Casey's General Store CEO talks mixed earnings report and 'gradual' COVID-19 recovery

Casey’s General Stores CEO Darren Rebelez joins Yahoo Finance’s On The Move panel to weigh in on reopening stores and break down the company’s latest earnings report.

Video Transcript

- Well, Casey's General Stores just reported its earnings. Those earnings per share just more than doubled from where they were a year earlier, even as we saw same-store sales decline. We are joined now by the CEO of Casey's General Stores. He's joining us from Iowa. And that's Darren Rebelez. Darren, thank you for joining us.

So first, I just wanted to get you to talk us through those earnings a little bit, because as I mentioned, you all saw a big year-over-year increase in earnings per share, even as you were seeing declining same-store sales. So where did you see that pickup on the earnings side?

DARREN REBELEZ: Yeah, thanks for having me, Julie, and it's great to be here to share our story. And you know, we had a really strong fourth quarter and overall finish to the year, but you know, something that is great about our business model is we're really in three businesses in one. We have a fuel business, we have a convenience store business, and then we have this really developed prepared foods business, anchored by our pizza. And we're actually the fifth largest pizza chain in the US.

And so it gives us the ability to navigate a variety of different environments and be able to deliver strong results. And in this case, in the fourth quarter, we really leaned in to the fuel business, and we were able to manage really strong margins on the fuel side, even though we were seeing some demand destruction occur as states went into shelter-in-place mode.

So-- and it was really a tale of two halves of the quarter. Our first half of the quarter, we saw really strong comps in our gallon volume, our convenience store, and our prepared foods. Then about the second half of the quarter, as those shelter-in-place orders took effect, we saw some declines. But overall, as you mentioned, earnings per share up 145% in the quarter, EBITDA up nearly 50%, and for the year, earnings per share up around 29% and EBITDA up 15%. So very strong finish to the year, and really enables us to continue to accelerate execution of our strategic plan moving forward.

- Darren, what are you guys seeing now in terms of the traffic to your stores, in terms of what's going on with fuel sales, for example, as well, as we start to see reopenings? I mean, you guys, what, are mostly concentrated across the Midwest. So what does reopening look like there, and are people driving?

DARREN REBELEZ: Yeah, it's a great question. And we're seeing a gradual recovery in our volumes. And really, we kind of hit the trough in mid-April. And ever since then, we've seen some sequential improvement, albeit gradual, throughout that time period. And in the last 14 days in particular, we've seen some acceleration there, as states start to loosen things up. The-- but again, that varies state by state. And as an example, Illinois just came out of their shelter-in-place on June 1st, and that's about 20% of our store base. So we're still working through that process in the state of Illinois, and starting to see recovery.

On the prepared food side, we've had various restrictions on our ability to execute self-serve food service. So about 25% of our stores are still under some sort of restriction there. So our prepared foods is coming back a little more slowly than the rest of the business. But overall, things are starting to feel a little bit more normal, but we expect it to take a little more time to work itself all the way back.

RICK NEWMAN: Hey, Darren, Rick Newman. Wondering about your staffing. I assume you've had to cut some staffing. How are your employees doing? What are your payrolls looking like? And when do you expect to get back to pre-virus staffing levels?

DARREN REBELEZ: Well, Rick, you know, what we did first off when the pandemic started, we really focused on the safety of our team members. And so we implemented a lot of measures around taking care of them. So certainly, giving them the PPE that they needed to be safe in the stores, we implemented social distancing in the stores, installed plexiglass shields at the cash registers to protect them. We also gave them incremental pay. So we gave every one of our hourly workers, whether it was in our stores or distribution centers, an additional $2 an hour, and field supervisors got additional weekly bonuses, really to help them.

Now, to your point around hours, we did have to adjust some store hours because we didn't need to keep stores open 24 hours when things were shut down, so there was some impact there. But we did have the incremental pay to offset that. And I would just say, while we're talking about our team, I was overwhelmed with how well our team members, our 38,000 team members in our stores were able to execute and continue to take care of our guests and our communities throughout this pandemic. You know, we threw a lot at them, a lot of change in process and procedures that they had to deal with, and they handled it masterfully. And I couldn't be more proud of our team.

- Can you speak to more of the product mix? Especially as people have been trying to limit their grocery store visits, of course the lines have died down over the last couple of weeks. Do you anticipate offering more fresh grocery just so that, you know, the average kind of receipt per user can go up over time?

DARREN REBELEZ: You know, what we've seen is we've definitely seen a shift in mix. And remember, with convenience stores, we rely on daily traffic and people using us for their immediate consumption needs. So typically, our mix is a lot of single-serve items, whether that's single-serve beverages, snacks, or prepared foods. And what we saw during the pandemic was a shift towards take-home.

And some of that's driven by the fact that people aren't out and about, but they're at home, and so they'll buy a case of beer instead of a single can of beer, or a case of soft drinks versus single-serve. Some of that's also driven by value, where people have been furloughed or laid off, and they're a little more cost-conscious. So we've definitely seen that shift in mix from more bulk buying versus the single-serve. But we expect, as things more normalize, people get back to work, that need for immediate consumption convenience will start to come back, and we'll see that mix more normalize again.

- And Darren, just very quickly, can you talk to me about online ordering? Because it's my understanding this isn't something you guys were taking a lot of before, and now you are.

DARREN REBELEZ: Well, we've actually been working on that prior to the pandemic hitting, and we had launched our e-commerce platform about this time last year, and primarily focused on our food business and our pizza business. And that was gradually growing. We launched our rewards program in January, and now we're up at a little over 2.2 million members in that program.

But we definitely saw a shift in our online ordering business when the pandemic hit. And now, fully 50% of our pizza orders come in through our digital, either our mobile app or our e-commerce platform, and 20% of all of our transactions have a rewards member. So that part has really accelerated. The thing we moved up in the-- in our digital roadmap was expanding the online assortment to the center of the store, more of those convenience store items. And we're seeing really nice acceleration in that, as well.