.bodytext {float: left; } .floatimg-left-hort { float:left; margin-top:10px; margin-right: 10px; width:300px; clear:left;} .floatimg-left-caption-hort { float:left; margin-bottom:10px; width:300px; margin-right:10px; clear:left;} .floatimg-left-vert { float:left; margin-top:10px; margin-right:15px; width:200px;} .floatimg-left-caption-vert { float:left; margin-right:10px; margin-bottom:10px; font-size: 10px; width:200px;} .floatimg-right-hort { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 300px;} .floatimg-right-caption-hort { float:left; margin-right:10px; margin-bottom:10px; width: 300px; font-size: 10px; } .floatimg-right-vert { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px;} .floatimg-right-caption-vert { float:left; margin-right:10px; margin-bottom:10px; width: 200px; font-size: 10px; } .floatimgright-sidebar { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px; border-top-style: double; border-top-color: black; border-bottom-style: double; border-bottom-color: black;} .floatimgright-sidebar p { line-height: 115%; text-indent: 10px; } .floatimgright-sidebar h4 { font-variant:small-caps; } .pullquote { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 150px; background: url(http://www.dmbusinessdaily.com/DAILY/editorial/extras/closequote.gif) no-repeat bottom right !important ; line-height: 150%; font-size: 125%; border-top: 1px solid; border-bottom: 1px solid;} .floatvidleft { float:left; margin-bottom:10px; width:325px; margin-right:10px; clear:left;} .floatvidright { float:right; margin-bottom:10px; width:325px; margin-right:10px; clear:left;} Bob Myers knows that Midwestern drivers won’t hesitate to turn left against heavy traffic if it means saving a penny or two per gallon on gasoline. That’s why his company, Casey’s General Stores Inc., always prices its gas to match its competitors.

“This is a very challenging business that we operate in, as I think all retail businesses are,” said Myers, president and CEO of the Ankeny-based company. “It’s complicated by the competitive nature of the gasoline markets, which I believe are the most price-sensitive product in the market today.”

High gas prices didn’t slow down sales of Casey’s high-profit prepared foods and fountain soft drinks last quarter. Fueled by double-digit increases in those categories, Casey’s in September reported record quarterly net earnings of $29.77 million, a 73 percent increase from the $16.9 million in net earnings for the year-earlier quarter ending July 31, 2006. Gross profits for its two most lucrative product categories, groceries and prepared foods/fountain items, increased by 21 percent and 13 percent, respectively.

“There were a whole lot of things that lined up in our favor, not the least of which was the gasoline margin,” Myers said. “A penny a gallon on about 300 million gallons (the amount Casey’s averages per quarter) is a lot of money towards earnings.”

Sales in the competitive convenience-store industry, which have nearly doubled over the past five years, remained strong last year at $569.4 billion, a 15 percent increase from 2005.

High merchant credit card fees imposed by the two largest issuers, MasterCard Inc. and Visa Inc., represent one of the biggest challenges for Casey’s and other convenience-store chains.

“The two major credit card companies are very difficult to work with,” Myers said. “There is no transparency of their business operations. They impose significant requirements on retailers in terms of security, and rightfully so in that regard. But as far as I’m concerned, their fees are outrageous in relation to what they’re doing.”

In 2006, credit card issuers increased their merchant fees an average of 22 percent. Industrywide, convenience stores last year paid out more in credit card fees – $6.6 billion – than the $4.8 billion the companies posted in profits, according to the National Association of Convenience Stores.

As gas prices increase, customers tend to use their credits cards more frequently, which further affects convenience stores’ gross profits on gas. In its most recent fiscal year, which ended April 30, 41 percent of Casey’s total transactions were made on credit cards, compared with 21 percent five years ago, said Bill Walljasper, Casey’s chief financial officer.

“We are trying to take proactive steps,” he said. “In the past year, we have actually brought in-house the clearing of credit card transactions. We anticipate that will save from $1 million to $2 million for the upcoming fiscal year.”

Now the nation’s fifth-largest convenience-store chain in terms of corporate-owned stores, Casey’s operates 1,448 company-owned stores and 15 franchise locations in nine Midwestern states. The company is seeking additional growth, primarily through acquisitions, as it continues to roll out new products to complement its trademark doughnuts and pizza. With sales of more than 8 million pizzas last year, Casey’s has quietly become one of the top 10 sellers of pizza in the country, not to mention a top doughnut destination.

“We don’t want to be the largest convenience store chain, but we do want to be the best by anybody’s standard of performance,” Myers said. By total store count, Casey’s is the 13th-largest convenience store company in the nation. Its local competitor, West Des Moines-based Kum & Go LC, is the 21st largest, with 447 stores.

The company, which in 2006 completed a 120,000-square-foot expansion of its corporate headquarters, also finished rolling out a comprehensive point-of-sale system early last year.

“We’re really harvesting now all of that information, and refining our operations based on this tremendous amount of information we have about our operations,” Myers said. “Seemingly, we may be saving just pennies, but when you multiply it times the number of transactions, times the number of stores, it becomes a huge, huge contributor to the gross profit percentages of our operations.”

Casey’s financial position is extremely strong, Walljasper said. “We have very low debt and an exceptionally strong balance sheet,” he said. “Our average long-term debt to capital ratio is only 27 percent, which is extremely low in the industry. So should an acquisition opportunity present itself, we certainly have the financial ability to move on it very quickly.” The company currently has $235 million in total debt.

Casey’s goal this fiscal year is to add 50 stores through acquisitions and 10 stores through new construction, Myers said. Meeting that goal could be difficult, however, as the booming industry has created a sellers’ market, he said. So far this fiscal year, the company has bought just two stores.

“We’re going to be very diligent in our acquisition efforts and not overpay for acquisitions,” he said. “But we want to pay fair-market value.”

With the explosion in popularity of energy drinks and the added cooler space needed, convenience store shoppers are likely to see larger Casey’s stores in the future, whether they’re acquired or new construction.

Just as Casey’s continually seeks smaller companies to buy, “I suspect that we are looked at occasionally,” Myers said. “But I don’t think we are necessarily an acquisition target. We’re not for sale, for one thing, so it would be costly for someone who wanted to acquire Casey’s.”

Myers, 60, said he plans to be around “a few more years,” and said he hasn’t yet named a successor. “My major task is to ensure that the next level of leadership is well prepared and trained to assume the leadership of the company,” he said.

“I believe we’re well positioned for the future growth of our company in terms of facilities, systems, process and procedures,” Myers said. “And in terms of the quality and depth of our leadership in our company, I think we’re well positioned. And I think it’s safe to say you’ll continue to see Casey’s grow in the 4 to 6 percent range in stores on an annual basis for the next five years or so.”