Increased fuel prices mean increased profits for Casey’s General Stores.
The executives of Casey’s stated that the company earned a net income of $152.9 million for the period ending on July 31. This represents a 28% increase compared to the previous year. The gas station chain, based in Ankeny, reported strong quarterly results, with higher fuel prices leading to increased profits.
As per the report released on Wednesday, the company made a profit of 45 cents on each gallon sold, which is an increase of 10 cents per gallon compared to the previous year, with fuel sales being the primary contributor.
With a 31% increase, the boosted sales resulted in a profit of $308.2 million from fuel sales. Casey’s disclosed that it managed to sell an additional 22 million gallons of fuel, thanks to owning 74 more stores compared to the previous year. Casey’s took advantage of the company’s expanded presence, although executives noted that customers purchased less fuel per visit due to the period of increasing prices.
Steve Bramlage, the Chief Financial Officer of the company, warned investors during a call with analysts on Thursday that fuel sales margins are expected to decrease by around 35 cents per gallon. He mentioned that fuel prices have been peaking since mid-June, and cautioned that these high prices will not be beneficial for the company in the long run.
More: Casey’s breakfast pizza is reaching its 21st anniversary with a Busch Light beer cheese ‘bizza’ to commemorate the occasion.
“Including CEO Darren Rebelez,” it is improbable that fuel margins will persist above 40 cents per gallon. “We anticipate margins to return to normal in the second quarter.”
The initially negative news of decreasing fuel margins appeared worrisome to investors, but in line with analysts’ predictions, FactSet’s quarterly performance exceeded expectations.
Casey’s stock commenced trading on Thursday morning at $214.16 per share, encountering a decline of roughly 3% in comparison to the closing value on Wednesday.
The company’s ready-to-eat meals and served drink business remained relatively unchanged, generating a profit of $191 million, representing a 2% rise. Casey’s also experienced expansion in its grocery and miscellaneous goods sector, achieving a profit of $313 million during the quarter, which reflects a 14% surge.
According to Rebelez, the grocery industry has experienced positive effects from inflation. Customers are increasingly purchasing the company’s more affordable store-brand products. Additionally, they are also buying smaller beer packages, which have a higher cost per can.
He said some customers have begun opting for Casey’s instead of fast-food restaurants, pointing out that the company’s large pizza costs $17.
“That value proposition is quite compelling,” he remarked.
Additionally: Fuel costs drastically decrease in Iowa — specifically in the Des Moines urban region — to become the most economical in the United States.
Rising costs counterbalance a portion of the earnings for Casey’s.
The company said that the effective tax rate increased by about 1 percentage point largely because of some previous tax benefits that had expired. In the last year, taxes increased by about $50 million, up from about $14 million in the same time period.
Casey’s operating expenses also recorded a total of $543 million, experiencing an increase of approximately $64 million. This rise can be attributed to the elevated credit card handling charges, which escalate in proportion to the amount customers spend on fuel and amounted to around $17.8 million.
The company disclosed in late July that Rebelez would now be paid approximately $1.2 million a year, with an increase of $200,000. In addition, the company reported an increase in payouts to executives as part of their incentive packages.
Casey’s said that he is paying almost $14 an hour to nearly 14 employees in the store. He mentioned that the company is not struggling as much as it was six months ago to find employees due to the tight labor market. Bramlage, the spokesperson for Casey’s, stated that the company is paying its employees more than what it paid a year ago, with an increase of about a couple of percentage points, approximately $14 an hour.
As per the U.S. Bureau of Labor Statistics, the mean hourly wage for employees working at gas station convenience stores in July was $17.62. However, this remuneration falls short of the standard set by the national industry.
The convenience store gas station employee in Iowa typically earns $10.82 per hour, according to the bureau. The cost of living in the Midwest is lower compared to the national average, but the state does not release wage data as quickly as national data. However, the cost of living in the Midwest is generally lower, which is advantageous for the company operating in the 16-state region.
Furthermore, due to the increasing cheese prices, even the pizza at Casey’s gas station in Iowa has become more expensive.
Casey’s said that it has decreased the amount it pays workers for overtime and has cut the hours of “nonproductive” store workers. The company, said Rebelez, is reacting by trying to save money in other ways and reducing higher wages.
He said that it is trying to eliminate certain tasks at stores. In particular, the team that is looking to find ways to save money has also created “a continuous improvement company,” said Rebelez.
“We’re in the initial phases of that,” he stated. “We completely anticipate discovering additional chances to enhance efficiency.”