Casey's General Stores Inc.CASY

Morningstar Rating

Stock Research and Analysis

by Ann Gilpin

Building an economic moat as a convenience store operator is very difficult, given the heavy reliance on low-margin fuel to drive more-profitable in-store sales, but we think Midwestern consolidator Casey's General Stores has the tools to continue expanding Read more

Bulls Say

Because of its advantages over independents and smaller chains, Casey's can act as a consolidator in a fragmented industry by gobbling up smaller players.

Casey's purposely builds stores in small towns with limited competition and is often the only game in town.

Casey's benefits from economies of scale, and its operations are completely integrated. It owns nearly all of its stores, a distribution center, and all of its trucks, and it delivers three fourths of its own gasoline.

Casey's has a well-developed fresh food program that generates 62% gross margins, dwarfing the paltry margins from fuel sales. Read more

Bears Say

Convenience stores are generally not attractive businesses. Gasoline sales can make up a substantial proportion of sales while generating only a small portion of gross profits.

Fuel is a commodity, and consumers' sensitivity to retail fuel prices means Casey's can't price its fuel higher than competitors, limiting its ability to achieve higher gross margins.

Because of the high fixed costs associated with running a convenience store, most operators, including Casey's, generate only single-digit returns on invested capital.

Casey's may look to expand its store base into other geographies, which could lead to heightened competition in the more densely populated East and a potentially huge investment in building another distribution center. Read more

Strategy

Casey's is focused on acquiring smaller chains in its nine-state region as its strategy for growth. On a comparable basis, Casey's aims to increase in-store profitability by increasing traffic toward Read more

Management

Casey's General Stores is run by an impressive team of managers who have built up the chain from scratch and continue to do right by shareholders. Robert Myers has been with the company since 1989 and serves as CEO. Ronald Lamb, who served as CEO from Read more

Profile

Casey's General Stores was founded in 1959 as a single store in Iowa and now incorporates more than 1,470 convenience stores in nine Midwestern states. All of its stores Read more

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