Casey's General Stores (CASY) Q4 2018 Earnings Conference Call Transcript

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Casey’s General Stores (NASDAQ:CASY)
Q4 2018 Earnings Conference Call
Jun. 12, 2018 10:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to the Q4 fiscal-year 2018 Casey’s General Stores earnings conference call. [Operator instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to Mr. Bill Walljasper, CFO. Sir, you may begin.

William J. WalljasperChief Financial Officer

Thanks, Brian. Good morning, and thank you for joining us to discuss Casey’s’ results for the year and quarter ended April 30. I’m Bill Walljasper, chief financial officer. Terry Handley, president and chief executive officer, is also here.

Before we begin, I’ll 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 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 some realized 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 quarter reports on Form 10-Q as filed 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.

This morning, Terry will first take a few minutes to summarize the results of the fourth quarter and then provide an update on the progress with our value creation plan announced last quarter as well as our outlook for fiscal 2019. We will then open for questions about our results and outlook for this year. I’d now like to turn the call over to Terry to discuss our results.

Terry HandleyPresident and Chief Executive Officer

Thank you, Bill, and good morning, everyone. As Bill said, I will share a brief overview of the quarter. And in summary, we have made significant progress in implementing our value creation plan to position Casey’s for continued growth. Nevertheless, a lower fuel margin and unfavorable weather and continued macroeconomic challenges at our marketing region were headwinds to our results during the quarter.

Diluted earnings per share for the fourth quarter were $0.51, compared to $0.76 a year ago. For the year ended April 30, 2018, diluted earnings per share were $8.34, compared to $4.48 for the same period a year ago. Adjusted for the benefit from the tax reform act, earnings per share in fiscal 2018 would have been $3.81. In the fuel category, growth in same-store gallons sold continued to outpace growth in miles driven as reported by the United States Department of Transportation and our publicly traded peers.

For the fourth quarter, same-store gallons sold increased 2%. We believe that the combination of challenging weather and the strategic decision we made in the fourth quarter to reduce the number of 24-hour locations adversely impacted same-store gallons. Total gallons sold for the quarter rose 7.2% to over 532 million. The average retail price of fuel during this period increased over 12% to $2.48 per gallon, compared to $2.21 for the same period last year.

Throughout most of the quarter, we experienced an increase in wholesale fuel cost, which pressured the margin, resulting in an average fuel margin of $0.163 per gallon for the quarter, compared to $0.172 a year ago in the same period. The lower fuel margin compared to a year ago represents an impact to earnings per share of approximately $0.09. Same-store gallons sold for the year were up 2.3% with an average margin of $0.18 — $0.185, excuse me. Total gallons sold for the year were up 6.6% to $2.2 billion.

Same-store gallons and margins, thus far, in the first quarter are trending within our annual guidance. In the grocery and other merchandise category, total sales were up 2.4% to nearly $512 million in the fourth quarter. The combination of weather and the reduction in 24-hour locations adversely impacted the same-store sales, resulting in same-store sales being down 0.4% for the quarter. Despite these, industry data shows that we continued to gain market share in this category.

The average margin in the quarter rose 10 basis points to 31.2% compared to the fourth quarter a year ago. For the year, same-store sales were up 1.9% with total sales up 4.6% to $2.2 billion, with an average margin of 31.8%. Same-store sales, thus far, in the first quarter are trending at the upper end of our annual guidance. In the prepared food and fountain category, total sales were up 3.4% to $241 million for the quarter.

The combination of weather and the reduction of 24-hour and pizza-delivery locations negatively impacted same-store sales, resulting in same-store sales being down 1.3% for the fourth quarter. For the year, same-store sales were up 1.7% with an average margin of 61%. Recently, we have made some adjustments to our promotional and pricing strategies in order to increase value opportunities for our customers and remain competitive in our market area. We are encouraged by the results of these initiatives and we’ll continue to look for additional opportunities throughout the year.

The average margin for the fourth quarter was 59.7%, down 200 basis points from a year ago, primarily due to an increase in sales, input cost, and promotional activity. To manage input cost, the average cost of cheese is locked in at both of our distribution centers through December 2018 at approximately $1.87 per pound. We have also recently made some strategic pricing adjustments of select items. Same-store sales, thus far, in the first quarter are trending to the lower end of our annual guidance.

Operating expenses for the fiscal year were up 9.4%. For the quarter, operating expenses increased by 7.9% to $316 million, reflecting the positive actions of cost-control initiatives implemented during the year. The fourth-quarter operating expenses were impacted by the following items: a $4.5 million increase in health insurance, primarily due to an increase in the number and severity of claims; credit card fees and fuel expense increase of $4.4 million, primarily due to the rising fuel prices; $1.6 million in consulting fees related to the execution of the value-creation plan; and $1.2 million increase in snow-removal costs due to the unusual weather. Excluding these items, operating expenses were up 4.7%, primarily due to operating more stores this quarter compared to the same period a year ago.

We took steps to control the increase of labor expense in stores and as a result, same-store wages were up 0.3%. Operating expenses will continue to be an area of focus in fiscal 2019. I will now turn the call over to Bill to discuss the financial statements.

William J. WalljasperChief Financial Officer

Thanks, Terry. On the income statement, total revenue in the quarter was up over 13% to $2.1 billion, primarily due to a 12% increase in the retail price of fuel from the fourth quarter last year, increased sales gains mentioned previously, and an increase in the number of stores in operation this quarter compared to the same period a year ago. Depreciation was up 10.5%, which was below our annual guidance, primarily due to a decrease in accelerated depreciation from replacement store activity. For the year, total revenue was up 11.8%.

The effective tax rate in the quarter was down significantly due to the continued impact of the adoption of new tax reform changes. Under the new tax reform legislation, we expect our new effective tax rate to be around 24% to 25% in fiscal 2019. Our balance sheet continues to be strong. At April 30, cash and cash-equivalents were $53.7 million.

Long-term debt net of current maturities was $1.3 billion. Our debt-to-EBITDA ratio was at 2.8 times, which allows the company significant balance sheet capacity to grow the business. For the fiscal year, we generated $418 million in cash flow from operations and capital expenditures were $615 million, compared to $459 million a year ago in the same period. Capital expenditures were up primarily due to an increase in new store construction and acquisition activity.

We will discuss our plans for fiscal 2019 capital allocation later in this discussion. I would now like to turn the call back over to Terry to update you on our value creation plan and fiscal 2019 outlook.

Terry HandleyPresident and Chief Executive Officer

Thank You, Bill. This fiscal year, we opened 85 new store constructions, acquired 26 stores, completed 30 replacement stores and completed 74 major remodels. Our store count at the end of this quarter was 2,073. In terms of the store pipeline, we have 31 new stores under construction and currently have 11 additional stores under agreement to purchase, which positions us well to achieve our fiscal 2019 goal for unit growth.

Since our last update, we are encouraged by the significant increase in the amount of conversations we are having with people who were looking to sell their business. I would now like to discuss our outlook for fiscal 2019. We expect to achieve the filing this fiscal year. Increased same-store fuel gallons sold, 1.5% to 3% inclusive of a 60-basis-point headwind from the reduction of 24-hour locations with an average fuel margin of $0.185 to $0.205 per gallon.

Increased same-store grocery and other merchandise sales, 1.5% to 3% inclusive of a 60-basis-point headwind from the reduction of 24-hour locations with an average margin of 31.5% to 32.5%. Increased same-store prepared food and fountain sales, 1.5% to 3.5% inclusive of a 70-basis-point headwind from the reduction of 24-hour and pizza delivery locations with an average margin of 60% to 62%. Build 60 stores, acquired at least 20 stores, maintain operating expense at an increase between 8.5% and 10.5% including expenses related to our value creation plan, and we expect depreciation to increase between 14% and 16%. As highlighted in our value creation plan, over the course of the last 10 years, we have refurbished over 65% of the store base.

With this in mind, we plan to replace only 10 stores and remodel five this fiscal year. Combined with our store opening plans, this points to a significant reduction in capital expenditures for the year. We have a strong track record of growing the business while also returning value to shareholders through dividends. At its June board meeting, the board declared a quarterly dividend of $0.29 per share, which is nearly a 12% increase from the year-end dividend amount in fiscal 2018.

The dividend has increased approximately 61% in the last five years. In our last earnings call, we outlined the components of a multi-year, long-term value-creation plan comprised of several key programs and drivers, including enhanced store performance through a new fleet card program, price optimization and digital engagement programs, as well as a continued focus on controlling operating expenses and capital reallocation. We are confident these key initiatives will drive accelerated sales and profitable growth and most importantly, increase shareholder return. Now let me walk through a little more detail on the progress toward the implementation of these programs.

Starting with the enhanced store performance. Within this portion of the plan, there are three distinct but related growth opportunities that I will discuss in order of their implementation. They are fleet card, price optimization and a new digital engagement program. Our new fleet card program is a more aggressive approach than we have taken in the past to address some important customer category.

It is right on schedule as outlined in our last call. Since that time, we have completed an RFP and have selected FLEETCOR as our partner. Next week, we will on-board a new fleet card manager and begin implementing the new program in Q2 of fiscal 2019. We expect to begin seeing benefits from this program by the start of Q3 fiscal 2019, resulting in an incremental lift in fuel volume and in-store sales driven by increased traffic.

The next initiative I would like to update you on is price optimization. Price optimization will allow us to leverage the sales data generated by our broad network of stores combined with market data such as Opus Information to make centralized, rules-based pricing decisions at the pump and in the store, which will improve sales and margins in every category throughout the entire network. Since our last call, we have completed the RFP and identified the platforms for both fuel and inside our stores. We will begin testing in Q2 of fiscal 2019 with a planned rollout of fuel optimization and select key items inside our store in our third quarter.

In the first quarter of fiscal 2020, we will expand the program to all remaining categories. We’re excited about the opportunity we believe this program will bring to the company, as it represents a fundamental shift in our marketing process for both fuel and in-store purchases due to the increased visibility into our pricing and promotion strategy. We continue to progress our digital engagement program over the last quarter and reached several key milestones. We completed the on-boarding of a new chief marketing officer who will lead the implementation process.

He brings tremendous experience in digital and brand development to our organization. With his leadership, we are working on accelerating our timetable with a goal to begin piloting certain parts of this program including loyalty in the fourth quarter of fiscal 2019. We have also completed the start-up and design phase of our digital transformation. This would include the vendor review and selection of the technology stack.

Our program will include a new e-commerce platform, new marketing automation tools and a customer loyalty program, among other capabilities. Upon integration of the digital engagement program, we intend to create a seamless customer experience, both online and in-store, that offers new digital product categories and facilitates personalized marketing and rewards. This will involve an enhanced website, a redesigned mobile app, a loyalty program, in-store technology and enhanced enterprise infrastructure. This digital platform will allow us to gain a deep understanding of our customers and better serve them by providing the seamless convenience they value and target affected promotions that drive additional customer visits.

We expect to realize significant benefits from this program including same-store sales growth starting next fiscal year. In addition to these initiatives to enhance store performance, we remain focused on implementing ongoing cost reduction measures in managing operating expenses. As we indicated in our last call and in the press release, beginning in the fourth quarter of fiscal 2018 we made the strategic decision to reduce the number of 24-hour stores and pizza delivery stores. This decision came after an extensive hour-by-hour profitability analysis in an effort to determine the optimal hours of operation and delivery offering.

Even though we did experience an adverse impact on same-store sales from these changes, we achieved a significant and measurable reduction in store level operating expenses. The net result of this decision was an improvement in net income of approximately $1.5 million in the quarter. We continue to review other opportunities to further reduce expenses. Since the last call, we have implemented a new fleet management system that will improve distribution efficiency and reduce cost.

In anticipation of the increased sales volume generated by the value creation plan and new stores, we are currently in the middle of an evaluation of our distribution system to identify long-term optimization opportunities with a focus on cost and efficiency. This will be completed in the next several months. Another element of our value creation plan is a disciplined approach to capital allocation and increasing shareholder value through dividends and share repurchases. Our capital allocation strategy will continue to prioritize investments with attractive return profiles such as our value creation programs as well as disciplined store growth through new-store construction and strategic acquisition opportunities.

At this time, I would like to share with you our fiscal 2019 capital expenditure budget. New store construction and acquisitions, $256 million; land for future construction, $62 million; replacement stores, $33 million; major remodels, $4 million; transportation, $12 million; general maintenance, $50 million; information and technology, $49 million. Included in the information technology budget is approximately $23 million for digital engagement, for a total capital expenditure budget of $466 million, compared to $615 million in fiscal 2018. Since our last update, we have completed the remaining $107 million under the company’s original $300 million share-repurchase program.

With its completion, we will begin to execute on the next $300 million share-repurchase which the board authorized last quarter. We believe the share-repurchase program is an important lever in delivering value to shareholders and this, along with our prudent capital allocation, will significantly drive earnings per share and return on invested capital. The final area of the value-creation plan is our strategic board and governance initiatives. This is an important topic for all public companies including Casey’s and one where we have engaged shareholders over time, especially subsequent to our last annual meeting.

We outlined our new board members and key changes to corporate governance during our last call. However, since that time, I wanted to update you on an additional aspect to corporate governance. During our fourth quarter, the governor of Iowa signed into law a bill that will allow boards of Iowa companies, including Casey’s, to declassify. We were supportive of this change.

And based on the structure of the new law, we will have a declassified board by our annual meeting in 2020. We will continue to engage our shareholders and strive to evolve our governance structures to meet current best practices. This work is critical to our success. In closing, as the retail landscape continues to evolve, we have taken significant steps to transform Casey’s to enhance store performance and deliver long-term profitable growth.

Moving forward, we believe Casey’s has the right team in place and the correct strategy to successfully execute on our next chapter and drive significant long-term shareholder value. We will now take your questions.

Questions and Answers:

Operator

[Operator instructions] And our first question comes from the line of Chris Mandeville from Jefferies. Sir, your line is now open.

Chris MandevilleJefferies — Analyst

Hey, good morning, guys.

William J. WalljasperChief Financial Officer

Hi, Chris.

Chris MandevilleJefferies — Analyst

Bill, can you just start off with the cadence in the quarter on grocery and prep food comps? And just as we try and think about the weather impact on your planned initiative reduction, are you able to isolate those impacts on the comps?

William J. WalljasperChief Financial Officer

Yes. We actually did quite a bit of work on the weather impact, Chris, over the course of this last quarter. And depending on the category you’re looking at, it would range approximately from — anywhere from 1% to 3% impact. When you look at the respective months within the quarter, obviously, April is probably the one that most people would probably gravitate to just because that was a pretty widespread weather pattern that hit, quite frankly, the upper part of our territory.

We have record colds in the month of April as well as record snowfalls in the month. I’m not sure, I remember, Chris, a time in Iowa where we had blizzard warnings, tornado warnings and thunderstorm warnings all in the same day. But at any rate, that was a certain impact there. For instance, inside the store, Chris, however, that’s probably the biggest impact, when you look at that range of 1% to 3%, fuel a little bit less of an impact, packaged beverages and beer were probably two of the items that would be most dramatically impacted.

I know in contrast to that, obviously, May started off with some very favorable weather, and so we are seeing now double-digit increases in packaged beverages or high-single digit in beer as well, so definitely a reversal. Kind of giving you perspective on the customer count, we saw approximately a 400- to 500-basis-point turnaround from April to May in the same-store customer traffic. Now, February was the other month that was equally impactful for us, not so much regarding the weather. This particular February, it was the weather that we had — February a year ago, where we had multiple days — many, many days of 70-degree weather in February, which is a little bit unusual.

And so customer traffic, when you look at February and April, both of those were down anywhere from 3% to 4%.

Chris MandevilleJefferies — Analyst

OK. That’s actually all very helpful. And then just turning to the guidance here on the OPEX growth range of 8.5% to 10.5%. Can you just help us understand why that’s the right range, as you finished Q4 at the very low end of that range and you managed to open up over 50 stores, although now you’re reducing 24-hour formats and some delivery? So I guess I’m just trying to generally understand why shouldn’t the range maybe be a little bit lower or are you kind of thinking about conservatism in that number?

William J. WalljasperChief Financial Officer

A couple of things to think about right there, Chris. First of all, you touched on one of those. We did open in excess of 50 stores in the fourth quarter. Many of those were late in the fourth quarter.

So the operating expenses associated with bringing on those stores really were not embedded into the Q4 results, so you will start to see that here moving forward into this fiscal year. Secondly, you probably noted that 8.5% to 10.5% range includes the operating — expenses related to the value creation plan. Right now, we’re tracking about a full 1% impact right now we anticipate. So in actuality, when you pull up the value creation plan, it is trending closer to the areas that we finished in the fourth quarter.

Chris MandevilleJefferies — Analyst

OK. And I’m sorry, did you mention actually what the stores, the non-change stores opex growth there was in Q4?

William J. WalljasperChief Financial Officer

No. We didn’t, but I’m happy to just kind of walk through that. So when you look at what Terry outlined in his narrative regarding operating expense, obviously, we had some unusual activity. Normally, we don’t see a $1.2 million increase in snow removal, and really all of that came in the month of February.

We start looking to normalize that in relationship to the rise in retail fuel prices of credit card fees and even the high dollar claims that we incurred for the health insurance. That’s getting down to about 1.7% to 2% on a same-store or unchanged basis.

Chris MandevilleJefferies — Analyst

OK. Very helpful. And the last one for me before I hop back in the queue here. Terry had mentioned, and it’s also in the release, that you had better store level profitability from the strategic reductions in prior initiatives.

Can you just provide any additional quantitative color on just how much better things look these days, maybe give us some context around what gross profit dollar to opex growth looks like for those types of stores that saw a paring back of the initiatives versus what was overly — overall reported?

William J. WalljasperChief Financial Officer

Yes. I’d be happy to walk through some of the dynamics with respect to the changes we made in the 24- hour pizza delivery. I think Terry mentioned what we rolled out to be the net benefit. When you factor all that in, it was roughly about $1.5 million in the quarter.

So keep in mind, as we go forward, there is a headwind that’s embedded into the guidance as well, and Terry mentioned that — roughly 0.7% is going to be a headwind until we cycle over that in Q4 on the comps. That’s part of the reason the guidance kind of slid back a little bit from where we were. But when you look at from an operating expense benefit, you’re looking in roughly somewhere around $3.5 million to $4 million decrease related to the change that we made in the fourth quarter. Obviously, that’s going to be a benefit for us moving forward, at least through the first three quarters.

And then, obviously, the net benefit was roughly $1.5 million. Hopefully, that’s helpful for you, Chris.

Chris MandevilleJefferies — Analyst

It is. Thanks, guys.

Operator

And our next question comes from the line of Ryan Gilligan from Barclays. Your line is now open.

Ryan GilliganBarclays — Analyst

Hi, good morning.

William J. WalljasperChief Financial Officer

Hey, Ryan.

Ryan GilliganBarclays — Analyst

Just following up on the changes made to the 24-hour and pizza delivery. How many stores did you pull off this quarter and how many do you expect or do you expect to make any further changes this year?

William J. WalljasperChief Financial Officer

Well, we’ll continue to evaluate this on an ongoing basis. So right now, I don’t have — we don’t necessarily have any plans for the upcoming quarters, but I can give you perspective in the fourth quarter. I’ll give you the totals and then I’ll give you the, kind of the change that were made, Ryan. So as of the end of the fiscal year, we had about 663 24-hour locations, roughly about 680 pizza delivery locations and I’ll throw the major remodel in there as well, but that was roughly at about 538 major remodels.

As far as changes we made to 24-hour stores, roughly 400 of those were made in Q4. And with respect to pizza delivery, we made changes in about 100 to 110 locations, not necessarily pulling back completely in pizza delivery but maybe moving stores that were used to be seven days a week down to four days a week, but they’re still actually delivering, technically, pizza. So we’re just kind of trying to find that optimal — not only optimal hours but the optimal days of delivery, and we’ll continue to refine that and report on that every quarter as we move forward.

Ryan GilliganBarclays — Analyst

Got it. That’s helpful. And then so, I guess, you called out some adjustments to promotion and pricing strategy within prepared food. Can you talk a little bit more about that? And then, also, is that contributing to the comp acceleration in the first quarter so far or is that just all weather?

William J. WalljasperChief Financial Officer

No. I think both would be inclusive as a reason that we’re seeing some acceleration, so far, in the first quarter. And so one of the things that I would point to would be a promotion that we ran in the month of May, something that we haven’t done quite as deep before, but it was two medium pizzas for $6.99 each. We saw a, I would say — well, I’m going to put it this way, Ryan.

We’re very pleased and encouraged by the unit movement and we were in the high-single-digit movement with respect to whole pies during that period of time, and so that’s some of the promotion that we’re talking about.

Ryan GilliganBarclays — Analyst

Got it. That’s helpful. And then just last question on gas margin. So I know it sounds like they’ve improved so far in the quarter to date, but I guess just directionally can you help us understand why gas margin should step up this year, especially as RINs become what seems like less of a contributor going forward?

William J. WalljasperChief Financial Officer

Yes. There are several reasons, actually, Ryan. And so first of all, price optimization would be one of those. We’re looking at our fuel-pricing strategy maybe a little differently than we have in the past and we believe there’s opportunity to gain some margin as we start rolling that out.

A couple of other things that we haven’t talked about in the past and I think would be important to articulate outside of not just the fleet card program and price optimization, but we also here — and it’s going to be over the next probably several months, we’ll convert about 500 locations to biodiesel, which has higher fuel margin and also has tax credits associated with that, again, both helping the fuel margin. Also, we continue to refine our — what I’ll call our product optimization. And here, again, over the next several months, we’ll be converting about another 350 stores to either premium or diesel, adding those products. Both of those products have a higher margin than our margin that we report and will contribute to the fuel margin, we believe, going forward.

So I think we have a lot of things going on that will certainly promote a nice margin for the year.

Ryan GilliganBarclays — Analyst

That’s very helpful. Thank you.

William J. WalljasperChief Financial Officer

You’re welcome.

Operator

And our next question comes from the line of Paul Trussell from Deutsche Bank. Your line is now open.

ChristinaDeutsche Bank — Analyst

Hi. Good morning. This is Christina [Inaudible], on for Paul. I just had a question regarding your full-year comp guidance.

And I know that you’ve touched on this a little bit, but just at the midpoint for both grocery and prepared food, points to an acceleration from 2018, and you mentioned in your prepared remarks that grocery is running at the high end of annual guidance, but the prepared foods is at the low end. So I was just wondering like what gives you the confidence that you can deliver against your guidance.

William J. WalljasperChief Financial Officer

Yes. Great question. And so there are several things to think about in that regard. First of all, I’ll talk about the expected cadence in our same-store sales throughout the year, not only in grocery and general merchandise but also in — primarily, in prepared foods as well.

We do expect an acceleration in the cadence in the back half of the year as we bring on the fleet card program. Obviously, that’s intended to drive fuel gallons, but also we believe we’re going to gain an incremental customer that will also drive inside sales as well. And so that’s one of the first things in that regard. Secondly, we do have a planned price increase starting in July with respect to some donuts and we found ourselves out of the market with respect to pricing — or under the market, I should say, and so we are making that strategic adjustments starting in July which will also help lift the prepared food comp.

ChristinaDeutsche Bank — Analyst

OK. Good. Thank you.

William J. WalljasperChief Financial Officer

You’re welcome.

Operator

Our next question comes from the line of Ben Bienvenu from Stephens. Your line is now open.

Ben BienvenuStephens — Analyst

Hey, thanks. Good morning, guys.

William J. WalljasperChief Financial Officer

Hey, Ben.

Ben BienvenuStephens — Analyst

I want to ask about the — you talked about price optimization benefiting your overall fuel margin guidance for this year. To what extent are those changes reflected in your comp gallon guidance and do you foresee any sort of impact as a result of tinkering with pricing around the change? Help us conceptualize the changes that you intend to make on that front.

William J. WalljasperChief Financial Officer

Yes. So with price optimization, as Terry indicated, we have kind of selected the platforms for not only the fuel optimization but also inside optimization. And so over the course of the next 30 days, we should have those wrapped up and moving forward with the testing in that regard. So with price optimization, obviously, we believe there’s going to be a margin enhancement because we think that there are many opportunities in our market area that we have the ability to drive margin.

So as we look at that, we do have some of that opportunity embedded into the guidance. And as we get further down that path and get more details with respect to more results, with respect to how that’s going, hopefully, there’s an opportunity to make an adjustment in that guidance.

Ben BienvenuStephens — Analyst

OK. Understood. And do you anticipate that — making those changes in the pricing will have any implications for the gallons that you sell at your stores?

William J. WalljasperChief Financial Officer

It could, in some cases. I mean, in some cases, there may be a situation to optimize gross profit dollars where we might be more competitive on the retail price. In other cases, it’s probably just the opposite. At the end of the day, we’re trying to drive, ultimately, that gross profit dollar.

So if there’s any significant change in that regard, Ben, certainly, that’s something we anticipate reporting as well on the next update

Ben BienvenuStephens — Analyst

OK. Got it. Understood. And then, I think, Terry made some commentary around you’re encouraged by the level of conversation or interest you’re getting from potential sellers of their businesses.

Could you just add a little bit more color around those conversations, big or small change that you’re seeing? And then also, to what extent is pricing in the right neighborhood? Are expectations becoming more reasonable as time moves forward?

William J. WalljasperChief Financial Officer

Yes. So you might recall, Ben, in the last earnings call, we talked about the M&A environment. And it felt like after the tax reform act went into play at the beginning of the calendar year, there seemed to be a little bit of a pause in some of the conversations we were having. I think people were just taking a step back to kind of understand what that may or may not mean for them.

So now we have a little bit of distance behind us from that and so consequently, we definitely are seeing more and more operators willing to have a discussion with us about the opportunity to sell their business. Now having said that, as you know, I mean we are dominated by smaller operators in our area. Roughly two-thirds of the operators in our market area are operators of 10 stores or less. So just by that nature, we will have a lot of those opportunities and certainly, we see those opportunities continuing in this year.

But also, there are also a wide variety of, I would say, mid-sized chains as well and so we definitely are excited about having the conversations. That doesn’t mean necessarily that they will all come to fruition. We’re just going to continue to be prudent with our evaluation. Certainly, not going to overpay just to let somebody know we added stores.

And so we will be very cognizant of the multiples and expectations moving forward. So kind of wait and see in that regard but, again, we’re just highly encouraged by what we’re seeing so far.

Ben BienvenuStephens — Analyst

OK. Great. And then last one for me, I think you had spoken in the past around potentially thinking about partnering with third-party distributors to handle some of your merchandise. Have you done any further testing there or has your thoughts around that opportunity evolved over the course of the last several months at all?

William J. WalljasperChief Financial Officer

Yes. We should have — as Terry mentioned, we should have that final analysis shored up here in the next several months. We are currently reviewing all aspects of distribution to see what’s the most efficient for us as we grow our business. Looking at a wide variety of things, Ben, looking at, obviously, multiple week — multi-week deliveries in order to better serve our stores and customers to bring in different products that might be a little fresher, looking at the diversity of our geography as we move outwardly and how we best to serve those customers and stores as well.

So we will definitely have an updated report at the September meeting regarding kind of the direction and the outcome of that result.

Ben BienvenuStephens — Analyst

OK. Great. Thanks.

William J. WalljasperChief Financial Officer

You bet, Ben.

Operator

Our next question comes from the line of Chuck Cerankosky from Northcoast Research. Your line is now open.[Silence]

William J. WalljasperChief Financial Officer

Hey, Chuck. [Silence] I think we might have lost him, Brian.

Operator

OK. And our next question comes from the line of Irene Nattel from RBC Capital Markets. Your line is now open.

Irene NattelRBC Capital Markets — Analyst

Thanks, and good morning, everyone. Coming back here — coming back to your commentary around the success of the pie promotion in May. I mean, how does that — or does that change how you think about the need for deeper discounts in possibly both sort of the packaged food but also the prepared food to really sort of drive interest given the economic reality in the Midwest?

William J. WalljasperChief Financial Officer

No. I think it’s a great point. Certainly, it has made us reevaluate some of our pricing and promotional activity with respect to the competitive landscape that we have. And I know you’ve been on all these calls, and so you hear us talk about the competitive landscape changes and environment over the last 12 to 18 months.

So certainly, especially in our market area where the farm income continues to be down and we have a suppressed discretionary income perspective, it appears that a more value-creative proposition is resonating with our consumers. So we’ll continue to move forward with that, not only offering promotional and pricing like that, but also making sure that we do have value propositions at all dayparts of our business.

Irene NattelRBC Capital Markets — Analyst

That’s really helpful, Bill. And just when you did run that pie promotion, it was just straight pies? And have you tried sort of doing some kind of value bundling maybe to even further help drive the ticket and the value proposition?

William J. WalljasperChief Financial Officer

Absolutely. When we talk about the value proposition at each daypart, these typically are a combination of not just pricing on a product but a bundling value proposition as well. So we continue to tinker with that. Obviously, our new chief marketing officer has come on board that has a tremendous background in this area, certainly, has been a great resource for us and we’ll continue to drive that category.

Irene NattelRBC Capital Markets — Analyst

And so if we kind of want to — I mean, not to get too granular, but if we think about the range of guidance for the year, are you thinking about sort of maybe higher traffic, lower average product price but more — maybe a slightly higher basket ring because of the bundling? Like how do you think about what determines a lower end versus a higher end of guidance?

William J. WalljasperChief Financial Officer

Yes. I think the inverse of what you just indicated is really more the expectation, more of a higher basket ring and maybe a little bit lower traffic. The traffic piece is one that can be a little bit harder to predict as the competitive landscape maybe evolves or weather patterns may hit that may affect the short-term results. But obviously, we have taken a price increase — or we’ll be taking a price increase in July.

We also, by the way, took a series of price increases that’s starting in May as well, and so that will continue to benefit us going forward as well. And so we anticipate it would be more of a basket ring, but the opportunity there to increase the part traffic, I believe, is where the opportunity lies to get to that higher end or above.

Irene NattelRBC Capital Markets — Analyst

And can you give us some idea of what the price increase was in May and what it will be in July and sort of what that works out to on the sort of total average?

William J. WalljasperChief Financial Officer

Yes. So when you look at the May price increases, these were done on products that we believe would be less sensitive, have lower elasticity opportunities with our consumer, things like pizza slices, for instance, sub sandwiches and a variety of our hot sandwiches. And so when you look at the May price increase, that increase, when you roll that up, Irene, it will roughly be somewhere around 1%, maybe slightly higher than 1% on the comp. And then the May will be roughly about another 0.5%, that was the donut — strictly a donut pricing increase — excuse me, in July, that was strictly a donut pricing increase.

Irene NattelRBC Capital Markets — Analyst

OK. That’s great. And just, finally, one more for me, if I may. Will you — can you disclose to us who you’ve chosen as the platforms for the price optimization for gas and inside store?

William J. WalljasperChief Financial Officer

I won’t be able to do that at this point yet. We are still working through all of that and finalizing and selecting that, but we anticipate to have that wrapped up in the next 30 days.

Irene NattelRBC Capital Markets — Analyst

That’s great. Thanks, Bill.

William J. WalljasperChief Financial Officer

Thanks, Irene.

Operator

Our next question comes from the line of Chuck Cerankosky from Northcoast Research. Your line now open.

Chuck CerankoskyNorthcoast Research — Analyst

Good morning, everyone.

William J. WalljasperChief Financial Officer

Hey, Chuck.

Chuck CerankoskyNorthcoast Research — Analyst

When we look at the store optimization in terms of hours and pizza delivery, is it proper to consider that you don’t go from 24 hours back to 12 that some will still have extended or be 24 hours at certain parts of the week and same with the pizza delivery stores, you’re picking the number of days that you do it?

William J. WalljasperChief Financial Officer

Yes. That’s absolutely correct. When we went through this analysis, Chuck, it was really an hour-by-hour profitability analysis. And so each store will be a little bit different.

Some stores, we pulled completely back from 24 hours and that would be that — basically, would be that midnight to 5 a.m. time period. Some we just carve back three hours. I mean, really dependent on a store-by-store basis.

Same holds true with delivery on a day-to-day basis looking at that profitability moving back from seven days a week to four or five days a week and maybe shifted the days around. So yes, that’s exactly right.

Chuck CerankoskyNorthcoast Research — Analyst

And is there a bit of a learning curve on what it does to the gross margin, especially around shrink, or I think, Terry, you called it stales?

William J. WalljasperChief Financial Officer

Yes. With respect to stales, just to clarify maybe what stales are, it’s a wide variety of things kind of all-encompassing term. It really — it could be one of multiple things. It could be products that are warmer that have staled out on the time.

Our warmers are really built — they are intended to only have products in there for roughly an hour. They go by that, we throw those products away. It could be just maybe a recipe issue, maybe recipe management, maybe putting a little too much cheese or product on it outside the prescribed recipe, and it could be just topped as well. So that kind of encompass stales.

In this case, it’s really more of the first one than anything. So that 200-basis-point margin impact, roughly half of that was due to stales. And we just need to continue to refine our production plan, in which we are doing to be a little bit more agile when it comes to these weather patterns so we’re not throwing product away. The rest of that is 100 basis point remaining on that margin impact, roughly about 60 basis points to 70 basis points was due to promotional activity.

Early in the quarter, we were giving some dessert items like brownie bites away with pizzas that were impacting the margin. Also, with that promotion that we ran in May, we auto-shipped in April a number of medium pizza boxes that ran through the cost as well that got embedded into the fourth quarter. So hopefully, that helps.

Chuck CerankoskyNorthcoast Research — Analyst

So it wasn’t stales and it wasn’t tied to changing deliveries and hours?

William J. WalljasperChief Financial Officer

No. No. Not at all in that regard.

Chuck CerankoskyNorthcoast Research — Analyst

All right. And then just last question. Anything to update us on regarding supermarket relationships or any change in which you’re doing with Hy-Vee?

William J. WalljasperChief Financial Officer

Not at this point. We continue to have the fuel-saver program with Hy-Vee. We think, at least in our market area, that differentiates us from a lot of the smaller operators that I referred to earlier. And so that’s probably one of the aspects of why our same-store gallons probably are trending above USDOT miles driven as well as our publicly traded peers.

Chuck CerankoskyNorthcoast Research — Analyst

All right. Thank you.

Operator

Our next question comes from the line of Kelly Bania of BMO Capital Markets. Your line is now open.

David LantzBMO Capital Markets — Analyst

Hi. This is David Lantz on for Kelly Bania. Thanks for taking the questions.

William J. WalljasperChief Financial Officer

You bet, David.

David LantzBMO Capital Markets — Analyst

So you guys gave some helpful commentary on the opex guidance range for this year, but was also wondering if you could give some color on the progress you expect to make against the $200 million of cost-savings target for fiscal 2019 and possibly how much of that will be reinvested?

William J. WalljasperChief Financial Officer

Yes. So the $200 million, just as a reminder, it’s a cumulative effect over the next three to four years. And so when we look at that, some of the aspects that we have just made are going to go toward that and we’ll continue to, obviously, report on that. Obviously, the 24-hour reduction decision and the pizza delivery reduction decision is part of that.

We just rolled out a new transportation management initiative called telematics in our fleet, which will help in that regard, changed our cigarette stamping promotion — process as well that will help indeed. So probably the bigger aspect that we continue to monitor is the after hours. As Terry mentioned, when we look at on a same-store-hours basis, basically, we were flat, just up slightly on that. Obviously, that’s a credit to the work that’s been done on the hours.

There’s a lot of work to be had there and we’ll continue to monitor on that and continue to work toward that. But then, again, we’re going to be probably reinvesting the majority of that into standing up these new platforms. And as Terry alluded to, we are working to accelerate the digital in an effort to start piloting a number of those programs in the fourth quarter this year.

David LantzBMO Capital Markets — Analyst

OK. Great. And then one follow-up. How are you thinking about new store constructions over the next couple of years? Is there any chance that gets pulled back further in fiscal ’20 or fiscal ’21?

William J. WalljasperChief Financial Officer

Well, that will — because that will be evaluated on a year-by-year basis. A lot of things could affect that David. Obviously, one of the commentaries that we just made is we’re certainly having more and more conversations with the potential sellers of their business. To the extent that that accelerates what to evaluate and how the new store construction moves going forward.

And also, obviously, we’re putting — we’re trying to prioritize our capital and put it to areas that we believe are the quickest return and highest-returning items, and certainly, this value-creation plan is at the top of the list, so we definitely could see an acceleration in unit growth. But I think, again, it’s going to be dependent upon a number of things that may transpire over the course of this year.

David LantzBMO Capital Markets — Analyst

OK. Great. Thank you very much.

William J. WalljasperChief Financial Officer

You’re welcome.

Operator

Our next question comes from the line of Anthony Lebiedzinski from Sidoti and Company. Your line is now open.[Silence]

William J. WalljasperChief Financial Officer

Hi, Anthony. It sounds like we’re having a little difficulty there, Brian, maybe take the next question.

Operator

Of course, our next question comes from the line of Damian Witkowski from Gabelli and Company. Your line is now open.

Damian WitkowskiGabelli & Company — Analyst

Hey, good morning.

William J. WalljasperChief Financial Officer

Hey, Damian. How are you?

Damian WitkowskiGabelli & Company — Analyst

Well, good. How are you? Can you talk about your consumer? I know you’ve touched on the tough environment, but if I just look at your same-store sales and you have fuel increasing, so it sounds like they’re still driving even as prices rise but they, obviously, have less money and I guess they’re coming into the store less often. But just a general kind of a summary of your core consumer and what they’re feeling as gas prices continue to rise and I guess farmer income continues to be depressed?

William J. WalljasperChief Financial Officer

Yes. And you’re right on point, Damian, the farm income continues to be suppressed in our area. One of the things regarding fuel is a little bit different dynamic in our area of marketing territory, perhaps, in other parts of the United States in the fact that we really don’t have alternatives for public transportation. People will continue to need to drive to their work, continue to operate their farms.

So in that regard, I think we might be a little bit of an anomaly relative to the rest of the country. So having said that, I mean, definitely, when we see rising retail fuel prices — and they’ll need to get it a bit higher than where they’re at now, we historically have seen a pullback in gallons per transaction. But one of the dynamics in relationship to our gallons, in relationship to inside sales, is there’s still a significant spread between food away and food at home. And that does have an impact, especially in our prepared food category, and I think that’s where you’re seeing a little bit of that dynamic.

And so people are still a little bit cautious in trying to come into maybe buy a whole pie. So coming back to an earlier question, I think perhaps that’s one of the things that is resonating with consumers is a more palatable pricing and promotion opportunity, and so that’s what we’re going to be striving for throughout the year.

Damian WitkowskiGabelli & Company — Analyst

And then RINs were about a $7 million in contributor last year. I didn’t see anything in the press release. How much were they this year?

William J. WalljasperChief Financial Officer

Yes. And so just to — I’ll give you that number and then I’ll have a clarifying commentary. In Q4, we sold 14.8 million RINs for a value of just under $8 million in the fourth quarter. But I will say this, that I think we might have mentioned this in the last conference call, that RINs — we believe RINs are embedded in the cost of the product.

And so when RINs move up and down, they’re adjusting movements in the wholesale cost. I’ll give you a perfect example of that, Damian, RINs currently are trading around $0.24, $0.25 currently. Fuel margins, anybody that follows Opus, it seems to be relatively strong.

Damian WitkowskiGabelli & Company — Analyst

OK. All right. And then on the last call, you mentioned that you were looking at real estate options and you might have an update post the tax changes and things like that. Anything new on that front?

William J. WalljasperChief Financial Officer

Nothing new on that front, though. But we do owe, and we’ll do this in conjunction with the distribution or third-party distribution update next quarter, we’ll definitely update you on that. But again, nothing new to report at this point.

Damian WitkowskiGabelli & Company — Analyst

Thank you.

William J. WalljasperChief Financial Officer

Thank you, Damian.

Operator

Our next question comes from the line of Ryan Domyancic from William Blair. Your line is now open.

Ryan DomyancicWilliam Blair & Company — Analyst

Hey, good morning. Thank you for taking my question.

William J. WalljasperChief Financial Officer

Hi, Ryan. How are you?

Ryan DomyancicWilliam Blair & Company — Analyst

I’m good. I’m good. So just quickly on the average margin for 2019. It looks like for both grocery and prepared food, it’s roughly in line with where you finished 2018 at.

But there seems to be this kind of value theme into 2019 promotions and building the basket. So is it just price increases that offsets that value side which kind of gets you to that same margin level if you have increased promotion throughout 2019 versus ’18?

William J. WalljasperChief Financial Officer

Well, I just want to clarify your question here because we do — it looks like we are showing, we — I’ll tell you this, we do anticipate an uptick in the margin potential for both prepared foods and grocery and general merchandise from where we ended the fiscal 2018 year. That’s caused by a couple of things, one, price increases will be part of the prepared foods side, but also price optimization not only on the fuel side of the business but also inside the store. We believe we have an opportunity to drive some margin on certain key products.

Ryan DomyancicWilliam Blair & Company — Analyst

OK. I was talking about the midpoint. So then if you think about it, maybe the back half of the year we’ll start to see, especially for key some of that higher margin due to price optimization?

William J. WalljasperChief Financial Officer

Yes. We certainly anticipate as the price optimization rolls in and as well as fleet card rolls in, we do anticipate an acceleration in comp and margin in the back half.

Ryan DomyancicWilliam Blair & Company — Analyst

OK. And then last one real quick would be on new stores and new markets. Any commentary about how those are performing or how customers are receiving the Casey’s concepts in some of the more eastern states you’re pushing into?

William J. WalljasperChief Financial Officer

Yes. I would say we’re very pleased with the volumes that we’re seeing in some of the more easterly states that we are seeing. Generally speaking, when we penetrate a new state, it’s just, quite frankly, right over the border of an existing state. So it’s not necessarily huge geographically and so we — we do have some bread recognition to some degree.

And so I think because of that, we are seeing some very nice fuel increases as well as grocery and general merchandise. Those are two items that you would expect in a convenience store. And typically, when we go into a new market, they may not as expect the quality of prepared foods, and so it does take a little bit longer to ramp up, but there have been some nice ramp-ups in some easterly states. So we’ll continue to look for opportunities to do some tuck-in construction and acquisitions in all of those markets.

Ryan DomyancicWilliam Blair & Company — Analyst

All right. Thanks for the detail though.

William J. WalljasperChief Financial Officer

Thank, Ryan.

Operator

And our next question comes from the line of Ben Brownlow from Raymond James. Your line is now open.

Ben BrownlowRaymond James — Analyst

Hey. Thanks for taking the question. Most of my questions have been answered. I guess, Bill, can you just give us a little color around what you’re seeing in cigarette and tobacco unit sales trends through the quarter?

William J. WalljasperChief Financial Officer

Yes. Tobacco, well, Q4 was a pretty soft cigarette environment for us but we have seen a little acceleration here as we head into the first part of the quarter here, partly due because of the weather. But for pack and cartons, it’s been relatively stable for probably for the last 12 to 18 months running about 75%-ish on pack versus carton. Now we haven’t seen much of a change either when it comes to savings or generic or value brands, however you want to characterize that, it continues to be roughly the same.

We did have a little bit of a margin uptick in cigarettes in Q4, which is helping lift the margin slightly in Q4 relative to the same period a year ago. Hopefully, that’s helpful.

Ben BrownlowRaymond James — Analyst

That is helpful. And just one clarification. On the tax benefit for the April quarter, was that just an overflow from that the tax guide or any color there?

William J. WalljasperChief Financial Officer

Yes. Just a further refinement as we look at that tax reform and how it plays out.

Ben BrownlowRaymond James — Analyst

OK. Great. Thank you.

William J. WalljasperChief Financial Officer

You’re welcome.

Operator

Our next question comes from the line of Bonnie Herzog from Wells Fargo. Your line is now open.

Bonnie HerzogWells Fargo Securities — Analyst

Thank you. Good morning, everyone.

William J. WalljasperChief Financial Officer

Hey, Bonnie.

Bonnie HerzogWells Fargo Securities — Analyst

Hi. Unfortunately, I got dropped off the call. So you guys might have discussed a couple of these things that I wanted to just ask you about. The first is your fuel-margin guidance.

I guess I’m trying to understand why you’re guiding the range to return to normal in your FY ’19. I’m just thinking about the headwinds and don’t you expect a lot of that to continue, especially what you, I think, just discussed about RINs will that be more of a drag going forward?

William J. WalljasperChief Financial Officer

Yes. So I think RINs — I’ll start with RINs there. I think RINs tends to be somewhat of a misunderstood anomaly in the market. I mean, we don’t necessarily believe that RINs — I’ll put it this way, Bonnie, some of our highest fuel-margin quarters, we had some of the lowest RIN contribution.

And so we do believe there’s an offset to the — in the wholesale. As RINs come down there’ll be, of course, buying offset on the wholesale. And so we don’t necessarily view RINs coming down as necessarily a headwind as we move forward. Now I would say with respect to our optimism regarding the fuel margin, we talked about several things that we believe are going to be contributing factors in the fuel margin, especially as we head into the back half of the fiscal year.

We touched on price optimization as we move forward with that. We’ll actually be adding several pricing analysts here in the month of July to assist in that area as well and move forward with a different dynamic, more centralized pricing environment to optimize fuel. We believe there’s a margin opportunity there. Just to reiterate, also by the end of July, we plan on converting roughly 500 stores to biodiesel, which has a higher margin and also have some tax credit benefit opportunities as well and get going to the margin.

And then, lastly, just looking to continue to refine our product optimization. We’ve done some of this in the past, but we are moving forward and we’ll be doing roughly about 350 changes to stores, either adding premium or diesel here by the end of July as well. Again, both of those products have a higher margin than the margins that we report. I think all of those things will help contribute to and lift the fuel margin as we move forward.

Bonnie HerzogWells Fargo Securities — Analyst

That makes sense. But just to clarify, the wholesale cost environment is still an issue and will be pressured, at least near term, from what you can see. It’s about the [Inaudible] —

William J. WalljasperChief Financial Officer

The wholesale — yes, well, it’s hard to, obviously, for anybody to predict where wholesale-cost movements will go in the future. But what we have seen, obviously, in the last quarter, we saw wholesale costs rise, putting pressure on the margin. That kind of trickled into the first part of May and certainly has leveled off and moving back down in the end of May and here in June.

Bonnie HerzogWells Fargo Securities — Analyst

OK. And then I just wanted to verify something on the pizza delivery and thinking about the negative impact that you guys called out in terms of weather. But I guess I saw it, also, when you have periods of poor weather, I thought it could actually be a benefit as consumers might want to have their pizza delivered and not venture outside, but you didn’t necessarily see that.

William J. WalljasperChief Financial Officer

No, we didn’t — yes, we didn’t really see anything that’s materially to call out.

Bonnie HerzogWells Fargo Securities — Analyst

OK. And then last question for me is just on the price increases that — and the initiatives that you have. And I’m just thinking about the broader environment as it relates to the c-store industry and the competitive pressures. I just want to get a sense from you how successful you guys think you will be in passing on price increases.

William J. WalljasperChief Financial Officer

Yes. No. Great question, Bonnie. So when we do a price increase, we specifically hone in on the elasticity of that product and monitor the unit movement on that product relative to prior times.

And so if we do see some elasticity, we may have to make an adjustment. Thus far, at least in Granite, it’s just a little over a month. We haven’t seen the elasticity in the pricing changes that we made starting in May. Some of the products that we took in would be, at least from our perspective, less sensitive to the consumer, have lower price points and so that’s one of the things that we continue to monitor.

But you’re correct, obviously, we want to continue to kind of combat that or maybe augment that with some value propositions and — that we talked about earlier.

Bonnie HerzogWells Fargo Securities — Analyst

OK. Thank you very much.

William J. WalljasperChief Financial Officer

Thanks, Bonnie.

Operator

Our next question comes from the line of Irene Nattel from RBC Capital Markets. Your line is now open.

Irene NattelRBC Capital Markets — Analyst

Thanks. Just a quick question. When you’re talking about midsized chains, what is midsize to you?

William J. WalljasperChief Financial Officer

It’s a good question. It’s all relative because a high-population town for us might be different than what other people might think, so I get your point there.

Irene NattelRBC Capital Markets — Analyst

Exactly.

William J. WalljasperChief Financial Officer

Yes. It’s a good point. I would say, for us, a midsized chain would be anywhere from 50 stores to probably 200 stores.

Irene NattelRBC Capital Markets — Analyst

That’s great. Thanks, Bill.

William J. WalljasperChief Financial Officer

You’re welcome.

Operator

And I’m currently showing no questions. I would like to turn the call back to Terry Handley, chief executive officer, for any for the remarks.

Terry HandleyPresident and Chief Executive Officer

I would like to thank everyone for joining us this morning and close the call by reiterating our key initiatives to drive shareholder value: 1) positioning Casey’s for accelerated growth and improved profitability through our long-term value-creation plan; 2) continuing our strong track record of delivering value to shareholders through our disciplined capital allocation strategy by prioritizing high growth — high-return growth and profitability initiatives. We strongly believe the combination of these actions will unlock significant value for shareholders. This concludes our call for today, and we look forward to continuing a dialogue with our shareholders and updating you on our progress. Thank you.

Operator

[Operator signoff]

Duration: 63 minutes

Call Participants:

William J. Walljasper — Chief Financial Officer

Terry Handley — President and Chief Executive Officer

Chris Mandeville — Jefferies — Analyst

Ryan Gilligan — Barclays — Analyst

Christina — Deutsche Bank — Analyst

Ben Bienvenu — Stephens — Analyst

Irene Nattel — RBC Capital Markets — Analyst

Chuck Cerankosky — Northcoast Research — Analyst

David Lantz — BMO Capital Markets — Analyst

Damian Witkowski — Gabelli & Company — Analyst

Ryan Domyancic — William Blair & Company — Analyst

Ben Brownlow — Raymond James — Analyst

Bonnie Herzog — Wells Fargo Securities — Analyst

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