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The Year-to-Date Performance of Casey’s Key Segments

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Casey’s revenue segments

In this part of the series, we’ll look at Casey’s General Stores’ (CASY) revenue segments and evaluate their performances in the first nine months of 2017. 

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Fuel segment

Fuel continues to be the company’s largest segment, accounting for around 60.0% of its total sales. While volatile fuel prices took a toll on the company’s top line, gasoline sales did better than the annual goal in all three quarters.

Same-store fuel gallons rose 3.1%, 3.7%, and 2.6%, respectively, in 1Q17, 2Q17, and 3Q17 compared to the annual goal of a 2.0% rise.

The segment recorded an average fuel margin of 19.5 cents and 18.6 cents per gallon in 1Q17 and 2Q17, respectively, compared to the annual goal of 18.4 cents. However, it fell to 17.9 cents per gallon in 3Q17, primarily due to rising wholesale costs. Year-to-date, gasoline margins are 18.7%.

Grocery and merchandise category

The grocery and merchandise category, Casey’s second-largest segment, fell short of the goals in all three quarters. The division’s YTD (year-to-date) same-store sales have risen 3.5% compared to the annual goal of 6.2%. The YTD average margin of 31.6% failed to meet the 32.0% margin target.

Management cited rising food deflation, an increased pricing spread between food away and food at home, and higher promotional activities by big-box retailers as the key reasons for the segment’s poor performance. Grocers and discount retailers such as Kroger (KR) and Dollar General (DG) also reported falling sales comps (comparables) for reasons similar to Casey’s.

Prepared food and fountain category

The prepared food and fountain category is Casey’s most profitable segment. The company achieved an average margin of 62.5% in the first nine months of fiscal 2017, meeting its annual target. Same-store sales stood at 5.4%, falling short of its 10.2% annual goal.

Casey’s is included in the portfolio holdings of the SPDR S&P Retail ETF (XRT) with a weight of 1.0%.

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