Casey’s General Stores Inc.’s fiscal first-quarter earnings soared 54%, which was much higher than expected thanks to lower retail fuel costs and the company’s decision to lock in costs for cheese, the Wall Street Journal reported.
“Strong gas margins and enhanced profitability inside the stores were the primary reasons for the record quarter,” said President and Chief Executive Robert Myers. “Lower retail fuel prices also brought about significant relief in our operating expenses.”
The Midwestern c-store has been making a huge profit on food sales in both the prepared and grocery segments, as customers avoid higher-priced restaurants during the recession. Meanwhile, some wonder if rising unemployment might hurt growth for fast-food merchants.
Same-store gasoline sales by the gallon grew 3.2%, while the average gasoline margin increased slightly to 15.7 cents a gallon from 15.6 cents. Myers credited lower prices with helping his company top its same-store-sales goal, while margins grew because of a “more responsive pricing environment,” he told the Wall Street Journal.
Same-store sales of grocery and other merchandise grew 6.4%, and the average margin increased to 34.3% from 34%. For the prepared-food and fountain business, same-store sales grew 6.6%, while average margins widened to 63.8% from 60.5%. Margins benefited from the company’s decision to lock in costs for cheese, which is a hefty cost for the pizza seller, through October.
Casey’s shares grew 8.6% to $30.61 during after hours trading. The company’s stock rose two-thirds in the past six months and now is nearing its 52-week high set last November.
For the quarter ended July 31, Casey’s reported earnings of $44.2 million, or 87 cents a share, compared with $28.8 million, or 57 cents a share, a year earlier. Total revenue fell 24% to $1.19 billion on falling gas prices, the Wall Street Journal reported. Analysts had projected earnings of 60 cents a share on revenue of $1.19 billion. Gross margin widened to 18.5% from 12.7%.