The Ankeny-based Casey’s convenience store chain reported a big increase in its third quarter earnings — but it was because of a tax cut — not a surge in sales. Casey’s CEO Terry Handley talked about the issue in a conference call with investors.
“Diluted earnings per share for the first quarter were five dollars, eight cents, compared to 58 cents a year ago. The third quarter benefited from a one-time adjustment in our deferred tax liabilities as a result of the Tax Cut and Jobs Act that became effective January first,” Handley says. He says earnings for the quarter without the federal tax changes would have been 48 cents a share.
“Year to-date diluted earnings per share adjusted for the tax reform were $3.20 — compared to $3.72 in the same period last year,” Handley says.
Gasoline sales continued to be strong, although they didn’t make as much profit as hoped.
“During the quarter we experienced an increase in wholesale fuel costs — primarily in the back half of the quarter — that had an adverse affect on the margin, resulting in an average fuel margin of 18-point-six cents for the quarter,” Handley explained. Sales of prepared food fell below expectations.
“Same store sales were up one-point-seven percent which fell below our annual guidance,” according toe Handley. “Over the course of the quarter, we experienced an increasingly competitive environment, both in pricing and promotions in our market area at a time when we had reductions in our advertising spend.” The company started a promotion in December that offered a discount on gas for every pizza purchased. Company chief financial officer Bill Walljasper says the promotion didn’t take off as well as expected, but it still had an impact on gas sales.
He says the pizza to the pump promotion put more focus on gas sales as the average gallons for each sale went up and that is directly linked to the promotion. Walljasper says the pizza promotion was slow to take off last time they tried it and they are hoping it will pick up this month. He also says some competitors matched the promotion and the pizza market continues to be tight with several companies offering discounts.