Caseys General Stores, Inc.

Good day, ladies and gentlemen, and welcome to KC's General Stores' first quarter fiscal year 2020 earnings conference call. At this time, all participants are in listen-only mode. Later, there will be a question and answer session, and instructions will follow at that time. If you require any assistance during today's call, please press star, then zero, and touch the telephone. As a reminder, this conference call is being recorded. Now I turn the conference over to Bill Wall Jasper, Chief Financial Officer. Sir, you may begin.

Good morning. Thank you for joining us to discuss Casey's results for the quarter ended July 31st. I'm Bill Walch, ASPR Chief Financial Officer. Darren Rebelez, President and Chief Executive Officer, is also here. Before we begin, I'll remind you that certain statements made by us during the investor call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include any statements related to our possible or assumed future results of operations, Business Strategies, Growth Opportunities, and Performance Improvements at our stores. There are a number of known and unknown risks, uncertainties, and other factors that may cause our actual results to differ materially from any future results expressed or implied by those forward-looking statements, including our ability to execute on the value creation plan or to realize benefits from that value creation plan, as well as other risks, uncertainties, and factors which are described in our most recent annual report on Form 10-K and quarterly reports on Form 10-Q as filed with the SEC and are available on our website. Any forward-looking statements made during this call reflect our current views as of today with respect to future events and Casey's BISC claims any intention or obligation to update or revise forward-looking statements whether as a result of new information, future events, or otherwise. This morning, Darren will first take a few minutes to summarize the results of the first quarter and then provide an update on the progress with our value creation plan. We will then open for questions about our results. I would now like to turn the call over to Darren to discuss those results.

Thanks, Bill, and good morning, everyone. Before we get into the results of the quarter, I'd like to start by saying how excited I am to be part of the Casey's team. During my time in the convenience store industry, I've always admired and respected Casey's and felt this would be the ideal opportunity for me given my background not only in the convenience store space but also the fuel and restaurant industries. I've been on the job now for about three months and I'm optimistic about the initiatives underway and the opportunities for us going forward. I look forward to hopefully meeting all of you in person at some time in the future. As you've seen in the press release, diluted earnings per share for the first quarter were up 22% to $2.31 a share compared to $1.90 a year ago. The results were driven primarily by a strong fuel margin versus the first quarter last year, continued operating expense control, and sales gains inside the store. We executed on several key milestones of our value creation plan this past quarter, setting us up for continued strong performance in fiscal 2020. I would now like to go over our results and some of the details in each of the categories. During the first quarter in the fuel category, we experienced a favorable fuel margin environment combined with our ability to leverage the implementation of price advantage, which is our fuel price optimization tool. These factors enable us to achieve an average fuel margin of 24.4 cents per gallon, up nearly 400 basis points from the same period last year. This drove over a 22% increase in gross profit dollars from the fuel category. were down 2% in the quarter, in line with our expectations for the quarter, but lower than our annual guidance range. This was primarily due to our optimization efforts and softer demand as vehicle miles traveled in the Midwest declined. The average retail price for fuel during this period was $2.63 a gallon compared to $2.74 a year ago. Despite the decline in same-store gallons, total gallons sold for the quarter were up nearly 3%, to 619 million gallons due to the strong contribution from new stores opened in the last 12 months. Same store gallons in August were below our annual guidance. The average fuel margin in August is trending ahead of our annual guidance range. Moving to inside the store, total sales in the grocery and other merchandise category were up 6.7% to $688 million in the first quarter. Same store sales were up 3.2% during the quarter in line with our annual guidance. Excluding cigarettes, same-store sales were up 6.2%. The average margin in the quarter was 31.3%, down from a year ago, primarily due to an out-of-period inventory adjustment related to how we account for inventory and transit, which had a $6.6 million adverse impact. This impacted the margin by about 100 basis points, and gross profit dollars for the quarter in the category were up 3.1% to $215.5 million. Without the previously mentioned adjustment, gross profit dollars would have been approximately 6.3%, and same-store sales in August are trending within our annual guidance. In the prepared food and fountain category, total sales were up 5.3% to $296 million for the quarter. Same-store sales were up 1.6%. We anticipate acceleration in Sane Store sales in the upcoming quarters as we gain traction from the launch of our new e-commerce platform and mobile app, as well as the upcoming launch of our loyalty program later this fiscal year. The average margin for the quarter was up 20 basis points to 62.2% versus the first quarter a year ago, primarily due to a product mix shift in cycling over 50th anniversary promotions from a year ago. In the quarter, Prepared food gross profit dollars rose 5.6% to $184 million. The average cost of cheese for the first quarter was $1.96 and is trending up. We're currently buying on the spot market and monitor this closely looking for buying opportunities. Same store sales in August are trending below our annual guidance, but have been trending up sequentially as we gain traction with our new digital platform. Thank you, Darren.