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Casey’s Grocery Sales Comps Pressured throughout Fiscal 2017

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Grocery and Merchandise category

Grocery and Merchandise, Casey’s General Stores’ (CASY) second-largest revenue segment, recorded a 4.7% YoY (year-over-year) increase in sales to $500 million. This compares to average growth of 10% over the last three years. 

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Casey’s misses sales comps target throughout the year

The Grocery and Merchandise segment’s same-store sales growth fell to 1.5% from 7.4% in fiscal 4Q16 and 9.7% in fiscal 4Q15. The company also missed the annual goal of 6.2% growth in comps. 

The company’s management cited deceleration in customer traffic, which was mainly due to higher promotional activities by big-box retailers and the rising pricing spread between food away from home and food at home. Leap year comparisons also resulted in a 1.0%–1.5% negative impact on comps.

For fiscal 2017, CASY’s sales comps increased 2.9% as the company fell short of the annual goal in all four quarters. Nevertheless, the segment recorded a 16th consecutive year of positive sales comps during the year. Its total sales rose 5.7% YoY to $2.1 billion.

“In spite of the pressures experienced by many in the industry, we continue to be a leader in same-store sales growth in this category,” said Terry Handley, the president and CEO of Casey’s General Stores.

Average margin also falls short of target

Casey’s General Stores’ (CASY) fiscal 4Q17 average margin for the Grocery and Merchandise segment stood at 31.1%, down 100 basis points from fiscal 4Q16. This weakening was primarily due to a one-time inventory-related adjustment, which represented about 60 basis points of the decline.

For fiscal 2017, the average margin was 31.5%. CASYs annual goal for the average margin was 32%.

Investors looking for exposure to Casey’s General Stores can invest in the ProShares S&P MidCap 400 Dividend Aristocrats ETF (REGL), which has ~2% of its holdings invested in the company.

In the next article, we’ll discuss the company’s Prepared Food business.

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