Van Meerten's picks

I'm not as high on Casey (CASY) as the rest of the market is right now. Casey has experienced some positive price movement mainly on the theory that if gas prices are going up the retailers must be making a killing. Let's look at Casey's own press release on their annual results.

Although sales dollars were up the actual gallons of gas sold was only up 1.8% - not an impressive growth rate. Credit card companies are increasing their fees so the margins will be squeezed. As the gas prices go up this will increase operating expenses. There is a shift to charging gas - increasing credit card fees - instead of paying cash further squeezing gas margins.

While we're mentioning operating expenses, Casey's operating expenses rose 15.6 percent - much higher than the inflation rate.

Casey failed to execute their published expansion plans. They projected to acquire 50 new stores but only bought 12. They wanted to build 10 but built none.

What about the convenience store portion of the business? We all know that convenience store prices are higher than the supermarkets. They count on impulse sales. As the public tries to cut back on driving there will be fewer trips to the gas pumps and fewer visits will be made to the inside of Casey.

Long range - Number of gallons sold will probably decrease causing fewer customer visits. Higher operating cost, failed expansion plans, and more customers using credit cards instead of paying cash will squeeze gross margins. They failed to achieve their own grow in the number of locations - no projected increase in market share. What's to like about next 6 months?

Comments: View Comments |  Wednesday June 25, 2008