• Net Sales: Increased 8.7% to $1.034 billion from $950.5 million in Q4 2023.
• Gross Profit: Increased 9.8% to $251 million from $228.6 million in Q4 2023.
• Gross Profit Margin: Increased approximately 23 basis points to 24.3%.
• Operating Income: $46.5 million compared to $38.2 million in Q4 2023.
• Net Income: $23.9 million or $0.55 per diluted share, up from $16 million or $0.38 per diluted share in Q4 2023.
• Adjusted EBITDA: $68.2 million compared to $59 million in Q4 2023.
• Total Liquidity: $261.4 million, including $114.7 million in cash.
• Net Debt: Approximately $557.8 million, with a net debt to adjusted EBITDA ratio of approximately 2.5 times.
• Full Year 2025 Guidance: Net sales estimated between $3.94 billion and $4.04 billion; Gross profit between $951 million and $976 million; Adjusted EBITDA between $233 million and $246 million.

• Warning! GuruFocus has detected 8 Warning Signs with CHEF.

Release Date: February 12, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• The Chefs' Warehouse Inc (NASDAQ:CHEF) achieved its first $1 billion plus revenue quarter, marking a significant milestone in the company's history.
• Net sales for the fourth quarter increased by 8.7% year-over-year, driven by strong growth in specialty sales and unique customer growth.
• Gross profit margins improved by approximately 23 basis points, with a notable increase in the specialty category.
• The company reported a 13% increase in adjusted EBITDA per employee, indicating improved operational efficiency.
• Digital platform investments have led to increased online ordering, with 56% of customers ordering through digital channels, enhancing margin and customer engagement.

Negative Points

• Selling, general, and administrative expenses rose by 8.9%, primarily due to higher depreciation, amortization, and compensation costs.
• The gross margin in the center of the plate category decreased by approximately 7 basis points year-over-year.
• The company faces potential risks from tariffs with Mexico, Canada, and Europe, which could impact import costs and sourcing strategies.
• Inflationary pressures, particularly in the chocolate and egg markets, continue to pose challenges.
• Net debt remains high at approximately $557.8 million, although it has decreased from the previous year.

Q & A Highlights

Q: Did you see any impact from softer industry traffic in December or from the southern winter storms and California wildfires? A: James Leddy, CFO: The fourth quarter was consistently strong, with no significant impact from weather or demand issues. The fires in L.A. had minimal impact, affecting only a few customers.

Q: How would potential tariffs with Mexico, Canada, and Europe affect your imports, and could you pass through the inflation? A: James Leddy, CFO: We have over 4,000 suppliers, with many products sourced domestically. Historically, we've managed tariffs by finding alternative solutions and passing on costs. The largest impact would be on fruits and vegetables from Mexico, but it's manageable.

Q: What are the margin opportunities for 2025, and where do you see more favorability between gross margin and OpEx? A: James Leddy, CFO: We aim for incremental improvement in operating leverage and EBITDA margin by 20-25 basis points annually. Our focus is on driving gross profit dollar growth and managing operating expenses.

Q: Can you provide an update on labor costs and availability for 2025, and your expectations for commodity inflation? A: Christopher Pappas, CEO: Labor has stabilized post-COVID, and we pay competitively. For commodity inflation, excluding eggs and chocolate, we expect 2-3% inflation with some volatility. The meat market is stable, but eggs remain a headwind due to avian flu.

Q: How are your new facilities in Texas, California, and Florida performing compared to expectations? A: James Leddy, CFO: We don't disclose specific utilization levels, but Northern California's consolidation into one facility is promising. In Texas, we're optimizing space to grow specialty and protein sales. These investments are part of a multi-year strategy to drive improvements.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.