Casey's CEO talks Q4 earnings beat, Texas expansion plans

Casey's (CASY), the renowned convenience store chain, reported impressive fiscal fourth-quarter earnings that beat expectations on both the top and bottom lines. To delve deeper into the quarterly report, Casey's CEO Darren Rebelez joins Josh Lipton on Asking for A Trend.

Rebelez highlights the notable strength in the prepared food segment of the business, which saw a remarkable 9% rise. He attributes this success to the launch of new offerings, including thin-crust pizza and hot sandwiches.

Turning to consumer behavior, Rebelez notes that across income levels, "we're seeing pretty good resilience." However, he acknowledges a shift in the purchasing patterns of lower-income consumers, who are gravitating towards more value-oriented options.

Rebelez then talks the chain's expansion plans, with the company now moving into Texas: "As I like to say, everything from the I-35 corridor to the Mexican border is Casey's country."

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This post was written by Angel Smith

Video transcript

On Wednesday convenience retailer.

Casey's announced fourth quarter results, the company beating on revenue and blowing past eps estimates and joining us now to discuss this, Casey's Ceo Darren reel is Darren.

Thanks for joining us.

Thanks so much.

Let's start there.

Uh Darren because you, you reported you beat the stock ripped higher, just walk us through the quarter.

What drove the business?

Yeah, you know, we had a couple of things.

We had a great quarter.

But first, I, I'd just like to give a shout out to my 45,000 teammates in our uh 2600 stores.

They really executed at a high level this quarter.

So that was certainly part of the secret sauce behind the quarter.

But uh we really saw a lot of strength in our prepared foods business.

And if you don't know, we're actually the fifth largest pizza chain in the US.

So we have 2600 stores.

All of those stores have kitchens.

We make pizza from scratch every day and had really strong growth in prepared foods up almost 9% same store across there.

And that was driven by a couple of things.

Um We launched a thin crust pizza platform last summer.

And we're still cycling over that and really good growth there.

And then more recently launched a new lineup of hot sandwiches where um we were up 85% in the quarter in that hot sandwich line up.

So that, that really drove the traffic.

And then I would say just up and down the PNL, the team just execute on every single element of the PNL.

And when you put all that together, it, it results in a kind of quarter, we had hot sandwiches.

Uh Darren also, you have, I wanna get your take is you have really unique insight perspective on the consumer.

What's your take on the consumer?

Right?

In terms of what you're seeing, how healthy, how resilient, you know, we're, we're seeing pretty good resilience with the consumer at this point and that's across income brackets.

Now, what we are seeing is on the lower income consumer.

They're, they're starting to shift behaviors.

They're still spending money, but they're spending it a little differently.

How, how, so how are they spending?

I'll give you an example.

I think it's been pretty well reported that candy prices have gone up because cocoa prices have shot up.

So candy has become expensive.

Well, we have baked goods that we prepare in store every day.

So we're starting to see low income consumers rotate out of candy, but into cookies and brownies and our baked goods, it's a little more affordable indulgence.

They're, they're satisfying the sweet too.

They're just doing it in a little more economic way.

What about I wanna get your gas prices.

What, what, what average retail price now?

D what, what is it now?

Versus, you know, in our footprint, we're averaging about 308 to 310 a gallon.

You know, that was probably a dime higher last year.

So not significantly higher.

And really, we're not seeing the change in behavior that we sometimes do when gas prices get real high, we'll see consumers when they're high shift into more higher blends of ethanol because that fuel tends to be cheaper.

They stop buying premium fuel.

We're not seeing any of those behaviors right now.

So I think the consumers kind of so they're ok with gas prices right now, but then they're being a little more discerning as, as inflation starts to pinch their wallets a little bit.

And so they're, they're deciding where they wanna shop and where they spend their money.

And we're really positioned well from a value perspective.

And so we're starting to see more traffic come into our store.

Any changes you all are making kind of inside the store.

Well, and inside the store is like new leverage, you're pulling innovation.

You know, we've, we've done a lot of that over the last several years and uh really re merchandizing our stores.

We've got a, a really robust private label program now with over 300 items in the assortment.

More recently, we got into the liquor business in terms of private label and our Frost Trail Vodka.

Our own proprietary vodka is the number two selling vodka uh only behind Tito's in our stores.

And so uh the private label team's done a really nice job of broadening out that asso and that just offers a more affordable, high quality alternative for our guests.

I wanna get you out of this because I'm interested mostly focused in Midwest traditionally.

So you are now moving into Texas.

How much of an opportunity is that?

Well, you know, uh Texas is a really big state as you know, we, we just made a small acquisition 22 stores in North Texas.

But as I like to say, everything from the I 35 corridor to the Mexican border is Casey's country.

So I think we got a lot of runway to grow.

It sounds like a lot of why said Tran?

Thank you so much for joining us.

That was great.

I appreciate it.

Thanks a lot, Josh.