Executive Summary / Key Takeaways

• Casey's General Stores delivered a record fiscal year 2025, achieving diluted EPS of $14.64 (up 9%) and EBITDA of $1.2 billion (up 13%), driven by strong performance across all categories and effective cost management.
• The company is successfully executing its three-year strategic plan, highlighted by record unit growth of 270 stores in FY25, including the transformative acquisition of Fikes Wholesale (CEFCO), expanding its footprint and capabilities.
• Operational efficiency initiatives continue to yield results, marked by 12 consecutive quarters of reduced same-store labor hours, contributing to margin expansion and improved guest satisfaction.
• Casey's differentiated prepared food offering, particularly its pizza and hot sandwiches, remains a key traffic driver and high-margin contributor, supported by ongoing innovation and strategic pricing relative to QSR competitors.
• The outlook for FY26 projects continued EBITDA growth (10-12%), further unit expansion (at least 80 stores), and disciplined capital allocation including a dividend increase and planned share repurchases, signaling confidence in future performance and deleveraging post-acquisition.

Setting the Scene: A Midwest Mainstay's Strategic Evolution

Casey's General Stores, Inc., founded in Iowa in 1967, has built its enduring success on a simple yet powerful premise: serving the convenience needs of communities, particularly in smaller towns often underserved by larger national chains. With approximately 71% of its 2,904 stores located in areas with populations under 20,000 as of April 30, 2025, Casey's has cultivated a deep connection with its rural and suburban guest base. This foundational strategy, established with the opening of its first store in Boone, Iowa, in 1968, has been consistently reinforced over decades.

A pivotal moment in Casey's history was the introduction of prepared food, specifically pizza, in 1984. This innovation transformed the typical convenience store model, establishing Casey's as a destination for freshly prepared meals and laying the groundwork for its high-margin Prepared Food and Dispensed Beverage category, a key differentiator in the competitive landscape.

Under its current leadership, Casey's has sharpened its focus, launching a three-year strategic plan in June 2023 centered on three pillars: growing the store count, accelerating the food business, and enhancing operational efficiency. This plan leverages the company's core strengths – its established brand, extensive self-distribution network (including three distribution centers and a fleet of ~500 tractors), owned real estate, and a loyal guest base – while adding new capabilities in areas like procurement, data analytics, and culinary innovation.

In the competitive arena, Casey's faces a diverse set of rivals, from national chains like Alimentation Couche-Tard (ATD) and regional players like Murphy USA (MUSA) and Delek US Holdings (DK), to local grocery stores, dollar stores, quick-service restaurants (QSRs), and even online retailers. While larger competitors like ATD benefit from greater scale and potentially lower operating costs per unit, Casey's carves out its niche through its community focus, robust prepared food program, and strategic positioning in smaller markets where competition may be less intense from national players. Its self-distribution model provides a degree of control over its supply chain that some competitors may lack, although reliance on third-party suppliers for certain products and the inherent costs of operating its own network present different challenges compared to asset-light models or those with integrated refining operations like DK.

Operational Excellence and Technological Advancement

Enhancing operational efficiency is a core tenet of Casey's strategy, and the company has demonstrated tangible progress. By the end of fiscal year 2025, Casey's achieved its twelfth consecutive quarter of reduced same-store labor hours. This isn't merely cost-cutting; it's the result of deliberate efforts by the continuous improvement team to simplify store operations and eliminate non-value-added work. Initiatives like the digital production planner in kitchens, which automates forecasting and reduces manual tasks, and the 5S methodology for organizing inventory, contribute directly to labor savings, reduced waste, and improved ordering accuracy. These efficiencies have been achieved while simultaneously improving guest satisfaction scores, indicating that streamlined operations are not coming at the expense of the customer experience.

Technology plays a crucial role in Casey's operations and guest engagement. The Casey's Rewards program, delivered through the mobile application, has grown to over 9 million members. This platform is more than just a loyalty program; it's a data-rich tool that enables targeted promotions and offers, driving traffic and enhancing the value proposition for guests. The contract liability of $64.1 million related to the rewards program as of April 30, 2025, reflects the value of points outstanding and the program's scale.

In its fuel operations, Casey's is executing its "Fuel 3.0" initiative, which involves buying product further upstream in the supply chain and shipping it via pipeline to dedicated space. While still in early stages, this initiative aims to enhance procurement capabilities and potentially improve cost management. The acquisition of Fikes Wholesale, which included Casey's first fuel terminal in Waco, Texas, and an experienced fuel supply team, is expected to accelerate this capability and provide additional expertise and assets to leverage in its fuel supply chain.

Casey's is also exploring alternative fuels and electric vehicles (EVs). As of April 30, 2025, the company had 230 EV charging stations at 47 stores across 13 states. The EV growth strategy is focused on selectively adding stations in regions with higher consumer EV trends, acknowledging that demand in its core Midwest footprint is currently lower than coastal areas. The company also continues to expand its renewable fuel offerings, with almost all stores offering fuel with at least 10% blended ethanol and 41% offering biodiesel, and every newly built store having renewable fuel capability. While EV adoption could eventually impact demand for traditional motor fuel, Casey's is taking steps to adapt its offering, though the long-term impact on its fuel-centric business model remains a key consideration.

Financial Performance and Profitability Drivers

Fiscal year 2025 marked another period of strong financial performance for Casey's. Total revenue reached $15.94 billion, a 7.3% increase from the prior year, primarily driven by the Fikes acquisition and growth in inside sales. Net income increased by 8.9% to $546.5 million, resulting in diluted earnings per share of $14.64, a 9% increase year-over-year. EBITDA grew by 13% to $1.2 billion.

The Inside business (Prepared Food & Dispensed Beverage and Grocery & General Merchandise) continues to be a significant driver of profitability. In FY25, these categories generated approximately 36.1% of total revenue but accounted for roughly 63.7% of total revenue less cost of goods sold (excluding depreciation and amortization).

• Prepared Food and Dispensed Beverage: Total revenue grew 10.3% in FY25, with same-store sales up 3.5%. This growth was fueled by popular offerings like hot sandwiches (up double digits in Q4 FY25) and bakery items. The gross margin for this category remained high at 58.2% in FY25, although slightly down from 58.7% in FY24, primarily due to the integration of lower-margin CEFCO stores and specific promotions. Innovation, such as the testing of chicken wings and fries, aims to drive incremental traffic and sales.
• Grocery and General Merchandise: Total revenue increased 11.0% in FY25, with same-store sales up 2.3%. Strong performance in beverages, particularly energy drinks and alcoholic beverages (liquor, imports/super premium beer), contributed to growth. The gross margin for this category expanded significantly to 35.0% in FY25 (from 34.1%), driven by favorable product mix shifts towards higher-margin items (e.g., nicotine alternatives over cigarettes, certain alcohol subcategories) and effective cost management, including asset protection efforts reducing shrink. Private label products also contribute meaningfully to margin.
• Retail Fuel: While representing the largest portion of total revenue (61.3% in FY25), fuel contributes a smaller percentage to overall gross profit dollars (~33.1% in FY25). Total gallons sold increased 13.0% in FY25, largely due to store growth, while same-store gallons were up a modest 0.1%. The average fuel margin was $0.387 per gallon in FY25. Fuel margins can fluctuate significantly based on wholesale cost volatility, but Casey's team has demonstrated an ability to manage pricing effectively, often seeing margin expansion when retail prices drop quickly. The integration of CEFCO stores introduces a modest headwind to consolidated fuel margins (~$0.02 per gallon) due to the lower-margin profile of those geographies, although they tend to have higher volumes.

Operating expenses increased 11.5% in FY25, primarily due to the larger store base and one-time costs associated with the Fikes acquisition. However, same-store operating expenses (excluding credit card fees) were well-controlled, increasing only 1.7%, reflecting the impact of operational efficiency initiatives offsetting wage rate increases. Credit card fees, which exceeded $250 million in FY25, remain a significant operating expense, particularly impacted by higher fuel prices and transaction volumes.

Casey's strong operating performance translated into robust cash flow generation. Net cash provided by operating activities was $1.09 billion in FY25, an increase of $197.9 million. This supported significant investing activities, including $506.2 million in property and equipment purchases and $1.24 billion (net of cash acquired) for business acquisitions, primarily Fikes. Despite these investments, the company generated $585 million in free cash flow in FY25.

Strategic Growth Through Acquisition and Organic Expansion

Fiscal year 2025 was a landmark year for unit growth, with Casey's adding 270 stores, the largest annual increase in company history. This included 35 new builds and 235 acquisitions, notably the transformative acquisition of Fikes Wholesale and its 198 CEFCO stores, which closed on November 1, 2024. This acquisition significantly expanded Casey's presence in Texas (adding 148 stores) and marked its entry into Alabama, Florida, and Mississippi (adding 50 stores).

The Fikes acquisition is highly strategic, bringing high-quality assets in attractive geographies. While integration involves one-time costs (estimated $25M-$30M in FY25) and complexities, the long-term synergy potential is significant, estimated at $45 million over 3-4 years. Initial synergies are expected from fuel pricing and overhead rationalization, with larger benefits anticipated from integrating Casey's food program into CEFCO stores, which will require remodeling and is expected to materialize over the next 3-4 years due to permitting timelines and scope development. The estimated CapEx for renovating/retrofitting these stores is $145 million to $150 million. Early performance of converted stores in Texas that already had kitchens is encouraging, suggesting potential for increased margins and velocities by combining the best of both assortments.

Casey's has raised its three-year strategic plan store growth target to approximately 500 stores, demonstrating confidence in its ability to continue expanding its footprint through both M&A and organic new builds. While higher construction costs in recent years have made acquisitions a more efficient avenue for growth (allowing acquisition and remodel below replacement cost), the company maintains a developed land bank to support new-to-industry construction and can adjust its approach based on market conditions and deal flow. The M&A environment remains favorable for buyers like Casey's, as pressure on smaller independent operators and the increasing importance of scale drive consolidation opportunities.

Outlook and Capital Allocation

Looking ahead to fiscal year 2026, Casey's guidance reflects continued momentum and strategic execution. The company expects EBITDA to increase by 10% to 12%, driven by ongoing performance in the core business and the contribution from the Fikes acquisition. Inside same-store sales are projected to increase by 2% to 5%, with inside margin expected to be approximately 41%. Same-store fuel gallons sold are guided between negative 1% and positive 1%. Total operating expenses are anticipated to increase by 8% to 10%, primarily due to the full-year impact of the Fikes acquisition and associated integration costs.

Capital allocation priorities remain focused on driving shareholder value. EBITDA-accretive growth is the primary focus, with plans to open at least 80 stores in FY26. Having achieved its target leverage ratio of approximately 2x (1.9x as of April 30, 2025) faster than anticipated due to strong operating performance and cash flow, Casey's is now positioned to return capital to shareholders. The company increased its quarterly dividend by 14% to $0.57 per share in June 2025, marking the 26th consecutive year of increases. Additionally, Casey's anticipates approximately $125 million in share repurchases during FY26, funded by operating cash flow, reflecting confidence in its ability to generate cash flow beyond its reinvestment needs in a year without a large acquisition. Purchases of property and equipment are expected to be approximately $600 million in FY26, supporting new builds, remodels, and ongoing maintenance.

Risks and Considerations

While Casey's demonstrates strong performance and strategic momentum, investors should consider potential risks. Fluctuations in wholesale petroleum costs can significantly impact fuel margins, which remain a substantial portion of gross profit. Increases in commodity costs, particularly cheese, and other operating expenses like labor and credit card fees, could pressure margins if not fully offset by pricing or efficiency gains.

Competition remains intense across all categories and geographies, with larger national chains potentially leveraging scale advantages and non-traditional retailers impacting the fuel market. Changes in consumer preferences, including shifts towards EVs or alternative fuel vehicles, could impact long-term fuel demand. Regulatory changes related to environmental compliance, age-restricted products, or labor laws could increase compliance costs or impact sales.

The successful integration of large acquisitions like Fikes is crucial to realizing expected synergies and achieving growth targets. While integration is underway, complexities and unforeseen challenges could arise. Cybersecurity and data security incidents pose risks to operations, reputation, and financial condition, given the reliance on IT systems and handling of sensitive data. Litigation risks, including ongoing employment-related lawsuits, could result in significant costs.

Conclusion

Casey's General Stores has successfully evolved from a regional operator into a growing convenience store powerhouse, leveraging its unique prepared food offering, community focus, and robust distribution network. Fiscal year 2025 demonstrated the strength of its business model and strategic execution, delivering record financial results and achieving significant unit growth through the transformative Fikes acquisition.

The company's focus on accelerating its high-margin food business, enhancing operational efficiency, and disciplined expansion positions it for continued growth. While competitive pressures, commodity volatility, and integration complexities present challenges, Casey's strong balance sheet, consistent cash flow generation, and clear strategic roadmap, including plans for further unit growth, dividend increases, and share repurchases, underpin the investment thesis. The ability to effectively integrate acquired assets and continue driving operational improvements will be key factors for investors to monitor as Casey's pursues its target of approximately 500 stores and aims to deliver sustained value.