$5 Gas? Report Says Casey's and Susser Will Weather Rising Gas Prices

NEW YORK -- Casey's General Stores Inc. and Susser Holdings Corp., parent of Stripes convenience stores, will benefit "incrementally" if regular gas equals an average of $5 or more this summer, according to a report titled "$5 Gas?" released by BMO Capital Markets today.

According to BMO Food Retailing Analyst Karen Short, strong prepared food offerings and more frequent consumers trips to their c-stores will help the two chains. Customer visits will be more plentiful to Casey's and Stripes convenience stores because customers will place a cap on their spending during each visit, such as a $20 fill-up.

Short added that those two c-store chains will benefit more than other chains because their stores are primarily located in regions of the United States where gasoline prices are below the national average.

"We believe convenience stores with strong offerings inside the store and that do not rely on fuel margins to sustain the business are best positioned to weather the storm, along with fuel retailers that have the financial flexibility to remain competitive on pricing and tie their loyalty programs to fuel sales."

One c-store chain that could be negatively affected by rising oil prices is The Pantry Inc., parent of Kangaroo Express stores. Supermarket chain SuperValu Inc. would also be negatively affected, the report stated.

"Both companies have credibility issues with consumers as it relates to pricing, and in an environment where consumers feel increasingly pressured, we are not sure that either company has the financial flexibility to remain competitive on pricing and turn around recent traffic losses," Short said in the report, adding that The Pantry also has more exposure to vacation destinations than Casey's and Susser.

As for the economy in general, the BMO report stated that $5 gas would slow U.S. expansion and increase the unemployment rate. However, by itself, rising gas prices will not lead to a recession, "but the adverse effects of higher joblessness on already weak consumer confidence and housing markets could be troublesome, especially if Europe's credit crisis worsened," the report concluded.