ve from margin mix results up results we’re right do in same most We think

Chuck Cerankosky

Darren, X% calendar increase is for ’XX? the so cost average

Darren Rebelez

fiscal No, that would be year. for

Chuck Cerankosky

Fiscal year? Okay.

Darren Rebelez

Yes.

Chuck Cerankosky

ask, fiscal right, compare to did how you. ’XX? that me Oh, let All thank

Darren Rebelez

I Steve, don’t know, you--? do

Steve Bramlage

bit--we ’XX this the have think did we than just if higher a fiscal year We timing calendar more that inflation It’s in on and fiscal negotiate you we in little prior had year. certainly did of in lags fiscal levels the fiscal a incurred inflation of higher we basis. than ’XX, the consistent and

Operator

our by next stand Please for question.

Ben comes with question next from Our Bienvenu Stephens.

now open. is line Your

Jack Hardin

subbing quarter. on Jack Ben for is Hardin Congratulations this strong Hello, the Bienvenu. in

business just increased in pizza ask seeing business to for pizza your insulated in activity and I category? how What promotional wanted demand, starters. you about or in are the think you is from your do of terms exposed

Darren Rebelez

Jack, is Darren. Yes this

performed has volume and quarter pretty had both well. strong third business slices, the in in pizza in Our sales in units. We

positive bit more of recover in whole more softness. with we’re have the not level, and softened still recently a On characterize bit velocity but, just starting so terms that launch concerning launched, of bit at that’s here a a as little pies, our pizza. little a the see would we’re pepperoni-pepperoni-pepperoni actually I the units innovation timing sales, again, of issue to keeping the a that

a our around increased can keeping so get competitors promotional we they are at the pizza an a from sized said, point, from being activity major seeing standpoint, that. medium on we’re eye which mostly lower pizza, price That

fray, not to. jump monitor point, a accordingly we and into need our react We if but haven’t we impact seen necessarily material ready we’re to to business this continue we’ll that to so at

Jack Hardin

great. helpful. you, Okay, very Thank

side key fuel change. and things, about just the wondering have on the softened a your gallons talk was of if fuel that bit you driving Then factors could

Darren Rebelez

driving while maximize a able dollars, we’ve most and profit volume, a Well, and that that’s a sometimes of maintain strategy, been been What quarters little so in dance I our right to gallons a and that we’ve to has above we’ve gross hovering now a level, with little fuel is gallons. margin. sometimes bit fuel think bit below, around for balance seen been which driving flat is flat

look What down we environment, pretty a from down we’re a actually geography we as our specific seeing in that. at the business in good in when holding percent feel everybody half else down-X% a our about X% we’re share X%, is and to and of to so the relative take and position result we’re taking we’re anywhere a gallons industry that are

Operator

stand by our for question. Please next

question comes Bank. with next Deutsche from Our Katai Krisztina

now Your open. line is

Krisztina Katai

coming the the XXXX. segment congratulations XX% strength at looks very good to results. saw back nice in at on Hi, the and that least since I we morning, circle wanted know, at you strongest, to grocery -

under maybe, that your are great vendor it could penetration vendors getting joint you there, pressure, pricing, coming their label with to units segment going planning in taking private that increases that relates essentially does are open process As to more forward? less as margin seeing be and as help

Darren Rebelez

on we’ve we that the causes and on other in re-think conversation strategies them able we’ve side planning different to some bit matter of We’ve our some to their those have different implemented from their grow with in of other. that’s a at discussions pencil cases, the the brands us business in with Yes to perspective some have those goods ultimately and learnings of some of Krisztina, overall products, plans the products. it pricing advantage to category, the some does change strategies a to not that take of cost label and supplier the their when joint boats, prove able all the create private been on it’s expense maximize pricing to and, a private of partners because label goal, sharpening been one and cases, cases the is

team well supplier that have really worked I together make to think partners and happen. our our merchandising

Krisztina Katai

allocation. for question you capital I that. thank have a Great, follow-up around

the balance above generation potentially unit strong of flow think and of a do context back guys, from organic at You opportunistically? historical opportunities, of in you sheet the on so do well and what cash buying a the lot about cash pursuing business perspective, you shares growth, we’ve from seen it’s have your how M&A least

Steve Bramlage

Krisztina, this address morning good is I’ll that. Yes, Steve.

capital. a balance sheet that best the do We we about of for way what cash that, relative are in a of allocate We on to to had lot aware certainly have think historically it - of lot terms the we’ve sure.

talked capital buying both heavily to because year terms the over the opening right? those of M&A us most in about, going to of were in that the and reality very small course closing the deal are near think items and year term, knew for I for the this busy April spending we stores. have hold back is that going of our It the because have we’ve a seemed We’re very the of end-loaded, it. we realistically cash prudent to uses

grow number of we’ll an EBITDA is we the of to new But we investing dollars, will significance, off have us, go believe pay generation best cash ROIC flow into back is really as of where any units. which continues capital one environment the we and don’t and concerns of where to to company don’t in to debt, continue need potential leverage we and use the growth, so lean in in for accretive start, something those that’s terms we

the uses, and apace there the and the into point respectful that with around repurchase is excess needs what very of thoughtful our in of has and share comes dividend in and point company, near and time at it continues fore profile are growth the but been sure We term company there making historically a clearly the leverage beyond where the time. is the growth dividend earnings cash

We in the last haven’t quarters, obviously. been of there couple

that spending we’re very the short to think aware of I continue we going be cash term, already quite know in so to will things that the remain authorization we’re an to that We of, some finish we’ve to committed but, we aware have and of doing.

Operator

for stand Please question. next by our

comes question John Lawrence last with from Our Benchmark.

now open. is line Your

John Lawrence

seeing label the the through is Darren, and private more now is we there in it often have in. seeing any a bit about label, basket, that what gone as that a journey shift year? that Is private Thank are loyalty you would best customers, are basket drinks, continues? your in you label of me members, type in squeezing private it talk you you for little the as

Darren Rebelez

to that the more in because you’ll snacks and basket and is the as runs from John, store weather what you and in third beverages is see the beverage of cold rest we of outside, the label beverages Yes so sort get seasonality the standpoint the and and into less does, cycle terms it to a of more the thing, the I see sort think the summer, category. of acceleration same of that then private candy the start itself, quarter, shifts

saw pressure being the some before, been is historically unit candy category is difficult so in products, passing the I’ll because has aggressive starting had national That category some of basket of label gave why brand candy we the of velocity. cost increases this penetrate said, bar really of in put some accelerated a of which strength the the that and the you great brands into due so confidence were category to We manufacturers. on to was lot like to some a that it in important. all was tell national really the It the go private introductions candy candy mix to on recent something a of retailers, has not category seen and example that to really us

national and increases quality value cost kind a category. manufacturers, guests has mix of because us shifted of actually and that of of that’s--the to We great something product that continue to have from become to our at of we anticipated at value allows and have hadn’t some the category to introduced that’s the look price But quality of aggressive that. a so originally of a grow that items because gives the expanding the because bars continue the the line in selling price so at and top product, a candy in continue way the we look the

John Lawrence

Congrats and good thanks. luck. Great,

Darren Rebelez

John. Thanks

Operator

by call. our next stand Please for

comes question John next from Our with Morgan. Royall JP

now is line open. Your

John Royall

good I just try end, we’re taking guys, my on the question. for Thanks in. morning. squeeze realize Hey so at to I’ll

there of more might deal having environment there, that repeated? gotten like you’ve being the deal. execute have of scale side, and do one-off larger be to a a today, you you a a it of on today, be thoughts Buchanan done any questions seems of there wouldn’t consider on or kind another talked plenty Just that out Is but that scale on constructive M&A the it a follow-up I you know liquidity lot of about

Darren Rebelez

No scale, or deals larger even that John, at we certainly bigger. of look

issue deal. around the I’d our the isn’t say speaks size Our of sheet for itself. balance

strength a we’ve and how larger integrated rhythm a from have standpoint balance to has three have we a plenty We acquisitions, do and sheet has frankly, that and, of team process that now capability understands a this.

our acquisition. a more larger to in successfully have We confidence ability integrate

valuation, the more really we’re right small. opportunities, our on right deals, really--from large about looking strategic geography, and and finding for at that’s work so This all at us, deal of perspective, continue the types that’s we that’s the those right in to but it’s

John Royall

Thank you.

Operator

now this to for I conference show turn time. Darren closing back to no further questions I would at remarks. the like

Darren Rebelez

on us All right, the the call. today for taking thanks and time joining

and our quarter strategic we thank for finish three-year to their again plan, hard work team serve our all Casey’s you. want we As and to day. just and the I members fiscal communities final commitment every Thank

Operator

you This for concludes today’s participating. conference call. Thank

You disconnect. may now

Casey's General Stores (CASY) 8 Mar 232023 Q3 Earnings call transcript