Executive Summary / Key Takeaways

• Casey's General Stores (NASDAQ:CASY) delivered a robust first quarter for fiscal year 2026, with diluted EPS up 19% to $5.77 and EBITDA increasing 20% to $414 million, driven by strong inside sales and effective fuel management.
• The company's strategic three-year plan, focused on accelerating its food business, growing unit count, and enhancing operational efficiency, continues to yield results, evidenced by positive same-store sales across categories and consistent labor hour reductions.
• The transformative Fikes acquisition, while presenting initial integration costs and margin dilution, is strategically expanding Casey's footprint into new states and bolstering its wholesale fuel network, with significant food-related synergies expected in the coming years.
• Casey's maintains a strong competitive position through its differentiated prepared food offerings, value perception, self-distribution model, and strategic focus on underserved small-town markets, which insulates it from some broader industry pressures.
• Fiscal year 2026 guidance projects continued growth, with EBITDA expected to increase 10% to 12% and inside same-store sales rising 2% to 5%, supported by a healthy balance sheet and a commitment to returning capital to shareholders through dividends and share repurchases.

A Differentiated Model: From Iowa Roots to Regional Powerhouse

Casey's General Stores, founded in 1959 with its first store in Boone, Iowa, in 1968, has cultivated a unique position within the competitive convenience store landscape. The company's enduring strategy of targeting small towns, with approximately two-thirds of its stores located in communities of 20,000 people or fewer, has allowed it to become the third-largest convenience store chain and the fifth-largest pizza chain in the United States. This focus on "underserved" markets, as CEO Darren Rebelez describes them, often positions Casey's as one of the few comprehensive retailers, making its food service business particularly vital.

The company's overarching strategy, articulated in its three-year plan, centers on accelerating its prepared food business, expanding its store footprint, and enhancing operational efficiency. This strategic framework is underpinned by foundational strengths, including a robust self-distribution network that supplies most in-store products and fuel, and a growing scale that differentiates it from many regional competitors.

The convenience store industry is highly competitive, with players vying for market share across fuel, merchandise, and food service. Casey's distinguishes itself through its "best-in-class food program," particularly its made-from-scratch pizza, which is often priced $1 to $2 below national competitors in markets where they overlap. This value proposition, combined with a consistent fuel pricing strategy, drives traffic and fosters a perception of Casey's as a "one-stop shop" for prepared food, groceries, and fuel. The company's self-distribution of key categories like Monster energy drinks further enhances its in-stock position and execution at the store level, providing a competitive edge.

Strategic Expansion and Technological Edge

Casey's growth narrative is a blend of organic expansion and strategic acquisitions. Fiscal year 2025 marked a record year for unit growth, with 35 new builds and 235 acquired stores, bringing the total to 270 new units. A pivotal moment was the November 1, 2024, acquisition of Fikes Wholesale and its 198 CEFCO Convenience Stores for $1.145 billion (net $980 million after tax benefits). This acquisition significantly expanded Casey's geographic reach, adding 148 stores in Texas and marking its entry into Alabama, Florida, and Mississippi, alongside a new fuel terminal that strengthens its wholesale fuel network.

Integrating an acquisition of this scale naturally presents challenges. The CEFCO stores initially contribute a lower margin to prepared foods and fuel due to their different operating models and existing supply chain agreements. Management anticipates a $0.02 per gallon drag on fuel margins from Fikes throughout fiscal year 2026. The full realization of prepared food synergies, which are the largest component of the targeted $45 million in total synergies over three to four years, will require extensive kitchen remodels, a process expected to span the next two to three years due to permitting timelines. Despite these near-term headwinds, the Fikes acquisition is expected to be EBITDA accretive for fiscal year 2026, though dilutive to EPS.

Casey's leverages several technological and operational differentiators to enhance its competitive moat. The "Fuel 3.0" initiative, which involves procuring fuel further upstream, now accounts for approximately 8.8% of the combined business's total fuel procured, with 3% on the base business. This strategic move aims to optimize fuel supply and costs. The company's proprietary Casey's Rewards program, boasting over 9.5 million members, provides invaluable guest insights, enabling targeted promotions and product innovation. This data-driven approach helps Casey's maintain its value perception and drive traffic.

Operational efficiency is a core pillar, with the company achieving its 12th consecutive quarter of reduced same-store labor hours by the end of fiscal year 2025, while simultaneously improving guest satisfaction and team member engagement. This is a testament to continuous improvement initiatives that simplify store operations and eliminate non-value-added work. In response to evolving consumer preferences and environmental stewardship, Casey's is also expanding its alternative fuel options, with 230 EV charging stations at 47 stores across 13 states as of July 31, 2025. While EV demand in its Midwest footprint is currently lower, the company is strategically integrating charging stations in areas of higher demand. Furthermore, almost all stores offer fuel with at least 10% blended ethanol, and approximately 42% offer biodiesel. The company is also innovating its private label offerings, moving from a "one size fits all" approach to a tiered strategy encompassing premium, national brand equivalent, and value-oriented products.

Strong Financial Performance and Prudent Capital Allocation

Casey's demonstrated exceptional financial performance in the first quarter of fiscal year 2026 (ended July 31, 2025). Diluted earnings per share surged 19% year-over-year to $5.77, while net income and EBITDA both increased 20% to $215 million and $414 million, respectively. Total revenue for the quarter grew 11.5% to $4.57 billion, significantly boosted by $522.3 million in additional revenue from the Fikes acquisition.

Inside same-store sales were a highlight, increasing 4.3% (or 6.7% on a two-year stack basis) with an average margin of 41.9%. The Prepared Food and Dispensed Beverage category led the way, with revenue up 13.2% to $458.4 million, driven by a 5.6% increase in same-store sales, particularly strong performance in whole pizzas and bakery items. Despite a 30-basis-point margin decrease to 58.0% due to the lower margin profile of CEFCO stores, management noted "nice momentum" in the core prepared food business, aided by procurement improvements and the growth of high-margin whole pies. The ongoing chicken wings and fries test shows "encouraging early results," indicating incremental visits without cannibalizing pizza sales.

Grocery and General Merchandise revenue increased 14.6% to $1.23 billion, with same-store sales up 3.8%, primarily fueled by non-alcoholic beverages, especially energy drinks. The margin in this category expanded 50 basis points to 35.9%, largely due to a favorable mix shift towards higher-margin items like energy drinks and nicotine alternatives. The declining mix of combustible cigarettes, coupled with rapid growth in higher-margin nicotine alternatives (up 74% last quarter), is a significant driver of this margin expansion.

Fuel operations also demonstrated strength, with retail fuel revenue increasing 7% to $2.73 billion, driven by an 18% increase in total gallons sold. Same-store gallons sold grew 1.7%, outpacing the Mid-Continent region's approximate 3% decline, indicating market share gains. The revenue per gallon less cost of goods sold (CPG) increased to 41 cents from 40.7 cents in the prior year, reflecting effective volume and margin balancing by the fuel team.

Operating expenses increased 14.6% in Q1 FY26, with approximately 10% of this attributed to the 221 additional stores in operation. However, same-store employee expense contributed only 1.5% to the increase, as modest labor rate increases were partially offset by a 1% reduction in same-store labor hours, showcasing ongoing efficiency efforts. Net interest expense rose 90.9% due to debt incurred for the Fikes acquisition.

Casey's maintains a robust balance sheet and strong liquidity. As of July 31, 2025, the current assets to current liabilities ratio improved to 1.03 to 1, and the debt-to-EBITDA ratio stood at a healthy 1.8x. The company generated $262 million in free cash flow in Q1 FY26, a significant increase from $181 million in the prior year. This strong cash generation supports its capital allocation strategy, which prioritizes EBITDA and ROIC accretive growth investments. The Board of Directors maintained the quarterly dividend of $0.57 per share, marking the 26th consecutive year of dividend increases, and the company repurchased approximately $31 million in shares during the quarter, with $264 million remaining on its authorization.

Outlook and Key Considerations

For fiscal year 2026, Casey's projects EBITDA to increase between 10% and 12%, with inside same-store sales expected to grow 2% to 5% and inside margin to be approximately 41%. Same-store fuel gallons sold are anticipated to range from negative 1% to positive 1%. Total operating expenses are expected to increase 8% to 10%, with a higher mid-teens increase in the first half due to the Fikes acquisition, moderating to low single digits in the second half. The company plans to open at least 80 new stores, a mix of new builds and M&A, contributing to its three-year strategic plan target of approximately 500 new units.

Management's confidence in achieving these targets is bolstered by its proactive approach to cost management, including hedging 70% of its forward cheese requirements at favorable rates for the remainder of the fiscal year. The "One Big Beautiful Bill Act" is also expected to reduce cash taxes by approximately $90 million related to capital spending in FY26, though this will not impact the EPS tax rate.

Several risks and challenges warrant investor attention. The integration of the Fikes acquisition, while progressing, will continue to impact margins and operating expenses in the near term, with the CEFCO supply contract expiring at the end of 2026. The company is also involved in ongoing legal proceedings regarding the classification of Store Managers under the FLSA, though management believes the ultimate disposition will not materially impact financial results. Macroeconomic conditions, including potential increases in oil and fuel prices, higher interest rates, and geopolitical disruptions, could affect performance. While Casey's is somewhat insulated due to its focus on daily needs and value proposition, a softer lower-income consumer cohort has been observed, primarily impacting discretionary items like cigarettes. The rise of illicit vape products is also impacting the legitimate vape category, though growth in nicotine alternatives is partially offsetting this.

Conclusion

Casey's General Stores continues to demonstrate resilience and strategic acumen, transforming its business model to capitalize on its unique market position. The strong first-quarter fiscal year 2026 results, characterized by robust inside sales growth, effective fuel management, and expanding margins, underscore the success of its three-year strategic plan. The Fikes acquisition, while a complex undertaking, is a bold move that significantly expands Casey's reach and future growth potential, particularly as prepared food offerings are fully integrated into the new stores.

The company's commitment to operational efficiency, technological innovation in areas like fuel procurement and customer loyalty, and a disciplined capital allocation strategy positions it favorably for sustained long-term value creation. While integration challenges, competitive pressures, and broader macroeconomic uncertainties remain, Casey's differentiated food program, rural footprint, and self-distribution capabilities provide a strong foundation. Investors should monitor the progress of the Fikes integration, the realization of synergies, and the continued execution of its operational efficiency initiatives as key indicators of its ongoing success in a dynamic retail environment.