Casey’s General Stores stock price drops with high gas prices, predictions of slowing growth

Casey’s General Stores shares slipped Wednesday morning as executives predicted some customers will drive less because of high gas prices, slowing the company’s growth.

Leaders of the Ankeny-based chain said they expect fuel sales to remain flat or grow by up to 2% in the current fiscal year, which started in May. That’s down from 4.4% in the most recently ended fiscal year.

Executives also disclosed in an outlook statement Tuesday that they expect sales of pizza slices, donuts and other convenience store items to increase 4% to 6% this fiscal year. That would be slower than the 6.6% sales growth that Casey’s reported for the year ended in April.

In the wake of the quarterly report, Casey’s stock price dipped 3%, from $206.25 a share on Tuesday to $200.24 a share Wednesday morning.

In a call with analysts, CEO Darren Rebelez said Casey’s is seeing “some erosion of volume” in markets where fuel prices are highest. He added that customers are buying about one gallon less per stop than they normally do.

More: Casey’s denies allegations it shortchanges pizza-delivery drivers

U.S. gas prices began to spike in February when the invasion of Ukraine drew sanctions against Russia, once of the world’s largest oil producers. In Des Moines, according to AAA, the average price of a gallon of regular unleaded was $4.73 a gallon Wednesday, up from $2.87 a year ago.

In the Chicago metro, where Casey’s also operates, the average price has hit $5.90 a gallon. Rebelez told analysts he isn’t sure what drivers will do if the price continues to rise.

“Six dollars a gallon is uncharted waters for everybody,” he said. “I’m not sure what to expect from that. I imagine there is some demand destruction.”

More: Twitter reacts to California man moving to Iowa: Buy a good winter coat, eat gas station pizza

Rising prices are not all bad for Casey’s, as gas stations often manage to pass on more than their share of the expense to customers. Casey’s earned a profit of 36 cents per gallon in the quarter from February through April, up from 33 cents per gallon during the same period the year before.

Story continues

At the same time, profits slipped a bit. The company earned 38 cents per gallon in the November-through-January quarter. Chief Financial Officer Steve Bramlage told analysts that the company had expected to earn 37 cents per gallon in its most recent quarter, about a penny more than it received.

He said the company missed out on “several million dollars” as a result.

“(Profits) didn’t quite reach the level that we had anticipated,” he said.

More: Casey’s brings the pizza but not the gas to its first non-fuel location, now open near Drake

Rebelez also said customers are using Casey’s less like a grocery store than they have in the past, with shoppers shifting from bulk food and drink purchases to single items.

“People are making more frequent trips but buying less per trip,” he said.

The stock price dropped even though Casey’s reported a strong quarter. The company recorded a profit of about $60 million for the period of February through April, a 43% increase over the same period last year.

The company reported a quarterly profit of $409 million on in-store sales of clothes, food and drinks, a 12% increase. Casey’s also reported a $225 million profit on fuel sales, a 27% increase.

At the same time, operating expenses rose 15% to $491 million. Credit card fees increased 36% to $53 million.

The company’s growth came as it aggressively bought gas stations from other chains, adding 209 locations around the country during the fiscal year, bringing the total number of Casey’s around the country to 2,450.

Executives disclosed Tuesday that they expect to be less aggressive this year, adding a projected 80 more stores. That is more in line with how the company has expanded in prior years, when it added an average of 62 stores annually from 2017 to 2021.

Casey’s operates in 16 states, from Tennessee to North Dakota. Industry magazine CSP ranked it the fourth-largest convenience store in the nation in 2021.

Tyler Jett covers jobs and the economy for the Des Moines Register. Reach him at [email protected], 515-284-8215, or on Twitter at @LetsJett.

This article originally appeared on Des Moines Register: Stock drops as Casey’s General Stores grapples with high gas prices