Casey’s CEO talks earnings, beer cheese pizza, and fuel prices

Casey’s CEO & President Darren Rebelez joins Yahoo Finance Live to discuss company earnings, fuel prices, unique menu offerings like bear cheese pizza, consumer spending, and the outlook for growth.

Video transcript

JULIE HYMAN: Shares of Casey's General hit a one-year high on Wednesday after the convenience store chain reported an earnings beat for the quarter and raised its outlook. Joining us now to discuss the company's results and the state of the consumer is Casey's president and CEO, Darren Rebelez.

Darren, it's great to see you. I think we talked to you in your former role at IHOP. I haven't talked to you yet at Casey's. And obviously, we've been trying to get hints from CEOs like you as to what is going on in the broader economy. What say you in terms of recession, in terms of spending patterns, and what you're seeing among your customers?

DARREN REBELEZ: Yeah, well, thanks for having me. And first, I'd like to just give a shout out to our 43,000 team members at Casey's who delivered another fantastic quarter, taking great care of our guests in the communities that we serve. Yeah, with respect to the economy, obviously, it's been a challenging environment with inflation and supply chain and those sorts of issues.

But we've found, in our geography and our 16 states in the Midwest, that our consumer's really been resilient. And we see some shifting patterns in terms of their purchasing habits, but overall, we've seen a really resilient consumer. And it showed in our results this past quarter.

BRIAN SOZZI: Hey, Darren, it's Brian here. Good to see you again. I'm going a hard turn here. Talk to us about this Busch Light beer cheese pizza. Where does an idea like that come from? How many of these have you sold? And do have more innovation like that coming next year?

DARREN REBELEZ: Yeah, that's a great question, Brian. And that was really the brainchild of our culinary team. And for people who may not know, we're the fifth largest pizza chain in the US. So we really lean heavily on innovation as one of those things to help drive consumer interest and drive traffic to our stores.

And the team this time came up with the idea that because our breakfast pizza is turning 21, wouldn't it be fun to collaborate with a great partner in Anheuser-Busch and with what's a Midwest staple, Busch Light beer. And so beer cheese is on trend right now. Everything came together. And it's been fantastic. We've had record results in our breakfast pizza sales. And we've been doing it for 21 years. And so that's a big statement, but that innovation is continuing. And you'll see more of that innovation in the first half of the next calendar year.

JULIE HYMAN: Man, I don't know, Darren. I see that thing, I would go right to sleep after eating that pizza first thing in the morning. That's quite-- I mean, that is like-- that's your calories for the next day and then some.

BRIAN SOZZI: Send us a box of those, Darren. Come on. We want to try. Julie wants one. Come on.

DARREN REBELEZ: Well, it's good for the soul.

JULIE HYMAN: Oh, there you go.

BRAD SMITH: Yeah. Yes, that needs to be on every single box. Darren, while we have you as well, I did want to ask about some of the operating expenses because there is an environment where consumers are leaning more into their credit purchases right now. That was something that was noted within the higher operating expenses, credit card fees. And then additionally, some of the profitability inside the store was also impacted because of those higher operating expenses. Where are some of those efforts to mitigate those higher operating expenses? Where can you pull those levers within the business?

DARREN REBELEZ: Yeah, that's a great question. And we did see operating expenses increase in the quarter. But what I would say is that it was far less than what we were experiencing from an inflationary standpoint. And really, as we began this fiscal year, our team put a concerted effort around simplifying our store operations and engaging with our team members. Employee expenses are 3/4 of the expenses that we have in our stores. And so we really put an emphasis on trying to improve that team member experience, and thus reduce turnover.

And as a result, we've seen sequential improvement in our turnover every month this fiscal year and really resulted in a tremendous reduction in overtime and training expense without impacting the guest experience. And so that's been the single biggest lever that we've pulled.

The second thing is we have a phenomenal procurement team that goes out every day and is not only getting reduced costs of goods and reduced operating expense from our supplier partners, but in addition, really mitigating some of those cost increases being tried to pass through to us. So, overall, between procurement and our team member engagement efforts, we're seeing some really strong performance on the op-ex side of the P&L.

JULIE HYMAN: Talk to me about fuel prices because, obviously, that's a big part of your business as well. And we have seen fuel prices come down. On balance, is that a positive or a negative for you guys?

DARREN REBELEZ: Yeah, with fuel prices, it's definitely a positive for us. First, we don't like to see high gas prices any more than the consumer does. It puts a lot of strain on the consumer wallets. And we like for those people to come in to our stores and buy all the great products that we have, including our pizza. But when the fuel prices come down, our credit card fees come down.

And to put that in perspective, we spent $60 million last quarter in credit card fees alone. And so any time that retail price of fuel comes down, the credit card fees come down with it, and that impacts our operating expense in a positive way as well.

BRAD SMITH: All right, Darren, I know we've got some excitement about the ultimate beer cheese breakfast pizza, but I just want to try the breakfast burrito sometime because that is like 75% of my diet is burritos. So would love to give that a shot if you send the pizzas as well. Casey's CEO and President Darren Rebelez, thank you so much for joining us this morning.