Casey's General Stores, Inc. (NASDAQ:CASY) Q1 2020 Earnings Conference Call Transcript

Sep 10, 2019 • 10:30 am ET

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Casey's General Stores, Inc. (NASDAQ:CASY) Q1 2020 Earnings Conference Call Transcript

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Q & A
Operator
Operator

[Operator Instructions] Our first question comes from Chris Mandeville with Jefferies. Your line is open.

Analyst
Chris Mandeville

Hey, good morning.

Executive
William J. Walljasper

Hey, Chris.

Executive
Darren Rebelez

Hey, Chris.

Analyst
Chris Mandeville

Bill, if we could start off just with the comments around rising cheese prices. Did you proactively take any pricing to offset this pressure in the quarter and maybe if so, to what extent? And then how much did that maybe influence consumer elasticity in the quarter, if at all?

Executive
William J. Walljasper

Yeah. No. To answer your question, Chris, we didn't proactively take any price increases to offset that. As you know, we're certainly in a competitive pricing environment in that particular area of the business. And so we want to make sure that we continue to offer a value proposition to our guests. With respect to the cheese costs, from a comparative standpoint, last year in Q1, it's $1.87 a pound. We are about a $1.96 a pound for this quarter. And just as a reminder about every $0.1 per pound is roughly about 30 to 35 basis points to the overall prepared food margin. Currently, to give you kind of perspective, Chris, we're about $2.07 a pound. We anticipate this declining towards the back half of the calendar year; this has always been a cyclical product for us. And so after these school contracts get in place, we typically see a downward movement and look for opportunities.

Analyst
Chris Mandeville

Okay. And then, as we think about your enhanced fuel procurement practices, can you help us understand what the reasonable assumption to think about when it comes to a gallon transitioning over to short-term contracts versus spot buying by fiscal year end and to what extent that may be reflected in guidance today?

Executive
William J. Walljasper

Yeah. So I'll give you a little bit of directional comments there. And so, first of all, fuel procurement had very little to no impact in the margin in the first quarter. We have executed on a multitude of short-term contracts here that you will see start to benefit our Company here in the second quarter and then the rest of the fiscal year. Roughly, right now, we have about 11% or 12% of our fuel volume under contract, which is very different obviously than a structure then when we did buying on the spot market. Now where that goes in the future, I guess will determine as we kind of progress through the remaining part of this fiscal year. But definitely we're progressing to have more and more of our fuel gallons to be on a contract basis. We definitely see some benefit moving forward with that.

Analyst
Chris Mandeville

Okay. And then just a last one for me. Since you've actually outlined the value creation plan from six quarters ago, you guys have been averaging pretty healthy EBITDA growth of around 12% on average. So just based on what lies in front of you with loyalty, fuel procurement, additional price optimization and some various marketing initiatives, is there any reason to believe that such growth won't hold if not actually