Casey's Sharpens Focus Heading Into FY 2018

ANKENY, Iowa — After weathering a challenging fiscal year 2017, Casey's General Store Inc. is looking at long-term opportunities. 

In a report on the retailer's Investor Day meetings in Des Moines, Iowa, on July 20, Bonnie Herzog, managing director of tobacco, beverage and convenience store research at Wells Fargo Securities LLC, said management is focusing on increasing acquisitions and new store development; rolling out a broader digital platform; reducing operating expenses; and improving price optimization and merchandising to maximize sales.

"Traffic remains soft and we have questions — as do many c-store retailers, including Casey's — about the full explanation for the recent weakness in the channel but management's focus for fiscal year 2018 and beyond seems clear — improving their message," Herzog said.

That message is to consumers through improved digital engagement, to other retailers that it is in acquisition mode, and to the investment community that management is aware of — and actively addressing — the company's challenges, she said.

"While we remain encouraged overall, we think Casey's has its work cut out for it this fiscal year to reaccelerate growth," Herzog added.

According to the analyst, Casey's has a renewed focus on hitting its unit growth target, after missing its 4 percent to 6 percent goal for the several years. 

"On several occasions management indicated it needs to improve its messaging to the industry that it is willing and able — with hundreds of millions of dollars in buying power — to acquire assets, including outside its geographic footprint, as it seems to have missed out on several recent opportunities," she said explaining those opportunities included Holiday Stationstores and PDQ Food Stores.

Alimentation Couche-Tard Inc. reached a deal with Holiday Cos. to acquire the assets of Holiday Stationstores, and Kwik Trip Inc. is acquiring PDQ's 34 convenience stores, as CSNews Online previously reported.

Management is also focused on small town communities in its current and new markets that it has yet to enter, particularly Illinois and Wisconsin, she noted.

"While we are encouraged by management's desire to accelerate acquisitions, we have concerns about the availability of targets and whether legacy returns/multiples are still reasonable and achievable," Herzog added.

On the digital front, Casey's recognized the need to drive improved loyalty and engagement through digital platforms, according to Herzog, adding Wells Fargo Securities is "encouraged by these initiatives, but expect their rollout in the back half of fiscal year 2018 will have limited near-term impact."

Ankeny-based Casey's store count at the end of fiscal year 2017 was 1,978 in 15 Midwestern states.