Stock Wars: Casey's General Stores Vs. Shoprite Holdings

Benzinga matches up two leaders in a major industry sector, with the goal of letting readers decide which company is the better investment.

In this article, we present an intercontinental bout between two powerhouse food retailers: Casey’s General Stores Inc. CASY, a major presence the U.S. Midwest, and Shoprite Holdings Ltd. SRGHY, an industry titan in the sub-Saharan African market.

The Case For Casey’s It is safe to assume that most U.S. investors based on the East and West Coast have not enjoyed a direct personal experience with the retail units of Casey’s General Stores, but in so-called “flyover country” the company is very well-known.

A typical Casey’s store includes self-service gasoline, grocery market items and freshly prepared foods including made-from-scratch pizzas, sandwiches, subs and donuts.

Casey’s operates more than 2,200 convenience stores in 16 states, and roughly 57% of its stores are in areas with populations of 5,000 or less. Approximately 17% are in localities with populations of 20,000 or more.

The company recently expanded its presence with a pair of acquisitions: a $580-million, all-cash purchase last November of Buchanan Energy, owner of Bucky’s Convenience Stores, which operates 94 retail stores and 79 dealer locations, primarily in Illinois and Nebraska; and the March 22 announcement of a $39-million, all-cash purchase of 49 Oklahoma stores from Circle K Stores Inc.

Casey’s General Store in Fargo, North Dakota. Photo by Rexx W./Flickr Creative Commons.

The pandemic presented U.S. retailers with a surplus of challenges, and Casey’s was no exception.

“Total revenue for the quarter was $2 billion, a decline of $240 million or 11% from the prior year. This was due to the decline in retail sales of fuel of approximately $275 million driven by the lower number of gallons sold and the lower retail price of fuel," CFO Steve Bramlage said during last month’s third-quarter 2021 earnings call.  

The average retail price of fuel during this period was $2.12 per gallon, compared to $2.40 a gallon a year ago.

“Total gallons sold for the quarter were down 9.5% to 518 million gallons,” the CFO said. “Total inside sales were up 3.8% to $888 million. Grocery and other merchandise sales increased by $42 million, while sales of prepared food and fountain fell approximately $10 million.”

The company is pivoting to regain more stable footing.

During the third-quarter call, President and CEO Darren Rebelez noted that Casey’s performed “a significant store reset” designed to improve customer traffic flow by reconfiguring shelf placement and rolling out a private label brand of more than 100 low-price snack and beverage products.

“Not only will this enable us to more effectively roll out our private label program, we believe this will optimize category flow and adjacencies with existing SKUs and has allowed us to add more variety within existing categories,” Rebelez said.

At last check, Casey’s was trading at $213.95, closer to its 52-week high of $221.29 and distant from its 52-week low of $117.25.

Shopping Right With Shoprite: Shoprite Holdings is not a household name in the U.S., but the company is one of the dominant forces in sub-Saharan Africa: The South African-headquartered company operates more than 2,800 stores in 14 countries, with a 140,000-person workforce.

While best known as a food retailer, Shoprite is also involved in alcohol, clothing, furniture and home entertainment retailing, as well as financial services and pharmaceutical sales.

Sub-Saharan Africa was a complex place for conducting business prior to the pandemic, and the health crisis exacerbated the socioeconomic structures in many of the continent’s countries.

As a multinational, Shoprite is focused on both the struggles within its home country — South Africa has been plagued by a harsh recession and an unemployment rate of more than 30% — and the potholes that emerge in other countries, which include currency volatility, foreign exchange difficulties, delays in transporting goods and other economic instabilities.

The company is exiting Kenya and Nigeria, citing difficulties in continuing operations in those markets.

A Shoprite grocery store in Zeerust, South Africa. Photo by Ossewa/Wikimedia Commons.

But as with Casey’s, Shoprite is pivoting to re-establish a more solid foundation. On March 23, it debuted K’nect Mobile, a proprietary mobile virtual network operator offering competitive rates and other rewards to its customers. On March 29, the company’s Checkers supermarket brand introduced a premium range, Forage & Feast, with the endorsement of Jan Hendrik van der Westhuizen, South Africa’s first Michelin star chef.

Earlier in March, the Shoprite and Checkers stores announced plans to launch Elephant’s Cousin, an exclusive wine label.

South Africa’s wine farms were hard hit by pandemic-era import-export restrictions and the weak local economy, and the company purchased 1.5 million liters of wine from farms that would otherwise have no sales outlet.

For the six-month period ending Dec. 27, Shoprite reported merchandise sales of $5.6 billion, up 4.7% year-over-year, and the creation of 4,305 new jobs.

The company’s greatest strengths were in the South African grocery sector (up 5.6% year-over-year), in furniture sales (up 15.7%) and in the combination of its other operations (up 10%), but the drag came in non-South African grocery sales (down 8.4% from the previous year).

“It is noteworthy that the group increased trading profit by 18.3%, whilst making significant strides in other areas,” said CEO Pieter Engelbrecht.

“Borrowings declined by R5.9 billion ($402 million) to R5.5 billion ($375 million), inventories reduced by R3.0 billion ($204.5 million) and we lived well within our means in terms of capital expenditure of R1.6 billion ($109 million).”

At last check, Shoprite was trading at $10.57, closer to its 52-week high of $11.07 and far from its 52-week low of $5.35.

The Verdict: Both Casey’s and Shoprite have stood up admirably to the pandemic’s tumult — Shoprite in particular, given that it is operating in multiple countries with more perilous economies.

Both companies have pivoted with intelligent responses, and both are well positioned to move forward in a post-pandemic period.

For investors seeking a wider international exposure in their portfolio, Shoprite would be an invigorating stock choice. A word of caution: a little research into sub-Saharan Africa’s economy in general and South Africa’s in particular should precede any acquisition of shares.

But for investors who prefer a company that can offer stability and the promise of sustained growth, you can’t go wrong with Casey’s. In this bout, Casey’s comes across as the better bet.