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ANKENY, Iowa — Casey's General Stores Inc. will discontinue its pizza delivery program in several stores and cut back the hours the program is available in some other stores, Chief Financial Officer Bill Walljasper revealed during the company's 2015 fiscal second-quarter earnings call Thursday.
He explained that the net profits were not large enough to counteract the labor costs required for pizza delivery at these stores. However, the company did not reveal which stores will discontinue or cut back on the program.
Casey's has definitely not soured on pizza delivery, though, Walljasper stressed. In fact, the convenience store retailer will continue to add the program to stores in more populated areas. Twelve such locations added pizza delivery in the first half of Casey's fiscal year, with the goal being to add 68 more stores by the end of fiscal 2015.
"We still think [pizza delivery] is a viable option," said Walljasper. "There are tremendous opportunities in many areas."
Despite the one snafu, Casey's 2015 second-quarter earnings were quite strong, rising 26 percent compared to the same period in fiscal 2014. The chain earned a net profit of $49.87 million, compared to a profit of $39.4 million in the year-ago period.
Grocery and other merchandise same-store sales advanced 6.6 percent, with an average margin of 32.3 percent. In the first six months of its 2015 fiscal year, grocery and other merchandise sales reached $945.5 million, with total gross profit increasing 12.3 percent to $306.7 million.
Prepared food and fountain beverages turned in an even stronger performance, rising 11.1 percent year over year with a robust 59.3 percent average margin. For the first six months, prepared food and fountain sales increased 17 percent to $395.8 million, while gross profits for the category rose 12.9 percent year over year to $235.8 million.
During Thursday's call, Walljasper noted that sales of chewing tobacco and snacks were particularly strong in Casey's most recent quarter. He also said premium tobacco products — such as those branded Marlboro and Camel — were doing well, perhaps due to lower gas prices providing consumers with more spending money.
For the 2015 second quarter, same-store fuel gallons were up 2.3 percent year over year, with an average margin of 19.5 cents per gallon.
DC REMAINS ON SCHEDULE
When questioned by an analyst, Walljasper confirmed that Casey's second distribution center is on schedule to open in early 2016 in Terre Haute, Ind. Once the new distribution center opens, it will serve 40 percent of the retailer's store base.
The new distribution center could also encourage Casey's to ramp up its interest in acquisitions as the retailer looks to expand into more states. For now, Casey's continues to look at acquisitions, but is more likely to grow organically in the near future, the CFO reported.
For the first six months of fiscal 2015, Casey's opened 21 new stores, replaced 13 stores and acquired 29 stores. The Ankeny-based retailer operated a total of 1,856 stores as of Oct. 31.
Of note, during the earnings call, Casey's did not discuss its announcement in November that an accounting error related to the excise tax on ethanol led the company to pay $31.5 million to the Internal Revenue Service and revise its financial statements for fiscal years 2012, 2013, 2014 and the first quarter of 2015.
Walljasper did reveal that Casey's completed an analysis of the Affordable Care Act (ACA). The company expects to pay $5 million to $6 million more in health care costs related to the ACA in 2015, he said.