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ANKENY, Iowa — Casey’s General Stores Inc. suffered a drop in consumer spending in its 2017 fiscal first quarter, ended July 31, Chief Financial Officer Bill Walljasper reported Wednesday during the company’s Q1 earnings call.
“Consumer spending decelerated throughout the quarter,” he said. “It was partly due to lower farm income in the Midwest [where Casey’s mainly operates]. …According to the USDA [U.S. Department of Agriculture], farm income is at the lowest level since 2009.”
Consumers continue to visit Casey’s fuel pumps in strong numbers, but Walljasper explained that for some reason, they don’t “feel like they need to come into the stores as often.”
Poor weather in July in Casey’s operating regions was another reason for in-store sales weakness during the quarter, according to the CFO. To encourage customers to come into Casey's convenience stores more often, the retailer will soon institute promotional programs, though Walljasper said he could not “say what these programs are for competitive reasons.”
When customers did come inside Casey's stores during its 2017 fiscal first quarter, the basket ring in the grocery/other merchandise category was down, the executive revealed. The primary source of weakness was tobacco, with customers at Casey’s stores trading down from cartons to packs and from premium brands to generic products.
Beer sales also experienced weakness, with unit volume up significantly but the price per unit declining during the most recent quarter, he noted.
On the positive side, energy drinks were strong sellers in the first quarter.
ACQUISITIONS HEAT UP
Although Ankeny-based Casey’s has mostly focused on organic growth in the recent past, this could soon change. Walljasper discussed that the merger and acquisition environment has picked up considerably in the past three to four months. Many small c-store chains have returned Casey’s phone calls or have placed their own calls to Casey’s to initiate acquisition discussions.
“There are more people knocking on our door,” Walljasper said. “Hopefully, we can convert some of those opportunities.”
This is a major change compared to nine to 12 months ago, he pointed out. As for why acquisition opportunities are more bountiful now, he cited the current U.S. financial environment, as well second- and third-generation owners who have less passion for the industry than their predecessors.
WAIT & SEE WITH EMV
Looking ahead, Casey’s has done a lot of research regarding the Oct. 1, 2017 EMV liability shift deadline for automated fuel dispensers. Walljasper said Casey’s is taking a wait-and-see approach regarding upgrading its fuel pumps to be EMV-ready. EMV is an acronym for Europay, MasterCard and Visa, the three companies that originally created the security standard.
Casey's estimates that making EMV upgrades would cost $30,000 to $40,000 per store, depending on the number of fuel pumps the store has.
“We don’t plan to roll out EMV to every store,” said Walljasper. “We will likely not need to do this at stores in rural areas where little fraud occurs. [But we will likely] make these upgrades at our locations near interstates and metropolitan areas.”
For a full rundown of Casey’s 2017 fiscal first-quarter financial results, click here.