C-store, restaurant-industry veteran brings new energy to regional chain, takes on pandemic challenges,
CHICAGO — If Casey’s General Stores Inc. CEO Darren Rebelez’s enthusiasm and expectations for his new company, leadership team and employees are any indication, the convenience-store industry’s fourth largest chain is poised to maintain a steady growth track while driving sales in-store, at the pump and online.
- Casey’s is No. 4 on CSP’s 2020 Top 202 ranking of U.S. c-store chains by number of retail outlets, with more than 2,200 stores in 16 states.
He is leveraging his experience in both restaurants and c-stores to move Casey’s forward with a refreshed vision that is respectful of the company’s past and strategically mindful of its future. And the pandemic, while challenging, hasn’t slowed him or his team down one bit.
Rebelez joined Casey’s in late June 2019 from IHOP restaurants, a unit of Dine Brands Global, where he was president since 2015. Before joining Glendale, Calif.-based IHOP, Rebelez spent nearly eight years with 7-Eleven Inc. He joined the Irving, Texas-based retailer in 2007 as a senior vice president in charge of operations for its U.S. and Canadian stores. The company promoted him to executive vice president and COO in 2009. Prior to 7-Eleven, Rebelez was with Exxon Mobil Corp., Irving, Texas, for six years, and with Thornton Oil Corp., Louisville, Ky., for four years. Before that, he was with Fuddruckers and PepsiCo.
Rebelez attended the U.S. Military Academy at West Point.
On the first anniversary of being named CEO, Rebelez spoke to CSP Daily News about his experience in taking the reins at the regional c-store chain.
How would you describe your first year as Casey’s CEO?
I spent my entire career after the military either in the restaurant business or the convenience-store business. So when I heard about the Casey’s role, it just seemed like a perfect fit for me, and selfishly allowed me to do the two things that I’m really passionate about all in one job. It has been a lot of fun so far, and we’ve got a lot of runway for growth.
I’ve always loved this industry, between the fuel and the convenience and the foodservice. Coming to a company like Casey’s, I’m getting the best of both worlds of running restaurants and convenience stores at the same time. The team here has been fantastic, and we’ve had a really good year in terms of being able to be thoughtful about where we want to take the company in the future and building out that plan and starting to put it in motion.
How are you approaching the CEO job differently than previous CEOs Terry Handley, Bob Myers or Don Lamberti?
I’ve been in contact with Terry and Bob and Don. It has been great to be able to keep in touch with former leaders, particularly Don, who is the founder. It’s pretty rare to be able to come into a company that’s 50-plus years old and still be able to have lunch with the founder and pick his brain on what was behind the brand and how we got to where we got. Terry and Bob have been very supportive, as well. Each of those leaders had their own challenges and opportunities to tackle when they were in the role. I’m bringing a different point of view from having various experiences both at larger convenience-store chains or from the restaurant business. One of the things that I would say that has stayed consistent is our brand purpose, and that’s to make life better for our communities and guests every day. That’s something Don Lamberti was very passionate about as he built the company, and Bob and Terry certainly followed through on that purpose. It’s important for me to carry on that legacy.
That brings to mind the new “Here for Good” initiative. What is that all about?
The Here for Good positioning was really born out of a lot of consumer insight work, and our team did some really good work around understanding how Casey’s showed up in the world. What guests loved about Casey’s and maybe what they didn’t like as much. What came to the forefront was that we really stand for our quality products, we have staying power within the communities and we do good in the communities. We contribute. We’re part of the fabric of those communities. So you take all those sentiments together, and “Here for Good” has multiple meetings.
What has been you biggest challenge since you took over as CEO?
The coronavirus. It wasn’t part of my first-year plan to deal with that. I’m really proud of the entire team here and how well everybody responded to the crisis. Our 38,000 team members have done a fantastic job of being safe and taking care of their guests and their communities, and at the same time being very nimble to adjust to changes that we’ve had to throw at them to adapt to the various regulatory environments or for what guests were looking for.
But with challenge comes opportunity. We’ve made some adjustments, we’ve pulled some things forward. I think we’ve proven to ourselves that we can be a lot more nimble and faster than maybe we thought we were. We just wrapped up our fiscal year, and we’re very pleased with the results there. For the for the full year, earnings per share were up 29%, and EBITDA was up nearly 15%.
On the earnings call, you called Casey’s fiscal fourth quarter “a tale of two periods.” What did you mean by that?
It was a little disappointing because we had shared our plan with the investment community in January and it was very well received. Things were accelerating in February, and got even better in March. We were setting up to have the best quarter we’d had in years and then we got a global pandemic thrown at us, and so things changed.
But we’re really in three businesses–we have our fuel business, our convenience business and then we have this really strong food business, and what that enables us to do is navigate a lot of different environments, and we have multiple levers to pull to deliver great growth in earnings in a variety of environments, and that really came through in our fourth quarter. It’s a real testament to our business model.
What has been the biggest challenge in weathering the pandemic?
How quickly things changed from a guest traffic pattern standpoint. As states started to shut down, guest behavior changed rapidly, so we had to adjust to that. At the same time, for a company of our size, when you’re in as many communities as we are, there’s a patchwork of regulatory environments we had to navigate and be able to provide consistent guidance to our teams. There’s a variety of changes going on from the various state and local governments. Some states would have a stay-at-home order, some would not, some had different rules around foodservice, some did not, and that got down into the local municipality level.
We set up at a task force very early on in this process. As things really started to change rapidly, we had a well-established team and a nice cadence developed to be able to deal with that. I was really proud of our team in terms of how quickly we were able to respond, how quickly we were able to change processes and procedures and everything from open hours to implementing social distancing, to enhanced cleaning processes to changing from self-service food to full-service food. It wasn’t just in our stores. We have two distribution centers that we had to adapt, as well, and all of those folks really proved to be very nimble at being able to change.
What were the challenges on the employee level?
Our top priority was to ensure the safety of all of our team members, so we started off with really trying to take those extra measures to ensure that our team members and guests were safe, so we enhance the cleaning procedures in the stores, we implement the social distancing, we installed plexiglass shields at our cash registers, we provided PPE for our team members, but we also gave them extra pay. We gave all of our hourly workers an extra $2 an hour in appreciation for everything that they were having to deal with in the stores. We did that for distribution center team members, as well, and gave weekly incremental bonuses to supervisors and other field-level folks. We paid for testing. We also paid folks if they tested positive for COVID-19 and were quarantined.
In April, Casey’s withdrew its 2020 guidance. What have been the challenges in sustaining Casey’s on the business side?
For the business, we limited the hours in our stores or adapted the hours in our stores to respond to the guest needs. There’s a corresponding labor saving there. In fact, we really work hard on managing liquidity and making sure the balance sheet was strong. We took a really hard look at working capital particularly in our distribution centers and made sure that our inventory was rightsized for the demand profile we were seeing. We deferred some of our capital spending to slow down some of our store development to make sure that we are keeping our liquidity strong, and so we managed through all that.
As you saw with the fourth-quarter results, the balance sheet is in really strong shape. Our debt to EBITDA [ratio] is 2.1 times. We own all of our real estate, so we don’t have a lot of lease exposure. We’re in a really good position to not only navigate through the crisis, but at the same time be able to continue executing our strategic plan and be able to accelerate our growth.
What are some of the changes Casey’s instituted because of the pandemic that may be here to stay?
There are a few things we were doing already that we ended up accelerating, like our DoorDash partnership. We added 600 stores. We’re certainly going to keep that. We put a greater emphasis on our whole pizza pie business, and see really strong double-digit growth there, so we’ll continue to do that. We’ve implemented contactless delivery. We’re implementing curbside delivery. Those are going to stay.
We expanded the assortment available online via our e-commerce platform, not just of foodservice, but more broadly to the center of the store and in the vault, as well. Given the current environment, we accelerated those. We’re seeing nice results there. Those are things that are going to stay post-pandemic.
Clearly with people being furloughed and laid off, value is top of mind with our guests, so with a digital platform, it has enabled us to test a variety of different value propositions for the guests on a limited scale and see what resonates and what doesn’t, and so we were really starting to dial in those value propositions and be able to push those out to both our Rewards members and folks in our email database.
Since you took over as CEO from Terry Handley, Casey’s has been through some major leadership changes, adding Adrian Butler as CIO; Steve Bramlage as CFO, succeeding the retiring Bill Walljasper; Ena Williams as COO; Michelle Wickham as vice president of foodservice; and Tom Brennan as chief merchandising officer. Why all of the high-level appointments now?
It’s a combination of things. We’ve had a few people that have retired. In the case of [CMO and CIO], those roles didn’t exist here. For a company of our size, I felt it was appropriate to have those roles, and so we filled those, and that was really to help us accelerate execution of our strategic plan. We were building out the team to be able to execute on that strategy. The COO role was one that Terry had. When he became CEO, they eliminated that role, or just never filled it. I felt that was a role that would be helpful to accelerate the execution of our strategy, so we’ve added that role. I think we’ve got a great team and have a really good mix now of people who been around for a long time and some people that are coming in from the outside with different perspectives, so now we have a broader diversity of viewpoints and experiences. I think that will really help us grow the business moving forward.
Also, Brian Johnson, vice president of finance, corporate secretary and head of investor relations, has been tasked with heading up store development with a focus on mergers and acquisitions. What’s the strategy there?
M&A is one of the areas that we identified in our strategic planning process as a big opportunity, and to accelerate that, we are going to focus on the smaller chains. We think there’s a big opportunity in the types of communities that we operate in to be able to roll some of those up. So we established a dedicated team. We did this before the pandemic hit. We had established that M&A team, and we were just getting started when the pandemic happened. We believe that as things get back to normal, there will be a greater opportunity to acquire some folks who may want to get out of the business. What we outlined on investor day is that we have a track record of being able to acquire these smaller chains at pretty attractive multiples, and there’s about a 300- to 500-basis-point difference between what we can buy them for and what we trade at today, and so they’re immediately accretive from a value standpoint. And then we put in our foodservice program, and we layer in our scale, we layer in our rewards, we layer in our technology. With Brian leading that charge and developing a pipeline of potential opportunities, we see a lot of runway there to accelerate our growth.
Casey’s reputation for acquisitions and growth has always been extremely prudent. How will this change?
I don’t know about changing strategy. We certainly will stay prudent. We don’t feel the need to overpay for anything, and we’ve seen some of these bigger transactions that have occurred over the last two years that have traded at really high multiples, and that’s fine for the folks that want to do those deals. We’ve participated in some of those processes and elected not to make those purchases at those multiples, but again we don’t feel the need to, because we think there’s a lot more operators that are at a much smaller scale that we can buy for attractive multiples and bring more value to.
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