Casey’s General Stores continues Arkansas expansion amid shareholder squabble

Casey’s General Stores has plans for a new location at 12000 U.S. 71 in Huntington, moving the Iowa-based company closer to 40 convenience store locations in Arkansas since opening its inaugural Bella Vista location in 2011.

Travis Brisendine of Morrison-Shipley Engineers, agent for Beau Harlan, appeared before the Fort Smith Planning Commission at a Tuesday (Feb. 6) study session to ask for zoning changes, approval of a development plan, and two variance requests that would allow for the store, which serves pizzas, wraps, snacks, drinks, and gasoline.

One of the requests is to move the unzoned area to “Commercial-3,” which would require a minimum of two acres. The development plan is just shy of that at 77,493 square feet. Harlan also requested a variance to allow five feet wide minimum screening landscape around the perimeter/parking lot instead of 10 feet.

The commission will vote on those requests at a Feb. 13 regular meeting. The vote is required because the development is in Fort Smith’s extra-territorial jurisdiction.

Casey’s expansion comes amid internal squabbling over the direction of the company. In a Jan. 3 open letter to fellow shareholders of the company, JCP Investment Management, LLC, BLR Partners LP, and Joshua E. Schechter — who collectively own around $45 million of the company’s common stock — said they believed Casey’s offers more value in a sale than as a standalone company. The parties encouraged the company to explore “strategic alternatives immediately.”

“We believe Casey’s shares are significantly undervalued as they do not reflect the true earnings power and full real estate value of the Company’s irreplaceable fleet of 2,000+ stores,” the investors wrote, adding that they had previously engaged with management regarding concerns with Casey’s returns on invested capital and capital allocation.

The letter continued: “Casey’s no longer delivers best in class returns as measured by either operating metrics or share price performance. Casey’s has missed earnings targets for seven straight quarters due in part to decelerating same store sales and bloated operational expenses. Casey’s has significantly underperformed the industry leader, Alimentation Couche-Tard Inc. (ATD), since Casey’s decision to reject ATD’s offer and remain independent in 2010.  Casey’s has also underperformed Murphy USA Inc. … since Murphy became an independent company in August 2013. We are concerned that Casey’s store level returns on invested capital have declined as the Company has gone from operating in 9 states to 15 states. Prior to 2010 (before the offer from ATD), the Company had only operated in nine states since 1995. We believe such rapid expansion coupled with seeming declining returns on invested capital is symptomatic of a company that has been unable to manage growth effectively.”

Terry Handley, President and CEO of Casey’s, responded to the letter, remarking that the investor group “did not raise their recommendation that Casey’s explore strategic alternatives” during their previous meeting, “and there has been no substantive engagement with them since that time. However, the Board will review the content of their letter thoroughly.”

In a recent press release, the company said it had a strong track record of delivering value for shareholders with 5-year total shareholder returns (TSR) of 121%, which exceeds TSRs of the S&P 500 index (108%) and the S&P Retail index (46%) over the same period.

ATD’s 5-year TSR is 316%.