Prepared Food and Fountain segment
The Prepared Food and Fountain segment, which accounted for 13% of Casey’s General Stores’ (CASY) 1Q18 sales, recorded a 7.4% YoY (year-over-year) increase in its sales during the quarter. The segment’s total sales were $262 million.
Its sales comps grew 3.7% during the quarter—compared to the annual goal of 5%–7% growth.
“Like others in the broader food service industry have reported, we experienced a softening of traffic, particularly in the month of July,” said Terry Handley, Casey’s president and CEO.
The segment, which was once Casey’s fastest-growing segment, recorded average comp growth of ~11% (between fiscal 2014 and 2016). It missed the annual goal in the last five consecutive quarters.
“We believe this pressure is related to the agricultural economy in our market area and the continued spread between food at home and food away. Another contributing factor was the excessive heat during the month of July,” added Handley.
As a result of the softer traffic, Casey’s management revised the same-store sales target for the Prepared Food and Fountain segment. It expects sales comps to rise 4%–6%—compared to the 5%–7% range guided earlier.
Margins meet the annual target
Casey’s Prepared Food and Fountain segment’s average margin for the quarter stood at 62.5%. It was in line with the 61.5%–62.5% goal. It was 30 basis points lower compared to its 1Q17 margins, primarily due to a rise in costs.
Investors looking for exposure to Casey’s through ETFs can consider the First Trust Consumer Staples AlphaDEX Fund (FXG). Casey’s has a weight of ~3.5% in FXG.
In the next part, we’ll discuss Casey’s 1Q18 profitability and margins.