Casey's (CASY) Q1 2027 Earnings Call Transcript

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DATE

Wednesday, Sept. 9, 2026 at 8:30 a.m. ET

CALL PARTICIPANTS

• Senior Vice President, Finance and Investor Relations - Samuel James
• Chairman, President, and Chief Executive Officer - Darren Rebelez
• Chief Financial Officer - Stephen Bramlage Jr.

TAKEAWAYS

• Total Revenue -- $5.68 billion, an increase of 24.3% primarily driven by higher retail prices for fuel and increased inside sales.
• Diluted EPS -- $7.37, representing a 27.7% increase from the prior year.
• Net Income -- $273.7 million, up 27.1% from the first quarter of the previous fiscal year.
• EBITDA -- $485.1 million, a 17.1% increase reflecting the performance of the convenience flywheel model.
• Inside Same-Store Sales -- 3.2% growth, or 7.7% on a two-year stack basis, led by the prepared food and dispensed beverage category.
• Fuel Margin -- 47.8 cents per gallon, an increase of 6.8 cents from the prior year due to volatility in global petroleum markets.
• Prepared Food and Dispensed Beverage Same-Store Sales -- 4.8% increase, driven by traffic growth in whole pizza pies.
• Grocery and General Merchandise Same-Store Sales -- 2.7% growth, with significant unit volume in energy drinks and nicotine alternatives.
• Fuel Same-Store Gallons -- 0.3% decrease, reflecting a 50 basis point headwind caused by store remodel disruptions.
• Inside Gross Profit Margin -- 42.2%, a 30 basis point increase attributed to favorable product mix and effective cost management.
• Prepared Food and Dispensed Beverage Margin -- 59.3%, up 130 basis points due to lower cheese costs and an internal distribution cost reclassification.
• Cheese Costs -- $1.93 per pound, a 9% decrease from $2.11 per pound in the prior year.
• Operating Expenses -- $754.1 million, an 8% increase resulting from unit growth, higher credit card fees, and increased labor rates.
• Same-Store Labor Hours -- Roughly flat, as the operations team met increased demand without increasing total hours worked.
• Liquidity -- $1.4 billion as of July 31, 2026, comprising $524 million in cash and $857 million in available credit lines.
• Share Repurchases -- $45.6 million during the quarter, with approximately $973 million remaining under the current authorization.
• Fiscal 2027 EBITDA Guidance -- 8% to 10% increase, which would imply 35% growth on a two-year stack basis at the midpoint.
• Fiscal 2027 Store Growth -- At least 120 stores, to be achieved through a combination of new construction and acquisitions.
• Fiscal 2027 Capital Expenditures Guidance -- Approximately $800 million, including investments in store remodels and new unit construction.
• Cefco Remodel Performance -- 30% average lift in prepared food and dispensed beverage sales at converted stores compared to pre-remodel levels.
• Casey's Rewards Membership -- Over 11 million members, serving as a differentiator for driving guest traffic.

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RISKS

• Rebelez stated, "approximately 1% of our total store base had a planned disruption associated with remodeling legacy Cefco stores to Casey's," which impacted same-store sales performance.
• Management noted that the alcohol category, specifically beer, remained a headwind during the quarter.
• Bramlage reported that same-store credit card fees increased by 1.5% due to higher retail fuel prices.

SUMMARY

Management reported growth in net income and EBITDA driven by margin expansion in the fuel and prepared food categories. The company integrated the Fikes acquisition by remodeling 24 legacy Cefco locations during the quarter while managing expenses related to labor and credit card fees. Casey's General Stores, Inc. (NASDAQ:CASY) maintained its full-year guidance, anticipating continued store expansion and inside sales growth despite temporary disruptions from store remodels.

• CEO Rebelez stated, "The stores that have been already remodeled to Casey's in prior periods have performed exceptionally well," noting that converted sites see an average 30% lift in prepared food sales.
• Management reported that nicotine alternatives increased 47% in the quarter, offsetting volume declines in combustible cigarettes.
• Regarding snack categories, management noted that national brand chips decreased 8% in units while Casey's private brand chips increased 16% in units.
• CEO Rebelez indicated that the chicken wings rollout reached 850 stores, with 38% of guests making wings-only orders.
• Management noted that higher fuel prices led to fewer gallons purchased per fuel trip and a higher frequency of store visits by guests.
• The company is approximately 80% covered on cheese costs through early in the first quarter of the next fiscal year, providing visibility into future margins.

INDUSTRY GLOSSARY

• CPG: Cents per gallon, a standard measurement for fuel profit margins.
• DMA: Designated Market Area, a geographic region used to measure television and retail audiences.
• EBITDA: Earnings before interest, taxes, depreciation, and amortization.
• OPIS: Oil Price Information Service, a source for petroleum pricing and news.
• PFMDB: Prepared Food and Dispensed Beverage, a reporting segment including hot food and drinks.
• Two-Year Stack: A metric that combines the growth rates of the current year and the previous year to show cumulative progress.

Full Conference Call Transcript

Operator: Good day, and thank you for standing by. Welcome to the First Quarter 27 Casey's General Stores Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during this session, you will need to press *1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press *1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Samuel James, Senior Vice President, Finance and Investor Relations. Sir, please go ahead.

Samuel James: Good morning, and thank you for joining us to discuss results of our first quarter ended 07/31/2026. My name is Samuel James, Senior Vice President, Finance and Investor Relations. With me today are Darren Rebelez, chairman, president, and chief executive officer and Steve Bramlage, Chief Financial Officer. Before we begin, I will remind you that certain statements made by us during this investor call may constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act of 2000.

These forward looking statements include any statements relating to the potential impact of the Fikes transaction, expectations of future periods, possible or assumed future results of operations, financial conditions, liquidity, and related sources or needs, the company's supply chain, business and integration strategies, plans and synergies, growth opportunities, and performance 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 uncertainties or any future results expressed or implied by those forward looking statements.

Including, but not limited to, the integration of the recent Fikes acquisition, our ability to execute our strategic plans, or realize the synergies from the strategic plan, the impact and duration of conflicts in oil producing regions, and related governmental action as well as other risks uncertainties, and factors which are described on our most recent annual report on Form 10-K, our quarterly reports on Form 10-Q, as we file with the SEC and 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 disclaims any intention or obligation to update or revise forward looking statements.

Whether as a result of new information, future events, or otherwise. A reconciliation of non GAAP to GAAP financial measures referenced in this call as well as a detailed breakdown of our operating expense increase for the first quarter can be found on our website at www.caseys.com under the Investor Relations link. With that said, I would like to turn the call over to Darren to discuss our first quarter results. Darren?

Darren Rebelez: Thanks, Samuel, and good morning, everyone. Before we go into further detail on our outstanding first quarter performance, I would like to thank the entire Casey's team for their hard work during our 1 100 days of summer, and for the excellent job they did serving our guests. I am also proud of the positive impact we are making on the communities we serve. As students head back to school, our annual Cash for Classrooms giving campaign raised funds for grants that will support schools, students, and teachers. This year, the help of our guests, team members, and supplier partner Coca Cola, we raised over $1.8 million.

This sets a new record and reflects our shared commitment to invest in the future of the communities we call home. We are through the first quarter of our fiscal 27 to 29 3-year strategic plan that we laid out in June. Where we highlighted Casey's advantage convenience QSR flywheel with our 3 lines of business, under 1 operating cost structure. Our strong first quarter result is yet another proof point that our advantaged model is working, as we continue to gain share both inside and outside the store. Now let's discuss the results from the quarter. Diluted EPS finished at $7.37 per share up 28% from the prior year.

Net income was $274 million, an increase of 27% from the prior The company generated $485 million in EBITDA, 17% higher than the prior year, and up 40% on a 2-year stack basis. Inside the store, prepared food and dispensed beverages remain strong. PFMDB transactions were up over 100 basis points driving and DB units up nearly 4% versus the same period in the prior year as guests continue to gravitate toward our abundant offering, compelling value, and continued innovation such as our bacon cheeseburger pizza LTO. Inside margin expansion was driven primarily by prepared food and dispensed beverage mix. In the forecourt, the capabilities we developed over the past couple years help us navigate a volatile environment.

Fuel margin was nearly $0.48 per gallon, while same store gallons were roughly flat. 1 note on the quarter. As part of our integration of the Fikes acquisition, approximately 1% of our total store base had a planned disruption associated with remodeling legacy Cefco stores to Casey's. As a result, same store sales both inside and outside the store faced a slight headwind. Despite this, we still posted strong same store results for the quarter, and remained ahead of schedule on our integration efforts. The stores that have been already remodeled to Casey's in prior periods have performed exceptionally well, and we expect to remodel Cefco stores throughout the fiscal year.

Now with that disclaimer out of the way, I would like to now go over our results and share some of the details in each of the categories. Inside same store sales were up 3.2% for the quarter, or 7.7% on a 2-year stack basis. Gross profit margin for the quarter was 42.2% up 30 basis points from the prior year. Prepared food and dispensed beverage led the way, as same store sales were up 4.8% or 10.7% on a 2-year stack basis with a gross profit margin of 59.3%. The majority of same store sales growth was from traffic with minimal price.

This was highlighted by great performance in whole pies, with units up nearly double digits in the quarter. Same store grocery and general merchandise sales were up 2.7% or 6.5% on a 2-year stack basis with a gross profit margin of 35.6%. Energy drinks and nicotine alternatives continue to outperform the category. With double digit growth. The alcohol category, specifically beer, was a headwind during the quarter. On the fuel side, same store gallons sold were down slightly at 0.3% but were positive 1.4% on a 2-year stack basis with a fuel margin of 47.8¢ per gallon. The Mid Continent region saw an approximate 6% decline this quarter according to OPIS fuel gallons sold data.

Indicating that our play is working, and we continue to gain market share and drive guest traffic. In the quarter, same store operating expense excluding credit card fees increased 5%. Steve will provide some of the specific puts and takes related to operating expense changes. But I am extremely proud of our operations team to be able to meet the increased food demand without meaningfully increasing store labor hours. The same store labor hours were roughly flat for the quarter. I would now like to turn the call over to Steve to discuss the financial results from the first quarter. Steve?

Stephen Bramlage Jr.: Thank you, Darren, and good morning. Before I begin, I also want to share my appreciation for our team members' hard work executing a plan during our busy summer months. It takes the entire organization's buy in to be able to generate such strong results which are not easy to achieve. Our total revenue for the quarter was $5.68 billion that is an increase of $1.11 billion or 24.3% from the prior year due primarily to higher inside sales, and a higher retail price of fuel. Higher fuel gallons sold also contributed. Results were favorably impacted by operating approximately 2% more stores on a year over year basis.

Total inside sales for the quarter were $1.78 billion that is an increase of 94 million or 5.6% from the prior year. For the quarter, prepared food and dispensed beverage sales rose by $34 million to $493 million an increase of 7.4% and grocery and general merchandise sales increased by $60 million to $1.28 billion an increase of 4.9%. Inside same store sales have an approximate 25 basis point headwind from the Fikes construction. Retail fuel sales were up $991 million in the quarter, as the average retail price of fuel rose 33% from $3.00 to $3.99 per gallon and total gallons sold increased by 2.5%. Same store gallons had an approximately 50 basis point headwind from the Fikes construction.

We define gross profit as revenue less cost of goods sold, but excluding depreciation and amortization. Casey's had total gross profit of $1.24 billion in the quarter, an increase of $127 million or 11.4% from the prior year and up 29.7% on a 2-year stack basis. This is driven by the higher inside gross profit of $44.3 million or 6.3% as well as higher fuel gross profit of $73.4 million or 19.6%. Inside gross profit margin was 42.2% and that is up 30 basis points from a year ago. The increase is primarily due to mix shift and solid cost of goods management.

Also, during the first quarter, we made a modest change in accounting for inside cost of goods sold related to internal distribution costs that had no net impact on inside margin in the aggregate but it did create a slight tailwind to the PFMDB margin. And a slight headwind to the grocery and GM margin. We believe this change better reflects the true cost of goods sold between the 2 categories. Prepared food and dispensed beverage gross profit margin was 59.3% that is up 130 basis points from prior year.

Cheese was $1.93 per pound for the quarter, compared to $2.11 per pound last year. it is a decrease of 9% or an approximate 45 basis point benefit to the margin. Along with the aforementioned distribution cost reclass, these 2 items accounted for all of the margin change in the quarter. The grocery and general merchandise gross profit margin was 35.6%, a decrease of 30 basis points from the prior year, and that change is completely attributable to the distribution cost reclass. Fuel margin for the quarter was $0.478 per gallon, up $0.068 per gallon from the prior year.

And sequentially, about $0.01 stronger than the fourth quarter of fiscal 26, which reflected the beginning of the Middle East conflict and the related volatility in global petroleum markets. Total operating expenses were up 8% or $55.9 million in the quarter. Approximately 2% of the total operating expense increase was due to unit growth. As we operated 64 more stores than the prior year. Same store credit card fees added approximately 1.5% to the increase. Primarily due to the previously mentioned higher retail prices per gallon. Same store employee expenses accounted for approximately 1% of the increase due primarily to increases in labor rates as same store labor hours were roughly flat.

Insurance, primarily same store healthcare insurance, was responsible for approximately 1% of the increase. In addition, same store repairs and maintenance and same store utilities collectively made up approximately 1% of the increase. Net interest expense was $22.1 million in the quarter. that is down $4.8 million versus the prior year, was primarily due to deleveraging, Associated with the Fikes transaction. Depreciation in the quarter was $116 million, that is up $7 million versus the prior year. Primarily due to operating more stores. The effective tax rate for the quarter was 21.1% compared to the prior year of 22.7%. That decrease was driven by an increase in tax benefits that were recognized on share based awards.

Our financial flexibility remains excellent. On July 31, we had total available liquidity of $1.4 billion Also, our credit facility debt to EBITDA ratio was 1.5 times. For the quarter, net cash generated by operating activities of $384 million plus purchases of property and equipment of $194 million resulted in the company generating $190 million in free cash flow. Compared to generating $262 million in the prior year. The decrease in free cash flow is due in large part to the planned increase in capital expenditures from the Cefco store remodels. At the September meeting, the Board of Directors voted to maintain the quarterly dividend at $0.65 per share. During the first quarter, we repurchased approximately $46 million in shares.

While we are off to a great start to the year, consistent with our past practice, we plan to update annual guidance on our second quarter earnings call when we are through the seasonally largest time of the year. Our results for August were as follows: same store volumes, both inside and outside the store were consistent with our first quarter results and within our annual guidance range Fuel CPG is in the low $0.40 per gallon. Current cheese costs are slightly favorable versus the prior year. We expect the second quarter operating expense increase to be similar to the first quarter and that is partially driven by the increase in retail fuel prices.

As compared to the second quarter of fiscal 26. I will now turn the call back over to Darren.

Darren Rebelez: Thanks, Steve. As we just wrapped up our first quarter into the new plan, I am as excited as ever about our progress. Our food team is doing a tremendous job. Whole pies have continued their strong momentum in the quarter. Guests are flocking to the Casey's Rewards platform, as we are now over 11 million members. We believe our abundant and value oriented food offering is not only a differentiator driving inside traffic, but it is also driving traffic to the pump. This coupled with our fuel team doing an excellent job balancing fuel margin and gallons during an uncertain environment, has yielded great results. This is our 3-legged business model in action.

During fiscal year 26, we remodeled approximately 50 Cefco stores to Casey's. In the first quarter of fiscal year 27, we have remodeled 24 more stores, We are extremely excited about the results we are seeing, as the average PFMDB lift at the stores that were remodeled to 30% versus its results of the same period prior to remodel. While we are busy with Cefco conversions, does not stop us from continuing to grow the store base, as we are on track to meet our 120 store unit goal for the fiscal year. Operational efficiency is another key pillar of the strategic plan.

As we discussed at our Investor Day, we expanded our continuous improvement efforts to include both store and the enterprise as a whole. We are off to a great start. As the team has completed a number of initiatives with many more on track for completion during the fiscal year both at the store and throughout the organization. Overall, I am very proud of the team's execution of the plan, We look forward to building on the momentum we have going throughout the fiscal year and beyond. We will now take your questions.

Operator: Thank you. As a reminder to ask a question, please press *11 on your telephone and wait for your name to be announced. To withdraw your question, please press *11 again. We ask that you please limit yourself to 1 question only. First question comes from the line of Edward Kelly with Wells Fargo. Your line is open. Please go ahead.

Edward Kelly: Yes. Hi. Good morning, everyone. Wanted to start this on fuel margins. I was hoping that you can maybe talk about the trend in fuel margin during Q1. I think you said you had a very strong start last quarter, which I think a lot of us kind of assume that maybe that was in the 50s. Just curious what the rest of the quarter looked like. And then the underlying dynamics that drove that really robust Q4 performance and strong start, Just curious as to the sustainability of those dynamics through the quarter.

And then just lastly, related to all this, as you think about your mid-40s sort of margin guide, is there anything you are seeing out there currently that sort of raises question about that at all? Maybe talk about breakevens as part of that. Thank you.

Stephen Bramlage Jr.: Hi. Good morning, Edward. This is Steve. I will address the first 1 on fuel margin during the course of the quarter. We certainly we did enter the beginning of this fiscal year in a good position, certainly given the experience that we had in the fourth quarter. But I would say honestly that the quarter was volatile is the word I would describe with fuel margins. There were days when it was in the 60s, There were days when it was in the 30s. Most days, it was in the 40s.

And, you know, to some extent, depending on the headlines, that you read about, in the paper and social media, the there would be a corresponding move in fuel margin over the next day or 2. So I do not think it is possible to really describe a solid trend during the course of the quarter. The floor for sure was higher which is what we saw in the fourth quarter of last year because of the conflict. That was unchanged. But it really moved around quite a bit based on headlines as we went through the quarter. Thank you.

Operator: And 1 moment for our next question. Our next question comes from the line of Mike Montani with Evercore ISI. Your line is open. Please go ahead.

Greg Millik: Hi, guys. I would love to follow-up on sort of the trends you saw through the quarter. Particularly with how much of the comp decel in grocery and food might have been people getting squeezed in terms of cash they had, filling up the gas tank at the same time. Anything about that and the trends from since the quarter as well? Thanks.

Darren Rebelez: Yeah, Greg. This is Darren. I will go ahead and take that 1. Yeah. I would say that, the trends that we saw in first quarter were similar to what we have seen over the last several quarters. A couple of points. 1 is that the lower income consumers are being slightly more impacted than the other income cohorts. If you look at our business, all 3 income cohorts that we measure had positive growth in the quarter. So I will caveat it with that. But I would say that more of the impact we saw on the grocery and general merchandise side is really driven by category trends versus you know, demographic trends.

And what I mean by that is if you look at the 3 areas where we had some softness is beer, snacks, and cigarettes. And those categories have all been challenged for different reasons. that is an industry wide phenomenon. We are we are not immune to that. Know, on the beer side, we were able to make up for a good part of that with our liquor business. Ready-to-drink cocktails, in particular, were up over 30% in the quarter. So we saw some good strength there, not enough to overcome. The drag on beer. Snacks, I think we talked about this before.

We have seen a lot of pricing price action taken from the national brands, which has put some pressure on there, and 6 has been a multi decade trend. On the other side, on grocery, and general merchandise, real strength in nicotine alternatives, up 47% in the quarter. Energy continues to perform well at 12%. And nonalcoholic beverages overall were a strong contributor. So overall, I would say the trends are what they are. And then lastly, when I look at a 2-year stack basis, grocery and general merchandise up 6.5%. In an environment like this, I think, is pretty solid performance. Thank you.

Operator: And 1 moment for our next question. Our next question will come from the line of Thomas Palmer with JPMorgan. Your line is open. Please go ahead.

Thomas Palmer: Good morning and thanks for the question. I wanted to maybe just follow-up on the Cefco commentary in terms of the remodels. You noted 25 basis point inside same store sales headwind and 50 on the fuel side fuel gallons. How did this compare to kind of what you had seen on past remodels? And as we look out here over the next couple of quarters, should we be thinking about a similar kind of headwind, or does, like, the lift from the remodeled stores start to more than offset let's say, any headwind from the disruption during the remodels?

Darren Rebelez: Yeah. This is Darren. Yeah, on the remodels, this is-- you know, this is to be expected when we do heavy lifting. Where why you did not see this in the first quarter or fourth quarter of last year was there is a cohort of stores that already had kitchens in them that we were able to convert in just a matter of days. So there is really very minimal impact to the performance of the business while those were being remodeled. These next tranche of stores that we started this quarter, this past quarter, are impacted anywhere from 4 to 6 weeks. And so that puts up a pretty significant drag.

Not closed the entire time, but they are closed for a good part of it. And then partially under construction for part of it. So there is a lot of disruption that puts a drag. It is not anything different than what we would normally see in a remodel of other acquisitions. Probably the biggest difference is the Sefco stores tend to be higher-volume stores versus others that we have acquired in the past. And so it has more of a disproportionate impact and there is just more of them that we are remodeling. So that is all that said, we have been very happy with the results. Coming out of the remodels.

And so at some point, to your point, Tom, these numbers will inflect, but that is probably later in the fiscal year. And so I would not expect to see that in second quarter. Probably not anything meaningfully in third quarter. It would probably be more fourth quarter. Where you start to see that inflection point.

Stephen Bramlage Jr.: Yeah. And I would probably just add to that. All of this was countenanced in our annual guidance. We knew all this was gonna happen, and so none of this is a surprise. And I think it is exactly kind of the impact and the timing that we would have expected. Thank you.

Operator: And 1 moment for our next question. Our next question will be from the line of Bonnie Herzog with Goldman Sachs. Your line is open. Please go ahead.

Bonnie Herzog: Had a question on OpEx, which has remained elevated over the last several years. So could you provide a little more color on the FQ1 drivers? And how you expect the cadence for OpEx to trend from here? And then curious if you could touch on how much of the increase in the quarter was tied to the new stores or CEFCO, maybe labor, credit card fees or other inflationary pressures? Just really just trying to think about how we should think about normalized OpEx growth from here over the long term. Thank you.

Stephen Bramlage Jr.: Sure. Hi, Bonnie. Hey. Good morning. This is Steve. In terms of the waterfall, that I think will end up on the web page, as we have done in the past. But to get to the total OpEx, change of the 8% in the quarter, About 1 point of that was same store employee expense. So think of kind of 3% wage rate offset by flat hours, gets you to kind of 1.5 points. About 2% would have been what we would kind of broadly bucket as same-store operations. So that would be repairs and maintenance utilities. Insurance. We are self insured for our health care. That would go into that 2% bucket.

New units, to your point, is about 2% all by itself. Just the wrap of new units. Credit card fees, same store credit card fees would be another point and a half, almost 2 points, and then you get kind of everything else in the 1% bucket, which would be technology and supplies and some miscellaneous things. We continue to believe the best way to think about OpEx on a long term basis is consistent with the algorithm, right? We will grow-- we firmly believe we can grow operating expense at a slower rate. And we are going to grow EBITDA over medium and long term, I think that is imminently achievable for us.

And for this year, I would just probably point you back to we obviously have not updated the guide for the year. But the squeeze math for the rest of the rest of the year, if you go back to what we experienced in the fourth quarter of last year, you will get less OpEx growth on a year over year basis this year. To land the plane within that range. And especially if you take the fact second quarter is gonna look similar to first because of the credit card fee dynamic. You should be able to land second half of the year pretty close. Thank you.

Operator: And 1 moment for our question. Our next question will come from the line of Mark Carden with UBS. Your line is open. Please go ahead.

Mark Carden: Hi. This is Matthew Carden on for Mark. Thank you for taking our question. I was wondering if you could touch on the competitive landscape and promotional landscape a little bit Are you seeing any impact from price investments from some of the mass merchants on your inside sales or grocery and gen merch? And any shift from kinda your con convenience store peers and competition and pricing?

Darren Rebelez: Hey, Matthew, This is Darren. Really, we have not seen any unusual or different activity from the c-store competitive set. I think that is a reflection of the more challenged environment that they find themselves in relative to us with a big prepared foods business. But, yeah, we really have not seen much of that there. On the on the pizza side of the business, it is been a mixed bag. I think there is there is been some more promotional activity, but you know, again, I would remind you of how we approach the business. You know, we have our own degree of promotional activity, but our starting point is far lower in price versus the national brands.

We are we are close to on average, about $3 for a single topping pizza below what a national brand would be priced at, just line pricing. And then you know, also as a reminder, about half of our stores do not even have a national brand pizza competitor. So we are really in a in a very good competitive spot. What we did see over the quarter was that you know, similar to the dynamic that we described in Investor Day where we have taken minimal price while the pizza QSR cent has taken more price. Saw that dynamic in first quarter continue.

And that gap that we had from our pricing in prepared foods to theirs actually widened even further. So we think we saw that in the numbers with the unit growth. And the dollar growth as well in PF and DB. Thank you.

Operator: And 1 moment for our next question. Our next question comes from the line of Chuck Cerankosky with Northcoast Research. Your line is open. Please go ahead.

Chuck Cerankosky: Good morning, everyone. Great quarter. I would like to return to the nicotine category. it is it is shrinking on the cigarette side. Can you talk a little bit about the I kinda cannot even think of the name right now. the artificial cigarettes? And then what it means for the inside merchandising is you change space allocation or need to use other products to get that traffic back.

Darren Rebelez: Yeah. Chuck, this is Darren, and they are called nicotine alternatives. And so yeah, that you know, what we have seen over the course of the last couple years is as that secular decline in combustible cigarettes continues, nicotine alternatives is starting to, replace that lost volume. Now it is not a 1-for-1 yet, has not quite grown that fast. But if you think about how the categories are trending, you know, with cigarettes down 1% or 2% on sales basis and down you know, call it, 5% or 6% on a unit basis, and nicotine alternatives up 47% in the quarter. You can see where that change is going to come here soon.

From a space allocation standpoint, I think that is where our merchandising team has done a really good job is getting ahead of this and we talked about this on previous calls. We reset those nicotine backbars to reduce the combustible cigarette space to make more room for nicotine alternatives. And that move a couple years ago was I think we were 1 of the first in the industry to do that. And it is really accrued to our benefit. And I think that is 1 of the reasons that you see the strength in that category. Today in our stores. And we just did another adjustment this past fiscal year to give even more space in the nicotine alternative.

So the category overall is definitely shifting in favor of those alternatives. And, we expect to be a leader in that. In that space. Thank you.

Operator: And 1 moment for our next question. Our next question comes from the line of Pooran Sharma with Stephens. Your line is open. Please go ahead.

Pooran Sharma: Good morning, and thanks for the question here. Just a quick 1 from me. I think you mentioned your cheese cost at about dollar 93 per pound. I was just wondering if you could give us how much of your cover as you are looking out here. How much you are covered and how many quarters you are covered out.

Stephen Bramlage Jr.: Yeah, Pooran. Hey. Good morning. This is Steve. I will address that. We are about 80% covered through early into the first quarter of next fiscal year. And generally, certainly for the remainder of this fiscal year, the 3 out quarters, we would be covered in a modest tailwind to margin each of each of those 3 quarters. Thank you.

Operator: And 1 moment for our next question. Our next question will be from the line of Corey Tarlowe with Jefferies. Your line is open. Please go ahead.

Corey Tarlowe: Great. Thanks, and good morning. Hey. Good morning. Have a Thanks. I have a 2-parter. So the first, I would love an update on chicken wings. And then second is on M&A. I think you have placed recently a little bit more emphasis on Texas. Could you maybe talk a little bit about the strategy within that market, please? You very much.

Darren Rebelez: Hey, Corey, This is Darren. With respect to Wings, wings are performing well. We have been really happy with the results so far. We are still in 850 stores. And we will start rolling out the next tranche of stores here, later this month. We did not do any rollouts over the 100 days of summer just to give our stores a chance during their biggest peak period to execute at a high level. So We will start those now, and we will start getting those open probably in early third quarter. Wing's like I said, have performed well. 1 of the encouraging things is about 38% of guests that have purchased wings have had a wings only order.

And if you recall, when we talked about this strategically, we were looking to achieve another night of the week or another occasion in addition to pizza, And so those wing only orders really represent that incremental occasion. And so the folks that have had a wing only order have increased their frequency of prepared food purchases overall by about 30%. So it is a really good fact pattern for us. We are still early stages and still growing You know, as an example, the Des Moines DMA, which we have had the wings in the longest, we were up 46% in the quarter over prior year. So there is still a long runway for growth there.

And, very bullish on that category. Thank you.

Operator: And 1 moment for our next question. And our next question will come from the line of Kelly Bania with BMO Capital Markets. Your line is open. Please go ahead.

Kelly Bania: Hi. Good morning. Thanks for taking our question. Steve and Darren, I wanted to just go back to the beer, snacks and cigarette commentary and the impact on the grocery comps. Just curious a little bit more color there when that kind of weaker trend started, and are you seeing just more of a unit slowdown, or is there a trade down to lower price points or smaller pack sizes? And do you or some of the vendors have some plans to promote these categories? Through the rest of the year.

Darren Rebelez: Yeah, Kelly. I will I will go ahead and take that. And you got something different going on in each of those. I would say just start with cigarettes because that is the easiest. that is been for 30, 40 years, that trend. So nothing new to report in cigarettes, other than it is just continuing to be under pressure. And like I said, I feel better about that category the total nicotine category, now than I have in a long time. Because the nickel alternatives and the growth rate we are seeing there and the margin profile. You know, as a reminder, the margin in nicotine is double what it is in combustible cigarettes.

So that ends up that math ends up working out pretty favorably on a gross profit dollar standpoint over the long term. Snacks is something that we have probably experienced for the last couple years where the national brand manufacturers have just taken a lot of price primarily in chips. And so you see a lot of pressure in that category. And while there is been some price action that they are taking on take home packages not taking that on immediate consumption packages, which is the bulk of what we sell. So there is just they just price themselves out of the market, frankly.

Now what we are doing about that is we have leaned heavier into our private label offering. And so we are seeing really good growth in those same categories in, in our private label products. So we think we are we are not losing traffic necessarily, but the retails are lower. And so does not have quite the impact on the sales line as it might otherwise have. And beer, beer has been a category that is really struggled for the last couple years. I think it started off with Budweiser and their social media snafu, and then it is just kind of hung in there like that.

The 1 bright spot is super premium beer with Nick Ultra, but outside of that, it is been soft. What we have really done is we have made sure that we are we are priced appropriately. We are looking at space allocation in the category to make sure we are appropriately spaced. And then leaning a little bit heavier on the liquor category. And like I have mentioned, earlier on the call, ready to drink cocktails up 30 plus percent. So that is been a good offset, and that is a little bit more on trend with, where the consumers are going. Thank you.

Operator: And 1 moment for our next question. Next question will be from the line of Bradley Thomas with KeyBanc Capital Markets. Your line is open. Please go ahead.

Brad Thomas: Good morning. Thanks for taking the question. I wanted to ask about the same store gallons. Know it is tracking within your annual guidance. This was the first quarter of being negative after about 6 quarters of being positive. Just curious what you were seeing in the quarter much of the decline is the being a tougher comparison that you are up against? And then to what extent is fewer gas sales trickling through to the inside comp? Not sure if you have been able to look at that yet. Thanks.

Darren Rebelez: Yes, Bradley. I will go ahead and take that. Just on the same store gallons, on the trend, a few things I would point out. You know, 1 is down 30 basis points. So you know, our annual guide was down a percent to plus a percent. So we are we are talking about pretty nuanced numbers there. Point number 1. Point number 2, as Steve described, with the CEFCO remodels, that is about a 50 basis point drag on overall gallons. So you know, so if you net that out, you are probably up 20 basis points. So that again, nuance, but probably right in the middle of the annual guide range.

Now on a 2-year stack basis, you know, we were cycling a 1.7% same store gallon number and to put that in perspective. so we are on a 2 year stack, we are up 1.4%. The OPUS Mid Continent region, which is where we operate primarily, over that same 2 year period is down 10%. So we have taken significant share in fuel, and, you know, 20 basis points here, 30 basis points there does not concern me when the overall trend is where it is.

And you know, from a I would just add with a consumer behavior standpoint on fuel, with the higher fuel prices, we are seeing exactly the type of behavior that we would expect to see. Fewer gallons per trip but more trips made. Which ultimately accrues to our benefit if we have more people coming to the store. People are trading out of premium and mid grade and opting for regular or higher ethanol blends of fuel, The higher ethanol blends of fuel carry a higher margin for us than clear gasoline. So while these trends kinda ebb and flow, it is very consistent with prior periods of higher gas prices. And ultimately, you know, works out to our benefit.

Thank you.

Operator: And 1 moment for our next question. Our next question will come from the line of Krisztina Katai with Deutsche Bank. Your line is open. Please go ahead.

Krisztina Katai: Hi, good morning, and thanks for taking the question. I had a follow-up to grocery. So, Darren, you have highlighted strong growth in energy, nonalcoholic beverages, and nicotine alternatives, but, obviously, snacks remain challenged. So do you think the weakness in snacks is entirely a function of pricing and value perception? And are you starting to see evidence maybe of a more durable shift in consumer behavior? Obviously, there is a shift towards healthier consumption patterns or also any GLP-1 usage that you might be seeing, and if that is warranting any kind of a revision of how you are thinking about maybe what the inside of the box needs to look like, maybe 2 to 3 years from now.

Thank you.

Darren Rebelez: Yeah. Thanks, Krisztina. And you know, certainly, we keep an eye on that. But, you know, when I look at what is happening in the category and as I mentioned before on snacks in particular, national brand chips down around 8%. Corey's chips up 16% units. So if it was a GLP-1 impact, I do not think we would see the strength in our own private brand. We just we would see overall you know, negative trend in the category. So I cannot put my finger on the idea that it is a GLP-1 type issue. That being said, there is certainly a trend of people leaning more towards protein-heavy snacks and foods in general, and we are seeing that.

And our merchandising team's done a nice job of bringing in more protein dense snacks and other foods. Satisfy that need. And we are seeing good growth in those. Just smaller categories. So they really do not move the needle as much on the overall G and GM category, but they are growing well. And, we are staying attuned to that trend. We are just I just do not see enough of it yet to make any more dramatic shifts at this point. Thank you.

Operator: And 1 moment for our next question. Our next question will be from the line Bobby Griffin with Raymond James. Your line is open. Please go ahead.

Bobby Griffin: Dan, I wanted to touch on just the Texas opportunity further, and I think you called out on the remodel stores for Fikes. They are performing well. But can you dive into a little bit more about what those stores are kinda showing versus maybe corporate average once they get your Casey's Pizza in there. I think Fikes were higher performing stores. So is that translating into a higher, you know, just a larger pizza business? And is that indicative of what maybe the opportunity could be as you open up new-to-industry or, you know, you do tuck ins. You guys completed a small tuck in Texas, you know, after the quarter end. Yeah, Bobby.

Darren Rebelez: You know, the like we said, the performance of the CEFCO stores has been fantastic. So far coming out of the remodels. And you know, what I would say is most encouraging is that these stores were high volume. They were generally higher volume than our average. Now, not in prepared foods, but their prepared foods business was probably the best that we have ever acquired. I do not think there is been anything that is even close to how CEFCO is performing in Prepared Foods prior to acquisition. And so you know, when we can come in and take a store already doing well in prepared foods and layer our program on top of it.

And see, you know, the types of lifts that we are seeing, 30 plus percent year over year. it is really encouraging. And even in the proof of concept stores that had the full Casey's assortment for over a year, they are still comping positively. And so we feel really good about what we see. We have also had some new to industry stores that we built down in Texas. Over the last year since we have been down there, and, those are performing very well. So we really like we really like Texas overall. We as you know, this has been a goal of ours to get into that state for a while now.

The 2 acquisitions we have done and now a third coming have been very good to us, and the new industries are doing well also. And as I have looked at Texas, you know, outside of the big 4 cities of Dallas, Austin, San Antonio, Houston, The rest of that entire state is Casey's Country, and from our perspective, it is got a long, long runway for growth. Thank you.

Operator: 1 moment for our next question. Our next question will be from the line of Daniel Guglielmo with Capital 1 Securities. Your line is open. Please go ahead.

Analyst: Hi, everyone. Thank you for taking my question. Kind of a follow-up on kind of state strength. You all have stores in 19 different states. If you think about customers at the state level, are there certain states or areas of the country where you are seeing a stronger consumer or weaker ones?

Darren Rebelez: Daniel, I would have to look. I probably have to look a little closer to try to answer that question. Nothing jumps out at me. Probably 1 example that we have seen is between Illinois and Indiana. On the border where Indiana has suspended gas tax in that state. And Illinois has not done anything similar. And so we are seeing a little bit of weakness along the border in Illinois. From a fuel perspective, but we are also seeing a corresponding strength on our on the other side of the border in our Indiana stores. I would say it is kind of a wash.

Just guests kinda playing an arbitrage game, but outside of that, I could not specifically point to any 1 state doing better or worse than the others.

Analyst: They are I mean, they always perform a little bit differently, but nothing that really jumps out. That concerns me.

Stephen Bramlage Jr.: I think it is worth reinforcing that if you just think about part of the strategic notes that Casey's has and that we tried to highlight at the Investor Day, right, the geographic footprint we have remains in some of the lowest cost of living parts of the country. And so you know, broadly speaking, the money that our consumers earn goes further than it would certainly for consumers who are similarly situated on the coasts. And we feel like that just accrues to our benefit for sure. And I think that is a very fair statement for the vast majority of the communities. That we serve and continue to serve.

Operator: Thank you. Our next question comes from the line of Jacob Aiken-Phillips with Melius Research. Your line is open. Please go ahead.

Jacob Aiken-Phillips: Good morning. Thanks so much for taking our question. This is Jacob Aiken-Phillips on for Jacob. Just wondering if you could zoom out a little and touch on M&A as a whole. Have you seen the industry change at all in the last several quarters? And then also, just wondering if you could remind us on philosophically just how you see M&A contributing to your 120 new unit growth target by the end of the fiscal year? Thank you.

Darren Rebelez: Yeah, Jacob. I would say the M&A environment is, is still really good. And that is a reflection of the challenging environment that, that the industry finds itself in particularly the small operators. And so it would not say it is changed. I would say it is still consistent, maybe even gotten a little better from a buyer's perspective. And you know, multiples have stayed relatively flat but the EBITDA that is multiplied by has not. And the EBITDA even with the higher fuel margins, tends to go backwards for these smaller operators. So we find ourselves paying a lower absolute price for some of these assets even though the multiples are about the same.

And you know, consistent with our guidance you know, every year we go into that you know, giving a number of stores we will add in the fiscal year. This year, it is a 120. We go into that assuming half of that will come from new industry builds, half of that will come from the small deal M&A and that is exactly how we see it playing out this year, give or take a couple. Thank you.

Operator: And I would now like to hand the conference back over to Darren Rubelis for closing remarks.

Darren Rebelez: All right. Thank you for taking time today to draw us on the call. Before we go, I want to thank our team members once again for all their hard work this quarter. Have a great day.

Operator: Thank you. This concludes today's conference call Thank you for participating, and you may now disconnect. Everyone, have a great day.

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