Why did earnings decline if the core inside business grew?

Lower earnings were driven mainly by a tough fuel margin comparison (37.3 cents per gallon versus 40.7 cents), lapping a one-time $15 million operating expense benefit in the prior year, and higher operating expenses from 167 additional stores. Inside gross profit growth partly offset these headwinds.

Is the fiscal 2024 outlook changing?

No. Casey's reaffirmed its full-year outlook, including inside same-store sales growth of 3.5% to 5%, inside margin of about 40% to 41%, EBITDA growth in line with its 8% to 10% long-term goal, at least 150 new stores, and capital expenditures of $500 million to $550 million.

How strong is the company's balance sheet and capacity for shareholder returns?

At January 31, 2024, Casey's had about $1.1 billion of liquidity, including $178 million of cash and $899 million of available credit lines. The company plans to repurchase at least $100 million of shares during fiscal 2024 and has about $310 million remaining under its authorization. The quarterly dividend is $0.43 per share, payable May 15, 2024.

What is driving the outlook for fuel going forward?

The filing does not provide a specific fuel margin forecast. It does guide to same-store fuel gallons between down 1% and up 1% for the year. Management noted that the fuel team navigated a rising cost environment this quarter, and fuel margin is the main variable investors should monitor.

How much of the operating expense increase is from acquisitions and how much is organic?

Operating expenses rose about 10% in the quarter. About 6 percentage points came from operating 167 more stores than a year earlier, about 3 points came from lapping the prior-year one-time benefit, and about 1 point came from same-store employee expense, where wage increases were partly offset by a 1% reduction in same-store labor hours.

CASY 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed March 11, 2024. Cited figures are marked; the original filing is the authoritative source.

Casey's General Stores reported third-quarter fiscal 2024 results (quarter ended January 31, 2024) that showed solid operational momentum in the store but lower year-over-year earnings.

Diluted EPS fell 13% to $2.33^a and net income fell 13% to $86.9 million, while EBITDA declined 2% to $217.6 million. The decline reflects a strong fuel margin comparison in the prior year, lapping a one-time $15 million operating expense benefit from a legal matter, and higher operating expenses from 167 additional stores. Management's narrative centers on inside gross profit, which rose 11.3% to $501.5 million on inside same-store sales growth of 4.1% and a 70 basis point margin expansion to 41.3%.

Fuel was the weak spot. Fuel margin compressed to 37.3 cents per gallon from 40.7 cents a year earlier, and fuel gross profit fell 2.0% to $257.2 million^b. Same-store gallons were down 0.4%.

Same-store operating expenses excluding credit card fees rose 2.5%, helped by a 1% reduction in same-store labor hours. Liquidity remained strong at about $1.1 billion^c, and the company repurchased about $30 million of stock in the quarter. Casey's reaffirmed its full-year fiscal 2024 outlook, including same-store inside sales growth of 3.5% to 5%, EBITDA growth in line with its 8% to 10% long-term goal, at least 150 new stores, and at least $100 million in share repurchases.

The quarterly dividend was set at $0.43^d per share, payable May 15, 2024. For investors, the key question is whether inside strength and cost discipline can offset fuel margin pressure and the cost of rapid store growth.

02—Key points

Key Highlights

Diluted EPS of $2.33, down 13% year over year; net income of $86.9 million, down 13%, with the prior-year quarter boosted by a one-time $15 million (about $0.31 per share) legal-matter benefit.
EBITDA of $217.6 million, down 2% year over year; the company's outlook calls for fiscal 2024 EBITDA growth of 8% to 10%, reaffirmed.
Inside same-store sales rose 4.1% (9.9% on a two-year stack), with inside gross profit up 11.3% to $501.5 million and inside margin up 70 basis points to 41.3%, driven by prepared food and dispensed beverage.
Fuel margin fell to 37.3 cents per gallon from 40.7 cents, and fuel gross profit declined 2.0% to $257.2 million; same-store gallons were down 0.4%.
Operating expenses rose about 10%, of which roughly 6 points came from 167 additional stores and about 3 points from lapping the prior-year one-time benefit; same-store operating expenses excluding credit card fees rose 2.5%.
Store count reached 2,639 at January 31, 2024, after 105 acquired stores and 23 new builds during the fiscal year to date.
Liquidity of about $1.1 billion ($178 million cash plus $899 million available credit); $30 million repurchased in the quarter with $310 million remaining under authorization; quarterly dividend of $0.43 per share.

03—Questions

Frequently Asked Questions

Why did earnings decline if the core inside business grew?
Lower earnings were driven mainly by a tough fuel margin comparison (37.3 cents per gallon versus 40.7 cents), lapping a one-time $15 million operating expense benefit in the prior year, and higher operating expenses from 167 additional stores. Inside gross profit growth partly offset these headwinds.
Is the fiscal 2024 outlook changing?
No. Casey's reaffirmed its full-year outlook, including inside same-store sales growth of 3.5% to 5%, inside margin of about 40% to 41%, EBITDA growth in line with its 8% to 10% long-term goal, at least 150 new stores, and capital expenditures of $500 million to $550 million.
How strong is the company's balance sheet and capacity for shareholder returns?
At January 31, 2024, Casey's had about $1.1 billion of liquidity, including $178 million of cash and $899 million of available credit lines. The company plans to repurchase at least $100 million of shares during fiscal 2024 and has about $310 million remaining under its authorization. The quarterly dividend is $0.43 per share, payable May 15, 2024.
What is driving the outlook for fuel going forward?
The filing does not provide a specific fuel margin forecast. It does guide to same-store fuel gallons between down 1% and up 1% for the year. Management noted that the fuel team navigated a rising cost environment this quarter, and fuel margin is the main variable investors should monitor.
How much of the operating expense increase is from acquisitions and how much is organic?
Operating expenses rose about 10% in the quarter. About 6 percentage points came from operating 167 more stores than a year earlier, about 3 points came from lapping the prior-year one-time benefit, and about 1 point came from same-store employee expense, where wage increases were partly offset by a 1% reduction in same-store labor hours.

04—Continue

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