I know what you might be thinking. Casey's General Stores (NASDAQ:CASY) is a gas station convenience chain. What does that have to do with burgers, fries, and McNuggets from McDonald's (NYSE:MCD)? Normally I'd agree with that assessment, but the performance of both plus a key mention in McDonald's latest conference call now makes is a good serious question.
First, don't let the name fool you. Yes, Casey's General Stores is a gas station chain, but it's more than that. Like many gas station chains, Casey's makes most of its gross profit not from gas but from merchandise inside. Casey's though is a bit different from many other chains in that it also prepares a lot of fresh food inside such as hamburgers, wings, and pizza. It even offers a pizza delivery service.
Casey's same-store sales of fresh food have been exploding every quarter for several years. For example, for the fiscal year ending April 2012 those sales jumped 14.3%. For fiscal year 2013, they jumped another 8.6%. For fiscal year 2014, it rose another 11.8% including 12.1% in the fourth quarter.
McDonald's can only dream of growth numbers like this. Its domestic same-store sales growth has been in the dump for several quarters and not too impressive for several years actually. There are likely many reasons for this and McDonald's has done a lot of blaming on competition. That certainly is in part a good reason though other burger fast-food chains have found creative ways to grow while McDonald's has not recently.
During McDonald's recent conference call, it seems like perhaps Casey's General Stores was hinted as part of the blame. While its merchandise category only did around $1.5 billion in sales last year, who knows, it may have cost McDonald's a decent enough of a chunk to matter. CEO of McDonald's Don Thompson stated (my emphasis added), "I would tell anyplace a person can stop we view as a competitor whether it's a petrol station or it's a convenience store, it's a grocery store, ready to eat food or take home food we view the whole set a competitor."
I find it interesting that he would single out this type of chain. I see that statement as bullish for Casey's and not so bullish for McDonald's. Would I sell McDonald's if I owned it based on that? Probably not, but if I owned Casey's General Stores let's just say it would make me feel a bit more comfortable to continue to hold. In fact, I think Casey's is a great company and stock and plan to go long just ahead of its next earnings report if not sooner.
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