Casey's General Stores makes sure that small towns in the Midwest get their fill of convenient shopping. It operates about 1,700 company-owned convenience stores, mostly in Illinois, Iowa, and Missouri, but also in a dozen states overall in the Midwest, all within about 500 miles of its headquarters and distribution center. Towns with 5,000 people or fewer, where rent is low, are home to about 60% of the chain's stores. Casey's sells lots of gasoline (more than 70% of total sales), as well as beverages, groceries, and fresh prepared foods, including from-scratch pizza, donuts, and hot sandwiches. It also sells tobacco products, automotive goods, and other nonfood items, such as ammunition and photo supplies.
Fiscal 2012 (ends April) sales at Casey's General Stores increased by 24% vs. the prior year, approaching $7 billion. Gasoline sales accounted for just more than $5 billion of that. The sharp rise was primarily due to a 20% increase in average gas prices, as well as the number of gallons sold. Beyond the pump, increasing same-store sales of groceries, prepared foods and other in-store items boosted sales, as did the expansion of the chain's pizza delivery service and the addition of about 65 new stores. Net income increased by about 23% over the same period. However, rising gas prices put pressure on gasoline profit margins as the company tried to keep prices competitive to retain customers.
Casey's seeks to meet the needs of its small town clientele by combining the features of a general store and convenience store. The stores, which offer more than 3,000 food and nonfood products, carry a broader selection than a typical convenience store. It addition to low-margin food and grocery items, the stores offer lots of prepared foods, which sell at higher markups. Indeed, while sales of products other than gasoline account for about 30% of its total revenue, they contribute nearly three-quarters of the chain's gross profit. To make more room for food, the convenience store operator has been opening larger (about 3,800 sq. ft.) "O-shaped" stores. The format (launched in 2008)devotes additional space to food and beverages, allowing for a wider selection of beer, energy drinks, and other high-margin items. Still, gasoline sales account for a growing share of the company's revenue: 73% in fiscal 2012, up from about 68% two years ago. Over the same period however, the gross profit on gas has declined from 5.6% in 2010 to just 4.4% in 2012. Volatile gas prices result in pressure to sell gas a competitive prices, putting pressure on margins. Acquisitive Casey's added about 35 stores through acquisitions and built another 30 locations in 2012. More recently, Casey's recently broke ground on its first stores in Kentucky and Tennessee.
Mergers & Acquisitions
The company's annual goal is to increase its store count by 4% to 6%. To that end, Casey's has been expanding in existing markets and broadening its presence by acquiring other Midwestern chains. During fiscal 2012 the company acquired 35 stores, including 22 locations, most in rural Iowa, from rival Kum & Go. Previously, it bought five convenience stores from rival QuikTrip located in the Springfield, Missouri, metropolitan area. Also in 2011 Casey's purchased about a dozen NuMart convenience stores in Minnesota from NuWay Cooperative and it completed the acquisition of about 45 stores in Nebraska, Kansas, and Oklahoma (a new market) from Kabredlo's. – less