One of the Midwest's most beloved convenience chains closed out its fiscal year this week. Unlike years past -- which brought heady growth and impressive returns for shareholders -- this is a year Casey's General Stores (NASDAQ:CASY) investors would like to forget.

People sharing pizza at a table

Pizza is an increasingly important line of business at Casey's. Image source: Getty Images.

As has been the case for the entire year, the results fell short of management's goals and expectations in several categories, which might help explain why shares were trading down by as much as 8% immediately after the release.

Casey's General: The raw numbers

Before diving into the details, it's important to get the view from 30,000 feet. Here's how the company performed on the headline numbers:


Q4 2016

Q4 2017

Year-Over-Year Change


$1.58 billion

$1.85 billion


Gross profit

$388 million

$398 million


Earnings per share




Data source: Casey's General Stores. Chart by author. 

Normally, data about gross profit wouldn't be included in this "raw numbers" discussion, but with Casey's, I can make a justified exception. The company counts on fuel sales to draw customers in, but because the price of gas is so variable and Casey's has little control over that variation, revenue figures alone don't tell us much about the strength of the business.

If you're wondering why the company's bottom line fell as much as it did even though gross profit was up, look no further than employee salaries. CEO Terry Handley said an 11% increase in operating expenses -- far outpacing gross profit growth -- was "primarily attributable to increases in employee-related costs."

Missing the growth marks

When the fiscal year began 12 months ago, management laid out an ambitious plan for comparable-store (comps) growth across its three business sections: gas sales, groceries (including cigarettes), and prepared foods -- which is primarily driven by pizza sales.

Here are those goals, juxtaposed with the fourth-quarter and full-year actual results:


2017 Goal

Q4 Results

2017 Results

Gas comps growth




Gas margin

18.4 cents/gallon

17.2 cents/gallon

18.4 cents/gallon

Grocery comps growth




Grocery margin




Prepared food comps growth




Prepared food margin




Data source: Casey's General Stores. Chart by author. 

Gas brings customers into Casey's, but it is through grocery and prepared food sales that the company earns its profits. While margins for these two categories fell just short of goals, full-year comps growth was nowhere near the stated targets.

What's more, both grocery and prepared food comps growth decelerated in the most recent quarter, with groceries barely eking out a gain, while prepared foods posted figures that were less than one-third of what management hoped for in mid-2016.

In essence, this means that while the company is doing a good job of controlling costs (margins), the moat surrounding the company and the growth opportunities that lie ahead may not be as great as once imagined (comps).

Indeed, while Handley correctly claimed that "[f]iscal 2017 proved to be a challenging environment for the broader food service industry," we also can't ignore that pizza vendors like Dominos increased comps by 9.8% in domestic stores last quarter.

Furthermore, the company came up short on its expansion goals for the year as well. Here are those goals, again juxtaposed against reality:


2017 Goal

2017 Reality

New store builds/acquisitions

77 to 116 stores

70 stores

Store replacements

35 stores

21 stores

Store remodels

100 stores

103 stores

Data source: Casey's General Stores. Chart by author. 

As the company's expansion outside the Great Plains and northern Midwest is a big piece of the investment thesis, meeting these goals will be important moving forward.

Looking ahead

It's not the company's flailing that investors are likely taking issue with. Rather, it is the fact that under Handley -- who took the reins just over a year ago -- the company has consistently overpromised and underdelivered.

That may lead some to revise their expectations for the year ahead downward from management's forecasts. Here's what those forecasts look like:


Comps Growth



1% to 2%

18.0 to 20.0 cents/gallon


2% to 4%

31% to 32%

Prepared food

5% to 7%

61.5% to 62.5%

Data source: Casey's General Stores. Chart by author. 

Given that Casey's didn't meet even the low end of the comps goals for groceries and prepared foods in the most recent quarter, management has a lot to prove in the year ahead.