Good day and thank you for standing by. Welcome to the Q4 fiscal year 2022 Casey’s General Stores earnings conference call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question and answer session. To ask a question during the session, you will need to press star, one on your telephone. Please limit yourself to one question and a follow-up. If you require any further assistance, please press star, zero. I would now like to hand the conference over to your speaker today, Mr. Chad Bruntz. Please go ahead.

Good morning and thank you for joining us to discuss the results for our fourth quarter and fiscal year ended April 30, 2022. I am Chad Bruntz, Senior Analyst, Investor Relations filling in for Brian Johnson, who is under the weather. With me today are Darren Rebelez, President and Chief Executive Officer, and Steve Bramlage, Chief Financial Officer. Before we begin, I will remind you that certain statements made by us during this investor call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include any statements relating to expectations for future periods, possible or assumed future results of operations, financial conditions, liquidity and related sources or needs, the company’s supply chain, business and integration strategies, plans and synergies, growth opportunities, performance at our stores, and the potential effects of COVID-19. There are a number of known and unknown risks, uncertainties and other factors that may cause our actual results to differ materially from any future results expressed or implied by those forward-looking statements, including but not limited to the integration of the recent and pending acquisitions, our ability to execute on our strategic plan or to realize benefits from the strategic plan, the impact and duration of the conflict in Ukraine and related and related governmental actions, as well as other risks, uncertainties and factors which are described in our most recent annual report on Form 10-K and quarterly reports on Form 10-Q, as filed with the SEC and available on our website. Any forward-looking statements made during this call reflect our current views as of today with respect to future events, and Casey’s disclaims any intention or obligation to update or revise forward-looking statements, whether as a result of new information, future events or otherwise. A reconciliation of non-GAAP to GAAP financial measures referenced in this call, as well as a detailed breakdown of the operating expense increase for the fourth quarter, can be found on our website at www.caseys.com under the Investor Relations link. With that said, I would now like to turn the call over to Darren to discuss our fourth quarter results. Darren?

Thanks Chad and good morning everyone. I’m looking forward to sharing our results in a moment, but I’d like to start by thanking our 42,000 Casey’s team members for their tireless efforts and contribution to a fantastic fiscal year. Our team members have done an outstanding job navigating through these challenging times and the team’s ability to be nimble and perform at a high level under difficult circumstances is something I am especially proud of and grateful for, and we certainly would not have delivered another record year without their efforts. At Casey’s, our purpose is to make life better for our communities and guests every day. As a rural Midwestern operator, we play a significant role in the towns we operate in. It is a privilege and a responsibility we take to heart. Throughout the fiscal year, we have truly been here for good. We raised $1 million in funds for organizations helping veterans and their families. We raised $1 million to help local schools through our Cash for Classrooms grant program, and we enabled over 5 million meals for our neighbors in need. We are here for our communities and we want to give back to those communities and guests that support us. Now let’s discuss the results for the past fiscal year. Fiscal ’22 was a record year for diluted EPS, finishing at $9.10 per share, a 9% increase from the prior year. The company also generated a record $340 million in net income and $801 million in EBITDA, an increase of 11% from the prior year. Inside sales and gross profit were each up 14% versus the prior year as guests returned to the store to buy pizza slices and items from our refreshed breakfast menu, among other Casey’s favorites. Inside gross profit margins remained flat…

Thank you Darren and good morning. Before I jump into the financials, I would also like to take a minute to acknowledge the entire team given the strong performance both in the quarter and for the record-breaking fiscal year. The excellent financial results wouldn’t have been possible without their hard work and dedication. The fourth quarter was the first one where we are fully consolidating the results from all three of the significant acquisitions that we closed this year, and it’s easy to see the impact of the unit growth along with the strong mothership execution on our total results in the quarter. Here are just a few examples to help contextualize the magnitude: total fuel gallons sold rose by almost 86 million gallons or 16%; total inside sales revenue rose over $120 million or 14%; total revenue for the quarter was approximately $3.5 billion, which is an increase of $1.1 billion or 45% from the prior year. Now in addition to the increase in gallons sold and inside sales, higher retail prices of fuel contributed to this increase as well. Total gross profit rose $96 million or 17%. This exceeded the rise in total operating expenses of $65 million or 15%, and as a result total EBITDA rose $31 million or 23%. Diluted earnings per share for the fourth quarter were $1.60, which was up 43% from the prior year. While the new units had a significant influence on our overall results, it’s important to highlight the healthy performance of our existing fleet this quarter. Same store sales were strong for both inside sales and fuel as guest traffic continued to improve. Inside same store sales were up 5.2% while fuel gallons increased 1.5%. Our inside margin decreased 50 basis points versus the prior year primarily due to wholesale…

Thanks Steve. I’d like to again say thank you and congratulations to the entire Casey’s team for delivering another record year. The hard work of the team and dedication to Casey’s gives us confidence in our ability to execute on our three-year strategic plan. As you can see, our business has performed exceptionally well in a challenging macroeconomic environment. Casey’s has shown tremendous resiliency and we’re positioned especially well to deliver future value to our shareholders through our strategic plan, which is being enhanced with our commitment to technology. As a reminder, the three pillars of our strategic plan are: reinvent the guest experience, create capacity through efficiencies, and be where the guest is via disciplined store growth. All three pillars are supported by investing in and growing our talented team. We’re leveraging technology more now than ever before to reinvent the guest experience. We’ve built a well respected tech, digital and data team that will position us for the future as we embark on our Casey’s modernization journey. Our focus on technology is centered around three primary areas: driving guest engagement and experience, improving team member engagement and impact, and supporting our growth via supply chain, merchandising and fuel capabilities. The goal is to create a guest experience that is best-in-class. Our mobile app now represents 65% of all digital revenue, which is currently driven by whole pies. We recently added 700 stores that can now deliver beer and hard seltzers along with their pizza orders. We also rolled out a carwash subscription program for our 200-plus carwashes. We plan to utilize technology to ease manual functions within our stores and enable our team members to spend more time on our highest priority, our guests. Merchandise ordering efficiency, inventory management, along with more robust data analytics will create efficiencies…

Our first question will come from Anthony Bonadio of Wells Fargo. Your line is open.

Hey, good morning. Thanks guys. For starters, I just wanted to ask a bit about the guidance. Looking at the opex guide, it looks like costs are running quite a bit higher than your guidance - I think you guys said something like 30% quarter-to-date. I guess what gives you confidence that that’s going to decelerate so much, and then beyond that, how are you thinking about the labor piece of that figure?

Yes Anthony, maybe I’ll start on just the cadence and Darren can chime in, obviously. I think the primary influence on the way opex will play out over the course of the four quarters next year is what we’re lapping in fiscal 2022, so half of our increase will still be from new units and that includes the units that we lapped in the prior year, and so we didn’t close the Buchanan acquisition until the middle of May last year, we didn’t close the Circle K acquisition until the end of May, so we will pick up at least a month as the case may be of kind of incremental opex, just from those two acquisitions, and then we still have to lap Pilot later in the year, so that’s what drives most of it. Then in the mothership business, we started to really face quite a bit of labor inflation in the middle of the first quarter in the prior year, where we put into place a variety of referral-retention type of bonus structures in our field, and so as we lap that, that puts a little bit more pressure on the first quarter lap. As it relates to the 30%, just to be clear, the 30% I was referencing to is the cheese cost inflation. Cheese cost is not operating expense - for us, that sits in our gross profit line in our prepared food business, and so that would not be relevant to the operating expense number. Darren, do you want to comment on just what we’re seeing in the labor market broadly?

Yes, I think from the labor side, things are somewhat starting to normalize. We still have inflation on wages, but that has moderated a bit from what we were experiencing, but still we have to lap over some significant increases from prior year. The other thing I would add is that credit card fees are a bit of a wildcard at this point in terms of the high fuel--high retail price of fuel and what that impact can be, and to put that in context, for every $0.10 in retail price increase, that equates to about $4 million in incremental credit card fees on an annualized basis, so as fuel prices are continuing to soar into record high territory, we’ll still feel that impact on credit card fees, and it’s hard to predict at this point where the top is and when that may start to decline, so we’ve factored in some of that into the opex guide for the year.

Got it, that’s really helpful color. I also just wanted to touch on fuel margins. Clearly Q4 continued to be strong for you guys. I know it trailed off a bit in the end, and it seems like industry data in May showed pretty significant declines. It sounds like you guys are seeing something better than that quarter to date, but just any color you can give us on how you’re thinking about the path from here?

Yes, I’ve thought a lot about how I wanted to talk about fuel margin and how that’s looking. This is an extremely volatile environment right now, and when I was in the military, we would call this a VUCA environment, which is an acronym for volatile, uncertain, complex and ambiguous. I think all of those words describe what we’re experiencing in fuel right now. As we mentioned, we’d seen an increase of about $0.74 in costs through the quarter. If you were to shift that from the beginning of the fiscal year to now, it’s about $0.80 in cost increase, but on the path to that $0.80 increase, we’ve had a couple periods where costs declined over $0.20 a gallon, so the volatility is pretty extreme. We’re working had to overcome that, and so what I’d tell is we feel confident in our ability to manage through it. We’ve spent a lot of time over the last couple years building the fuel pricing team and building up their capabilities, and I think they’ve proven themselves to be adept at managing through volatility, certainly through COVID, and now we have different drivers of that volatility but we feel confident in our ability to do that. Now that being said, it’s not going to always neatly line up with quarter end or any other artificial timeline that we’d draw to, so I think over time over the course of the year, we will manage it well and we will be able to navigate through it, but as you saw in the fourth quarter, we gave some guidance in a business update and margin changed pretty dramatically over the couple of weeks after that, and so we missed it by about a penny or so. But overall, we think we’ll be able to navigate through it, it will just be how that plays out quarter to quarter that’s really the big wildcard here.

Yes, I may add to that, Anthony. I do think it’s important to reiterate the structural dynamics that underpin the historically high levels of CPG for the industry remain in place. I think the fact that the operating costs of the business for the industry, for all the reasons we talked about in the opex discussion of just higher labor and higher compliance costs and higher credit card fees, those still exist and those exist whether CPG moves by a penny or two from a near-term perspective, and so we don’t see any change as we sit here today from an industry perspective though around what has really driven the industry to a different platform level of fuel profitability. None of that is changing, and for small operators, all of those issues are even more acute than they are for the larger players.

Got it, that’s really helpful, guys. Thanks and good luck.

Thank you.

Our next question comes from Ben Bienvenu of Stephens. Your line is open.

Hey thanks, good morning guys.

Morning Ben.

I want to ask about the in-store merchandise margins. You pointed to 40% margins, which I think is notable given all the cost pressures that you and your peers are seeing. When we think between grocery and prepared foods, I would think the margin compression would reside in the prepared food business and maybe there’s margin expansion in grocery, but please correct me if I’m wrong, and then if you could talk about what, if anything, you’ve done to forward buy cheese and mitigate any price or cost volatility there. That would be helpful.

Yes Ben, this is Darren. I’ll go ahead and start and Steve can kind of fill in the blanks. I think with respect to the margin, we certainly have the intent to stay ahead or try to stay apace with inflation throughout the year and maintain that margin in that 40% range. The grocery and general merch side is going to be a little bit more manageable because, as we’ve discussed before, those agreements with the major CPG manufacturers are on a calendar year basis, and we took some of those cost increases January 1 and we had planned retail price increases to mitigate those, and so as you’ve seen, we’ve still be able to have margin expansion in grocery and GM in spite of the inflation, so we think we’re pretty solid in that side of the ledger. On the prepared foods, it is more commodity based, and so that tends to be a little bit les ratable, but we’ve taken three retail price increases so far since October of last year, one of them most recently in the last couple of weeks, and we think we have more pricing power there because it’s a little less commoditized at retail, meaning nobody really knows what the proper price for a slice of pizza should be or for a breakfast sandwich, so we believe we have a little more pricing power there. It will be a matter of being able to keep ahead of it. As we sit here today, we believe we’re caught up to that, we just need to continue to see how commodity prices impact and then we’ll have to manage through the pricing piece of it. Steve, any other color you wanted to add to that?

On the cheese specifically, we had a little bit of cheese bought forward in the fourth quarter of fiscal ’23, but we really don’t have anything bought forward in the first three quarters. I wish we were able to secure cheese at a reasonable price in the forward market. The company has a history, obviously, of buying forward where it makes sense for us. We watch it like a hawk every single day. The last six months have proven to be very difficult to find forward pricing that really makes any sense, and so we’ve not been a big player in that space. Going into fiscal ’23, it’s a de minimis level of locked in pricing as we sit here today. Hopefully that changes, and obviously we will take advantage of it if we can do that on reasonable terms.

Okay, great. That makes perfect sense. Darren, you alluded to some of the pricing increases you’ve taken. When we think about your 4% to 6% in-store same store sales growth in 2023, if you could disaggregate price versus volume in that, that would be helpful as we think about the composition of growth this next year.

Yes, I guess Ben, probably the way I’d look at it is if we took a look at the fourth quarter, what we saw is about 4.5% of the increase was from price and about half a percent was from unit velocity, which equated to a little over 5% same store sales increase, so I would expect an equation similar to that. You know, we have a lot of different consumer dynamics going on right now with inflation the way it is. We’re seeing that consumers are buying less take home sized packages of things and more single serve items, which tends to accrue to our benefit on the margin side, and so we think that will continue to help us out. It helps out on the sales side with frequency, so I’d say people are making more frequent trips but buying less per trip. Now, inflation and price increases have kind of mitigated that average retail, so the average retail is still up, but we think it’s going to be mostly driven by price and flat to slightly higher traffic.

Okay, great. Thank you and best of luck.

Thanks.

Our next question comes from Irene Nattel of RBC Capital. Your line is open.

Thanks, good morning everyone. Just one point of clarification on your answer to the lat question. With respect to the trade-down in package size, does that apply to tobacco as well as beverage?

Yes Irene, it does actually. Over the last couple of quarters, we’ve seen that that mix of cartons to packs really start to get back closer to pre-COVID levels, and if you recall during COVID, things swung a little bit heavier on the carton side, less on the pack side as people spent fewer trips going to stores. That’s all reversed, and we are almost back to normal on that mix, which is about 85% single packs and about 15% cartons.

That’s really helpful, so essentially what you’re seeing is what you’ve seen previously when we’ve had consumer spending being pinched. Is that a reasonable comment?

Yes, I think so. When cash is a little bit tight, people just buy less per occasion than they normally do. That doesn’t mean they really stop, they just don’t pantry fill as much as they used to, so we’re seeing some of that behavior begin.

Thanks, that’s really helpful. I also wanted to come back to a question about gas margins. Clearly we all recognize the challenge with forecasting those, but I was really intrigued by your comment around if we use the mid-30 range, then you get to 5%, 6% growth. Is it safe, or should we infer from the way in which you phrased that, that as a result of all of the initiatives you’ve put into place, you think that on a longer term basis, that mid-30 range could be sustainable?

Well Irene, I’ve referred--you know, I’ve talked about a crystal ball and fuel margins before. It’s a difficult one to say. What I do believe to be true is what Steve referred to earlier - the underlying costs of operating a business in this industry is high now and is going to continue to stay high and potentially increase when you look at the cost of labor, the cost of regulatory compliance, and everything else that’s going on in the world. I don’t see those margins retreating any time soon. Now, there is a bit of a wildcard in there and that’s with the retail price of fuel, because I think margins tend to expand a bit to compensate for the credit card fees associated with higher retail prices, so I would anticipate that those can maybe go up in the short term as we see these really high fuel prices and then they could come back down a little bit to offset that, so net-net you end up in the same place. But on a cents per gallon, it may look a little bit higher to overcome those inflated credit card fees.

That’s very helpful. Just one final question on the gas volume guidance, if we take that flat to plus-2%--

Our next question comes from Bonnie Herzog with Goldman Sachs. Your line is open.

Oh hi, hello everyone. I kind of wanted to go back and just ask a little bit differently on the fuel margins. I just wanted to understand what you laid out in terms of the mid-30 CPG margins, and you noted this implies a 5% to 6% EBITDA growth, but Darren, how are you guys thinking about your medium term EBITDA growth target of 8% to 10%. Is that something that you see as still doable, and I guess I’m also asking in the context that this target assumed, I believe, opex growth of 7% or lower, so just given your guidance this year or next fiscal year for high single digit opex growth, how at risk is that EBITDA growth target of 8% to 10%?

Yes Bonnie, the 8% to 10% was a CAGR over a three-year period, and as we sit here today - Steve, keep me honest - I think we’re 11% to 12%, somewhere in that range over the first two years of that plan, so we’re cycling over, I think, it was a 12 and then an 11 on top of the 12, and now we’ll put a 5 or 6 on top of an 11, so the math will work out very favorably for the three-year CAGR of 8% to 10%, so we feel very confident in our ability to do that. Look, there’s just a lot going on in this environment right now that makes it volatile, so we think we’ve taken the right approach in terms of giving the guidance where we think we can land it, and that will still help us to land on our commitments from investor day over that three-year CAGR. Steve, you can talk about the opex a little.

I’d just remind you, we’re not giving EBITDA guidance for next year. It’s just a modeling exercise to calibrate folks. Darren’s points are all 100% valid - over the medium term, our algorithm holds. We feel very confident about our ability to do that. That algorithm includes growing opex at a slightly lower clip than we would grow EBITDA, and we feel very good about doing that. Some of that is going to come from same store, some of that will come from new units. As it relates to fiscal ’23, it just so happens because we’re still lapping non same store acquired units from fiscal ’22, you get a little bit of extra new unit pressure associated with that, and obviously it’s a super high credit card environment, but our confidence in that medium term algorithm is unchanged from where I sit, for sure.

Okay, that’s helpful. I then wanted to ask about prices at the pump, which continue to go up quite a bit. Curious to hear what’s your expectation of where prices could head this year, and I guess I’m asking because trying to understand what would be implied or assumed based on the guidance you laid out. Where do you see prices going? Do you think they could go above $6 a gallon, and thinking about when we may hit true demand destruction, do you guys have a level that you think that will occur at? Thank you.

Yes Bonnie, it’s really hard to predict where we’re going to see those prices ultimately peak out. I would say it’s very geography specific. We have a pretty wide range from the most expensive areas in our geography to the least expensive, and so if you were to take a look at the greater Chicago suburbs, where we just acquired some Bucky’s stores, those retail prices are well north of $5 and approaching that $6 range that you referenced, but at the other end of the spectrum we have some areas that are just slightly over $4 a gallon, so it’s a pretty wide range. In terms of demand destruction, we’ve kind of modeled this out based on our quartiles on retail prices, so we look at our top quartile of retail prices, which is well north of $5 a gallon at this point. We are starting to see some erosion in volume in the low single digits. In the middle two quartiles, we’re kind of flattish to maybe slightly down, and then in the bottom quartile we’re still seeing gallon growth, so you throw all that together, we feel like that flat to 2% is a solid number for guidance. But again, we’ll have to see how this plays out. Six dollars a gallon is uncharted water for everybody, so I’m not sure what to expect at that, but I would imagine there is some demand destruction at that point.

Our next question comes from Chuck Cerankosky of Northcoast Research. Your line is open.

Good morning everyone, great quarter. Talk about please, if you can, how the customer who’s pumping gas and then stopping in for prepared foods, how they’re maybe trimming down what they buy, and is that reflected in your comment before with pizza slices being up so much? Are they giving up other purchases and maybe going with the pizza or beverages, or the other items that are available?

Yes Chuck, we haven’t seen any reduction in what people are buying or the frequency of people coming into the store. What we have started to see is some trading around within the store, so certainly our private brand products have resonated well and we exited the quarter at 5% penetration. As we sit here today, we’re at 5.2%, so we’ve increased 20 basis points in about a month with that shift towards private brand and just the more affordable options, so we haven’t seen that behavior shift there. What we have seen on the fuel side is a few things in terms of change in behavior. People aren’t initially just pulling back on buying fuel, what they are doing is changing their fuel buying behavior. The average fill-up is down about a gallon versus where it was this same time last year, so people are purchasing just a little bit less fuel than they had historically per visit, but they’ll end up having to make more visits to the store over time, which we believe gives us a better opportunity to get people inside the store to buy more stuff. The second thing they’re doing is shifting over to higher blends of ethanol because the ethanol economics are actually working out pretty favorably right now from a consumer perspective, so they’ll shift over to an E15 type of product versus what most of the fuel is blended at E10, so we’ve seen about a 200 basis point shift in mix on E15. Then the last thing is you’ll see some customers trade down from premium into regular fuel to save money that way, but overall those are some of the behaviors we’re starting to see right now.

I was going to ask about that fuel sales mix. When the latter occurs, that hurts your margins, but increased purchases of a richer ethanol mix helps your margin, correct?

Yes, that’s correct.

All right, thank you. Good luck for the new year.

Thanks Chuck.

Our next question comes from Bobby Griffin of Raymond James. Your line is open.

Good morning everybody, thanks for taking my questions. First one is on fuel - I apologize, I know we’ve asked a lot about it, but just curious, there’s been a nice inflection point in Casey’s from pre-pandemic into the pandemic, where you guys have outperformed the OPIS average for the midwest. We as investors and analysts, is it fair to hold that outperformance going forward? Is that a goal, or should we think about that you guys can continue to outperform, understanding predicting the actual margin’s a lot harder, but can we keep the outperformance based on a lot of the structural changes you guys have made to your fuel practice? Is that something you can comment on or talk a little bit about?

Yes, sure Bobby. I would say that we expect to outperform our competitors on every category that we compete in, and fuel certainly is one of those we’ve made significant investment in and we have had some good success over the last couple years. I don’t see that changing. I think we’ve really stood up some strong capabilities and a very, very talented team that can--that has proven that they can execute in any environment. I think these more volatile environments are really where you see the talents of that team start to shine, and so yes, I would certainly expect that we would outperform our competitors in our geography.

Okay, and then Darren, your quartile data was very interesting, and I don’t know if the prices match up on directly as my question is going to go from a location standpoint, but in the quartile that you see the higher gas prices and you have more rural-based stores, are you seeing higher trips to your kind of grocery stores as larger grocery store is probably further away for that customer, so they’re shopping more frequently with you given that they can--you know, given it’s a much farther trip to go to Wal-Mart or whatnot in those small markets?

Bobby, I don’t have any data in front of me that would tell me that. I certainly would expect that as retail prices get higher. I think where we’ve really seen the extreme retail prices, like I said, are in more the Chicago suburbs. That’s probably not the dynamic you’re referring to. In the rural areas, particularly outside of Illinois, we haven’t seen those extreme prices like we’re seeing in Illinois, so we’d have to get back to you on that data point. We don’t have that in front of us right now.

Our next question comes from Anthony Lebiedzinski of Sidoti & Company. Your line is open.

Yes, good morning, and thank you for taking the questions. I just wanted to switch gears a little bit here. You talked about private label doing well and exiting the year with 5% penetration. As you look forward here, which product categories are you mostly focusing on as you look to expand the private label portfolio?

You know, Anthony, we’re working on a lot of different categories right now in private brand. We actually participate in 26 different categories of private brands, and some of those are underpenetrated, some of those are more penetrated, but I can tell you where we’ve seen some success so far in the last quarter, we launched a line of Casey’s candy bars which is something we have never played in before, and they have become the number one standard size bar in dollars, units, and margins within the category. When I say that, I mean that’s outperforming Reese’s, Snickers, all of those national brands, and so I think it really illustrates the quality and the value that those products provide. The other thing that I’d tell you about, we’ve had this longer term goal of getting 10% penetration over time within the grocery and general merch category, and that doesn’t sound as big an order as it is but when you factor in the fact that tobacco plays a pretty significant role in that grocery and general merch category, that tobacco category gets four cost increases per year, so that math becomes more challenging on a mix perspective. But the point I’d like to make is on the 26 categories that we play in today with private brands, we are already at 10% penetration in 14 of those categories, so I think when you take the tobacco equation out and you look category by category, we’re having some really good success in there. We launched 23 new items in the fourth quarter, we have another 20 items coming out this quarter, so we’re very bullish on our private brands, and now in this inflationary environment, we think that’s a little bit of a tailwind for us as we continue to expand on those products.

Thanks for that. Then just going back to the labor commentary, you talked about labor costs before, but as far as labor availability, can you give us some comments as to what you’re seeing there?

Yes, labor still remains tight, although I think our operations and HR teams have done a really good job of managing that. We haven’t had any issues where we’re closing stores or limiting hours because of team members, and as we sit here today, we’ve actually seen an uptick in applications and we are just below one person per store opening, so I would--in a historical context, I’d say that’s about average or that’s kind of normal, so feel really good about where we’re sitting from a staffing standpoint at this stage of the game.

Our next question comes from Kelly Bania of BMO Capital. Your line is open.

Hi, good morning, Kelly Bania here. Thanks for taking our questions. Wanted to see if you could shed some light on your total merchandise sales growth outlook - obviously the 4% to 6% comps, but from a non-comp perspective given still some M&A and the kitchen remodels, just help us understand what you are expecting on the total merchandise growth outlook.

Hey Kelly, good morning. This is Steve. I’ll start with that. It’s certainly going to be higher than the same store number. If you just think of the way we lap those, so the 80-ish new units, those won’t come in all in the first quarter like a lot of them came in last year, but you’ll get a benefit associated with those. You’re correct in that the remodeling benefit that we get in these new stores, the day we close the store, depending on the permitting, it’s not in a same store number, and when we open that kitchen, you kind of get a step up as we start to sell a lot more prepared food from a base usually close to zero. We haven’t quantified, and I don’t think we’ll disclose the specific number associated with that, but clearly your instinct is correct in that the total merch sale number should be noticeably better than what that inside run rate turns out to be.

Okay, that’s helpful. Also, just wanted to ask about the prepared food. You talked about, I think, the March price increases, sounds like another in April. One, the response in terms of elasticity, it sounds like you thought you had more pricing power. What is in your plan as you look at that comp guidance, and what have the recent price increases done to help offset some of the pressure in the prepared food gross margin line?

This is Steve. I’ll start and then let Darren chime in terms of what’s in our expectations. If I do the two categories separately, because we’ve behaved a little bit differently in the grocery versus prepared food, most of our grocery price increases excluding tobacco, I think were put into action at the beginning of this calendar year just based on the contractual nature of that business, and so we know what the inflation is across most of the center of the store through our joint business planning exercise, and most of those price increases were put in place in January, so let’s call that low to mid single digits, depending on what the particular category is. Those will run through the end of the calendar year, which is reflected in our expectation. We’ll have to renegotiate all of that as we get into the latter half of this calendar year, but I would expect we will continue to price in the grocery business consistent with maintaining margins as we enter the next calendar year, and so I don’t think we would take a lot of pressure on margin no matter how those negotiations turn out. Prepared foods, a little more complicated, to Darren’s point. We have mid single digit type of price increases on average rolling through the prepared food category. They’ve started at different points in time - you know, some of them started later last year calendar year, and the more significant ones started either in the middle of the fourth quarter for us or literally at the beginning of this fiscal year, but it’s a mid single digit kind of price increase, it is rolling through over the course of the year, we’ll get the benefit of most of that the entire year. We do think once you lap the cost increase, we’ve covered the dollars of inflation that we know about right now, but to the extent cheese gets better or worse, as an example, or proteins, I would expect we will need to continue to turn those dials on prepared food over the course of the year. But ultimately, we have enough pricing in the system now based on the inflation that we know about to give us confidence that kind of 40%-ish number for the year inside the store is sustainable and doable as we sit here today.

Yes, and Kelly, the only thing I’d add to that from an elasticity standpoint is that I think we’re not the only ones experiencing commodity inflation. Everybody that’s in the restaurant business, QSR fast casual, what have you, is experiencing the same thing, and so when you put us into that spectrum, even with the recent retail prices we’ve taken, we tend to be a more affordable option for most people than a QSR, certainly than a fast casual restaurant, so we would expect that over time, we will benefit from that and we’ll see some switching, some channel shifting from QSR fast casual into our channel, which should help us on the volume side.

Our next question comes from John Royall of JP Morgan. Your line is open.

Hey guys, good morning. Thanks for taking my question. On the store addition guidance, just looking at the 80 stores, it’s a relatively big program if you plan to do it mostly organically. Just comparing to prior years, the capex at the low end seems pretty similar to fiscal ’20 and ’21 on a much smaller build program, and that’s before backing out the remodels for the new stores, so I’m just trying to square why the capex appears so low relative to the 80 store program. I don’t know if there’s an assumption that some of that 80 comes from acquisitions or if there’s something else I’m missing there, maybe.

Yes John, good morning, this is Steve. The answer is yes on your assumption, so I would expect the 80 units will be a mix of new units that we build as well as units that we end up purchasing. If we purchase something, it won’t go through PP&E obviously, it will go through a different line item on the cash flow statement. As we sit here today, it’s probably directionally going to be half and half. I think we slowed down new builds in fiscal ’22 mainly because we were digesting so many acquired units, and that’s the beauty of our model, is we can kind of hold on the land bank, and so you’re going to have the first part of this year some units that we, frankly, could have opened last year and chose not to, but as we sit here today, probably it’s half and half, and that’s the biggest contributor to why the run rate of total capex is kind of that $450 million to $500 million. I will say one offsetting factor to that is we actually couldn’t spend everything we wanted to spend at the end of fiscal ’22 because of supply chain issues - we just couldn’t get things, and so I don’t know if that’s going to get better, frankly, in fiscal ’23 or not. We’re kind of assuming that it does and that we’re able to catch up on some things like vehicles and equipment for certain aspects of the store, but time will tell as to how successful we’re going to be and spending what we want to spend on things like that.

Great, thanks. That’s really helpful. Then Steve, you talked a little bit about deferred taxes in the prepared remarks. I just wanted to dig in on that a little because it looks like for the full year, your cash taxes were quite low after adjusting for the deferred add-back, which was relatively large. I’m just looking for a little more detail on what was driving that on the low cash taxes.

Yes, if I think of how it impacted the tax rate first, there were three states in our footprint during the year that lowered their state income tax rates, or they’ve announced that they’re going to have lower income tax rates in the future. We immediately have to make a deferred tax entry when they announce that, even if it’s not active yet, just to revalue deferred tax liabilities in Nebraska, Arkansas and Oklahoma for us. All will have lower state tax rates in the future and we have a tax liability, and so that provides an immediate benefit in the quarter. That was the big driver of why the rate was so low in the fourth quarter, was actually Nebraska - they announced a state tax reduction. I would tell you from a cash tax standpoint, we actually probably overpay taxes a little bit relative to what I think we’ll end up owing in fiscal ’22. It’s part of the reason we have a tax receivable on the balance sheet, and I think it will allow us to have a smaller estimated payment here at the beginning of the year and it will be a cash flow positive item for us in fiscal ’23.

Our next question comes from Karen Short of Barclays. Your line is open.

Hey, thanks very much. Sorry for the background noise. I wanted to ask a question just with respect to gas margins. I know you gave a slight indication in terms of where gas margins are trending into the current quarter to date, but you haven’t really given much of an outlook in any concrete way for the year, so I wanted to get your perspective on where you think the actual run rate should be on gas margins. Then I wanted to find out if you could talk a little more about if there’s any other changes to your inventory management process, because obviously with five to seven-day old inventory in the ground, you benefit from days-old inventory when gas prices are rising but you’re obviously going to get hurt if gas prices fall, so wanted to talk a little bit about how you’re managing that and thinking about managing through the inventory process.

Karen, I guess with respect to the first part of your question, we’ve historically not given fuel margin guidance for the year, so we’re kind of staying consistent with that practice of not doing that at this point. In terms of inventory management in the ground, yes, in the very short term when fuel costs are rising and you have lower cost inventory in the ground, that does help, but then the retail prices tend to lag moving up on that cost too, so that typically your margin doesn’t expand when the cost curve is going up, it tends to contract, and then the opposite is true on the way down, when you do have higher cost inventory in the ground as it’s falling but the retail prices tend to fall slower then they rise on the upside, so the margins actually expand on the way down. We’ll probably have more upside on the way down then we do downside on the way up, is the way we like to think about it.

And is there any evolution in terms of how you’re thinking about managing inventories to be leaner and more, I guess, marked to market, as in rack to retail at day of? Then the second question I had is you had talked, and I’m sure you’ll talk about this next week, about upstream capabilities in terms of gas margins, in terms of actual contracts on pipelines, so is there any update on that?

Yes, in terms of how we manage the fuel in the ground, we’re not as concerned about the mark to market. What we are concerned about is the competitive landscape that’s going on, so we want to make sure that we’re staying in our relevant pricing range and consistent with our strategy for retail pricing on the street, and then the cost is going to be the cost and we’ll manage that over time. In terms of the upstream fuel procurement, we implemented some systems this past year that would allow us to get more sophisticated in the fuel procurement process, both on the risk management side as well as the accounting side and dispatching side, so that we have those foundational capabilities. We just wrapped that up this past quarter, and so this year we’re going to begin the process of building out that capability to go further upstream in our procurement processes. We don’t expect to actually launch any of that in this fiscal year. We intend to launch that in next fiscal year, but this year will be one of really making sure that we’ve got all those systems and processes in place so we can execute on that further upstream procurement effectively.

I would now like to turn the conference back to Darren Rebelez for closing remarks.

All right, thank you very much. Thanks for taking time to join us today. I’d also like to thank our team members once again for their contributions in delivering another all-time record year. For those of you who will be able to come out to next week for our analyst day, we look forward to seeing you then. Thank you.

This concludes today’s conference call. Thank you for participating. You may now disconnect.