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Casey’s Met Grocery Comps and Margins Target in 2Q18

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Grocery and Merchandise segment

The Grocery and Merchandise segment is Casey’s General Stores’ (CASY) second-largest revenue segment. It accounted for 27% of the company’s 2Q18 sales. The segment grew 5% YoY (year-over-year) during the quarter to $572 million.

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Sales comps met the guidance

Same-store sales rose 2.5% and met the annual target of 2%–4% growth. The segment witnessed a slowdown in the last few quarters due to several factors like food deflation and higher promotional activities by big-box retailers. The segment’s comps grew at an average of 8% between fiscal 2014 and 2016.

However, management was satisfied with the current quarter’s performance.

“We continue to outpace market data in our operating region,” stated Terry Handley, Casey’s president and CEO. He added, “We were pleased with the gains in the category in light of the current environment and that we are currently experiencing, and we remain optimistic about our long-term growth opportunities as we benefit from the continued rollout of major remodels, replacement stores and new store openings.”

Casey’s performance was better than Kroger (KR), which saw 1% growth in comps (ex-fuel) in its last reported quarter. Discount store retailers Dollar General (DG) and Dollar Tree (DLTR) reported better comps. While Dollar Tree’s comps grew 3.2% during the quarter, Dollar General’s sales comps rose 4.3% during the last reported quarter.

Margins

The Grocery and Merchandise segment’s average margin stood flat at 32% and met the upper-end of its guidance range. The gross profit margin rose 4.9% YoY to $183.1 million.

Investors looking to invest in Casey’s through ETFs can consider the First Trust Nasdaq Retail ETF (FTXD). Casey’s has a weight of ~1.4% in FTXD.

Next, we’ll discuss how Casey’s Prepared Food segment performed.

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