Casey's General Stores, Inc. (CASY) is a leading convenience store chain that has been a fixture in the Midwest and beyond for over six decades. Founded in 1959 in Boone, Iowa, the company has grown to operate over 2,670 stores across 17 states, making it one of the largest convenience store chains in the United States.
Company History
The company's history is one of steady, organic expansion and strategic acquisitions. Casey's first store was opened in 1968 in Boone, Iowa, and by the end of the 1970s, the company had grown to 50 stores. In the 1980s and 1990s, Casey's continued its expansion throughout the Midwest, reaching 1,000 stores by the late 1990s. The company went public in 1983, trading on the NASDAQ exchange. Over the next two decades, Casey's continued to grow its footprint across the Midwest, taking advantage of the increasing demand for convenience stores.
In the early 2000s, Casey's faced a significant challenge when it struggled with integrating a large acquisition of Convenient Food Mart stores. This led to operational issues and financial strain. However, the company was able to overcome these challenges by focusing on improving its core business operations and store-level execution. This experience likely informed Casey's approach to future acquisitions and growth strategies.
The 2000s and 2010s saw Casey's embark on a more aggressive growth strategy, both through new store openings and strategic acquisitions. In 2011, Casey's acquired 1,660 stores from the Superstop convenience store chain, significantly expanding its footprint. More recently, in 2024, the company announced the acquisition of 198 CEFCO convenience stores, primarily located in Texas, Alabama, Florida, and Mississippi.
Today, Casey's operates a diverse portfolio of stores, with approximately 72% located in communities with populations under 20,000. This focus on smaller, rural markets has been a key part of the company's success, as it has allowed Casey's to establish a strong presence and brand loyalty in these communities. The company has established itself as a leader in the convenience store industry, known for its made-from-scratch pizza, donuts, and other fresh prepared food offerings.
Financials and Operational Highlights
Casey's financial performance has been equally impressive. In the company's most recent fiscal year (ended April 30, 2024), it reported total revenue of $14.86 billion and net income of $501.97 million. The company has demonstrated consistent growth, with a five-year average annual revenue growth rate of 7.5%. Operating cash flow for fiscal year 2024 was $892.95 million, with free cash flow of $370.95 million.
In the most recent quarter (Q1 2025), Casey's reported revenue of $4.10 billion, net income of $180.20 million, operating cash flow of $281.35 million, and free cash flow of $180.79 million. This represents a year-over-year total revenue increase of 5.9%, driven by higher inside sales and fuel gallons sold, partially offset by lower retail fuel prices. Net income increased by 6.5%, driven by higher profitability both inside the store and in fuel, partially offset by higher operating expenses and depreciation.
One of the hallmarks of Casey's business model is its diversified revenue streams. The company generates revenue from three primary segments: Fuel, Grocery and General Merchandise, and Prepared Food and Dispensed Beverage. In Q1 2025, Fuel accounted for 55.8% of total revenue, Grocery and General Merchandise 26.1%, and Prepared Food and Dispensed Beverage 9.9%.
The Prepared Food and Dispensed Beverage segment has been a key driver of growth in recent years. In Q1 2025, revenue from this segment increased by 8.7% compared to the prior year period, driven by a 4.4% increase in same-store sales. The increase in same-store sales was attributed to strong sales of hot sandwiches and bakery items. This segment's revenue less related cost of goods sold exclusive of depreciation and amortization was 58.3% of revenue during the quarter, relatively consistent with 58.2% in the prior year period.
The Grocery and General Merchandise segment saw revenue increase by 7.2% in Q1 2025 compared to the prior year, due to a 1.6% increase in same-store sales driven by sales of non-alcoholic and alcoholic beverages, as well as an increase of approximately 5.6% from operating 138 more stores than a year ago. This segment's revenue less related cost of goods sold exclusive of depreciation and amortization increased to 35.4% of revenue, up from 34.1% in the prior year period, driven primarily by strong cost of goods management.
In the Fuel segment, revenue increased by 5.3% in Q1 2025 compared to the prior year, due to an 8.2% increase in the number of gallons sold, partially offset by a 2.7% decrease in the average retail price per gallon. Fuel revenue less related cost of goods sold exclusive of depreciation and amortization was 12.3% of fuel revenue, compared to 12.2% in the prior year period. The company sold 8.5 million RINs (renewable identification numbers) for $4.83 million during the quarter, compared to 12.8 million RINs sold for $20.2 million in the prior year period.
Another impressive aspect of Casey's operations is its efficiency and cost management. The company has consistently demonstrated its ability to control operating expenses, with same-store operating expenses (excluding credit card fees) increasing by just 0.7% in Q1 2025. This has been achieved through initiatives such as store simplification, labor optimization, and supply chain efficiencies.
Liquidity
Casey's has maintained a strong balance sheet, with a healthy cash position and manageable debt levels. As of July 31, 2024, the company had $206.48 million in cash and cash equivalents and $1.64 billion in total debt, resulting in a net debt position of $1.43 billion. The company's debt-to-equity ratio stands at 0.51, indicating a relatively conservative capital structure.
Casey's has an $850 million unsecured revolving credit facility and a $50 million unsecured bank line of credit, with $0 outstanding on both as of July 31, 2024. The company's current ratio is 0.84, and its quick ratio is 0.44, indicating a solid short-term liquidity position.
Growth Strategies and Future Outlook
Looking ahead, Casey's is well-positioned for continued growth, both organically and through strategic acquisitions. The company's three-year strategic plan, which was announced in 2023, outlines several key initiatives:
1. Accelerate new store growth: Casey's initially planned to open at least 350 new stores over the three-year period. However, with the acquisition of the Fikes and CEFCO convenience store chains, this target is now expected to be achieved nearly 18 months early. For fiscal year 2025, the company has increased its store growth target from 100 units to approximately 270 units, primarily due to the pending acquisition of Fikes, which includes 198 CEFCO convenience stores.
2. Enhance the prepared food and dispensed beverage offering: The company is focused on innovation and expansion in its prepared food and dispensed beverage segment, which has been a significant driver of growth in recent years.
3. Improve operational efficiency: Casey's is dedicated to streamlining its operations and reducing costs through initiatives such as store simplification, labor optimization, and supply chain enhancements.
These strategies, combined with the company's strong financial position and proven track record of execution, position Casey's for continued success in the years ahead.
Casey's management has not updated their previously communicated fiscal year 2025 guidance, with the exception of the store growth target mentioned above. The company expects its pro forma leverage level to reach approximately 2.4 times at the closing of the Fikes acquisition and plans to quickly reduce this to approximately 2 times within the first 12 months through a combination of deleveraging, growth, and synergy capture.
For the second quarter of fiscal year 2025, Casey's expects total operating expenses to be within their annual range, which will include several million dollars of one-time deal costs associated with the Fikes transaction.
Risks and Challenges
Of course, no investment is without its risks and challenges. For Casey's, these include:
1. Competitive landscape: The convenience store industry is highly competitive, with players ranging from large national chains to regional operators and even supermarket and drug store chains. However, Casey's has demonstrated its ability to outperform peers in same-store fuel gallon growth, indicating market share gains.
2. Fuel price volatility: As a significant portion of Casey's revenue is generated from fuel sales, the company is exposed to fluctuations in wholesale fuel prices, which can impact its profitability. The industry has seen historically high average revenue less cost of goods sold per gallon excluding depreciation and amortization in recent years, though this metric can be volatile in the short-term.
3. Regulatory environment: Casey's operations are subject to various federal, state, and local regulations, including those related to food safety, environmental protection, and labor practices.
4. Supply chain disruptions: The company's operations could be impacted by disruptions in its supply chain, such as delays in the delivery of inventory or the availability of key ingredients for its prepared food offerings.
5. Integration risks: With the pending acquisition of Fikes and the CEFCO convenience stores, Casey's will need to effectively integrate these new stores into its operations, which could present challenges and potential short-term disruptions.
Despite these challenges, Casey's has consistently demonstrated its ability to navigate the industry landscape and deliver strong financial and operational performance.
Conclusion
Casey's General Stores is a well-established and highly successful convenience store chain that has been a fixture in the Midwest and beyond for over six decades. With its focus on smaller, rural markets, diversified revenue streams, and commitment to operational efficiency, the company is well-positioned for continued growth and success in the years ahead. The company's strong performance in Q1 2025, with increases in revenue, net income, and same-store sales across its key segments, demonstrates the resilience and strength of its business model.
Casey's strategic initiatives, including its accelerated store growth plans and focus on enhancing its prepared food offerings, coupled with its strong financial position and proven track record of execution, suggest that it will continue to be a leader in the convenience store industry. While no investment is without risk, Casey's ability to adapt to changing market conditions, its strong balance sheet, and its clear growth strategy make it an attractive option for investors looking for exposure to the convenience store sector.