Casey's and its competitors don't get much attention because they generally operate in smaller markets. Based in Ankeny, Iowa, Casey's has about 1,500 stores in nine midwestern states, mainly in communities with 5,000 people or less.
The $4 billion company fared well through the recession. Earnings rose 22% in the most recent quarter, to more than $17 million. Same-store sales also rose in most merchandise categories.
Wall Street has taken notice. Casey's stock has increased steadily over the last year (and naturally got a big bump when Couche-Tard's offer became public).
And it's not just Casey's that's performing well right now. Other convenience chains are growing, too. Sector leader 7-Eleven opened 200 stores last year, bringing its U.S. total to close to 6,000 units. Sheetz, which has nearly 400 stores in the Mid Atlantic states, is also expanding.
Part of the reason that convenience stores are doing so well right now is that they are offering customers more choices. Specifically, many chains are upping the amount of food in stores. Why go to a grocery to pick up a couple of items when they can be bought more quickly at these outlets? In addition, fast-food restaurants like Quizno's are making deals to increase their presence in convenience stores, providing another draw.
The business is not without its risks, though. Since most convenience stores offer gasoline, they are subject to the vagaries of the global oil market. For example, The Pantry (PTRY), with more than 1,600 stores in the Southeast, recorded strong sales in its most recent quarter, but had weaker-than-expected earnings due to its fuel margins plummeting.
In the case of Casey's, Couch Tarde may increase its $36 a share offer. Some analysts expect it to go as high as $42. Whatever the outcome, the offer itself proves that convenience stores don't come cheap.