Caseys General Stores posted a solid Q2 FY2025 despite a revenue decline tied to lower fuel prices. Total revenue declined 2.9% year over year to $3.95 billion, while gross profit rose 8.2% to $958.6 million, supported by an 110 basis-point expansion in inside gross margin to 42.2% and a 160 basis-point improvement in grocery and general merchandise margin to 35.6%. Operating income rose 14.5% year over year to $252.3 million, and net income increased 13.9% to $180.9 million, with EBITDA up 14.1% to $348.9 million. Management attributes much of the margin expansion to mix shifts toward higher-margin categories (energy beverages, liquor, premium tobacco alternatives) and ongoing shrink reduction. The quarter also showcased the ongoing benefit of Casey’s three-year strategic plan, including labor-hour efficiencies (10th consecutive quarter of reduced same-store labor hours) and stronger in-store execution across prepared foods and grocery. The company closed the large Fikes acquisition on November 1, 2024, and guided to a higher full-year EBITDA trajectory, acknowledging near-term dilution in Q3 due to one-time costs but expects modestly accretive EBITDA in Q4 and meaningful synergies thereafter. Casey’s also provided an updated, cautious but constructive outlook for H2 FY2025, including added one-time costs related to the deal and elevated interest expense, with a long-run target to deleverage back to 2x debt/EBITDA. Overall, Casey’s is leveraging its differentiated store format, enhanced in-store offerings, and scale advantages to drive margin expansion and cash flow growth while navigating integration risks and commodity volatility.
Key takeaways include: (1) resilient profitability amid fuel-headwind-driven revenue softness; (2) sustained margin expansion led by mix optimization and higher-margin categories; (3) meaningful synergies and revenue exposure from the Fikes acquisition; (4) solid liquidity and a clear deleveraging path; (5) ongoing channel innovation, especially in prepared foods and energy beverages; and (6) a multi-year growth runway anchored by store expansion and optimization of operating expenses. Investors should monitor Fikes integration progress, fuel-margin volatility, cheese-cost dynamics, and the pace of deleveraging as key drivers of the stock’s risk/reward in the near to mid term.