Can These Grocers Cope With a Changing Clientele? – Safeway Inc. (SWY), Harris Teeter Supermarkets Inc (HTSI)

Casey’s General Stores, Inc. (NASDAQ:CASY)

This company delivered better-than-expected same-store sales in January. Prime drivers of growth were remodeled stores and an increased number of 24-hour stores. Some additional tailwinds came from improving volume and expanded margins in Casey’s fuel segment.

The prepared food & fountain segment’s same-store sales rose by around 9% because of major remodels, 24-hour stores and the pizza delivery facility. Although the January comps for the segment lag sequentially, the performance drivers for the month should steer this vehicle for the rest of the year as well.

In fiscal 2013, Casey’s has plans to open 35 new locations to increase its reach throughout the country. Also, by the end of April 2013, it is expected that the company will renovate about 75 more stores. This is in accordance with its goal of having 800 renovated stores to upgrade the ambiance and improve the customer experience.

Furthermore, there is a plan to open 125 new 24-hour stores this fiscal year; by the end of the year, around 25% of the total stores will be open 24 hours. Currently, the company operates about 500 stores on a 24-hour basis, and around 225 stores that provide pizza delivery. It is expected that some additional stores may be converted to work round the clock and to deliver pizza in fiscal 2014.

The increase in the number of renovated stores, 24-hour stores, and pizza delivery facilities should improve the company’s presence.

What’s in it for investors?

Adapting to the changing environment shouldn’t be a bad thing for the investors — right?

For two of these companies, the change provides a good opportunity to grow in the future. Safeway Inc. (NYSE:SWY)’s innovative Just for U initiative and new fuel partnerships increase the company’s overall reach. And, Casey’s incline towards renovations, 24-hour stores, and pizza delivery facilities boosts the reach and experience of the company. The shift should be beneficial for both of them, which makes me bullish on these stocks.

As for Harris Teeter Supermarkets Inc (NYSE:HTSI), this scenario is somewhat different. The company came up with an aggressive pricing to compete with Food Lion, but only wound up with lower profits. But the market sentiments attached with the stock with respect to the takeover opportunity give it strength. I’ll rate the stock a hold until the takeover deal materializes.  

The article Can These Grocers Cope With a Changing Clientele? originally appeared on Fool.com and is written by Madhu Dube.

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