Casey's General (CASY +5%) reported mixed Q1 results, falling slightly short of top-line estimates due to lighter inside same-store sales growth compared to the company's FY25 (Jan) forecast. The gas station and convenience store chain, primarily located in the Midwest, had been consistently outperforming earnings and sales estimates. Despite the underwhelming Q1 numbers, several positives emerged from the report.
- CASY achieved double-digit earnings upside in Q1. Inside margins were 41.7%, slightly above the FY25 prediction of 41.2%. Fuel margins increased by 4.2 cents sequentially to 40.7 cents per gallon, surpassing the FY24 average of 39.5 cents per gallon.
- Revenue grew by 5.9% to $4.1 billion. Same-store fuel gallons increased by 0.7%, aligning with the high end of the company's outlook of -1% to +1% for the year. However, inside comps were weaker at +2.3%, below the FY25 forecast of +3.0-5.0%.
- Management noted during the Q4 conference call that inside comps were trending in-line with annual guidance, but traffic began to decline shortly after. Volatile discretionary spending among lower-income consumers and fewer significant lottery jackpots contributed to the lower foot traffic. Additionally, a one-time benefit adjustment related to the rewards program caused a 140 bp hit to comp growth, which was anticipated.
- CASY is maintaining its FY25 targets for inside comps, fuel comps, and inside margins. These projections will be updated after the $1.145 billion acquisition of Fikes Wholesale is finalized. Management indicated that August inside and fuel comps are tracking within the annual outlook, suggesting a brief interruption in inside sales demand during Q1.
Although CASY's fiscal year started slower than previous years due to reduced spending by lower-income consumers and fewer compelling lottery jackpots, the Q1 report highlighted steady growth in prepared foods and dispensed beverages. Fuel comps remained strong despite moderating travel demand, showcasing the strategic location of CASY's stores. We remain positive on CASY's long-term potential.
