October 1, 2014

Cigarette price wars & Illinois tax hike eat into Casey’s profits

A four percent dip in cigarette sales led to lower profits for Casey’s General Stores in the last quarter. Casey’s operates in Iowa and 10 other states, including Illinois where lawmakers just raised the cigarette tax. Bill Walljasper, the convenience store chain’s chief financial officer, calls it a “challenging cigarette environment.”

“Over the course of the past several months we have made additional price adjustments in response to the more competitive cigarette landscape,” Walljasper says. “We are encouraged with the recent gains we have been able to achieve in this area due to these initiatives. As a result, same-store sales in the grocery and other merchandise category in November were up 5.1 percent.”

Casey’s lumps cigarette sales into its “groceries and other merchandise” category — and the company’s profit margin on those items is more than 33 percent according to Walljasper. Casey’s profits on sales of fountain beverages and prepared foods like sandwiches and pizza were up nearly 14 percent in August, September and October.

“The margin gain was primarily due to an increase in pizza sales mainly as the result of increased 24 hour locations, pizza deliveries and major remodels,” Walljasper says. “Combined pizza sales…increased nearly 30 percent in the quarter.”

Gross profits on gasoline sales were down eight percent in the last quarter — and customers bought slightly less gas at Casey’s stores than they did in the same period last year.

“The average retail price of gasoline for the quarter was $3.61 per gallon, compared to $3.43 last year,” Walljasper says.

Casey’s second quarter ended October 31, 2012. In the past two quarters Casey’s has opened eight new stores and in November the company acquired 22 Kum and Go stores. Caseys has expanded into the states of Tennessee and North Dakota this year.