• Net Sales Growth: 3.2% increase in fiscal Q1 2025.
• Total Case Volume: Increased by 2.6%, with a 7.8% rise in independent restaurant volume.
• Gross Profit Increase: 6.1% growth in fiscal Q1 2025.
• Adjusted EBITDA: Increased by 7.3% to approximately $412 million.
• Net Income: $108 million for fiscal Q1 2025.
• Diluted Earnings Per Share: $0.69, with adjusted diluted EPS at $1.16.
• Operating Cash Flow: $53.5 million generated in the first three months of fiscal 2025.
• Capital Spending: Increased to $96.5 million in fiscal Q1 2025.
• Debt Leverage: Above the midpoint of the 2.5x to 3.5x target range.
• Share Repurchases: $29.5 million spent to acquire 0.4 million shares at an average price of $74.69.
• Fiscal 2025 Guidance: Net sales expected between $62.5 billion and $63.5 billion; adjusted EBITDA between $1.7 billion and $1.8 billion.

• Warning! GuruFocus has detected 7 Warning Signs with PFGC.

Release Date: November 06, 2024

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

Positive Points

• Performance Food Group Co (NYSE:PFGC) reported strong net sales growth of 3.2% in the fiscal first quarter, with a notable 7.8% increase in total independent restaurant volume.
• The company successfully closed two acquisitions, Jose Santiago and Cheney Brothers, which are expected to enhance growth and margins.
• PFGC's Foodservice and Convenience segments delivered double-digit adjusted EBITDA growth, increasing by 13.8% and 11.2% respectively.
• The company is making significant progress in digital ordering applications, enhancing customer engagement and operational efficiency.
• PFGC is actively expanding its infrastructure with 10 major projects, including new distribution centers and facility expansions, to support long-term growth.

Negative Points

• The Vistar segment experienced a modest adjusted EBITDA decrease due to lower foot traffic and challenges in certain customer channels.
• The Southeast region faced operational difficulties due to hurricane activity, impacting business performance.
• PFGC's leverage increased above the target range due to the Cheney Brothers acquisition, necessitating a focus on debt reduction.
• The convenience segment is experiencing mid-single-digit same-store sales declines, attributed to consumer adjustments to price increases.
• The company faces challenges in the theater and value store segments within Vistar, with competitive pressures and account closures affecting performance.

Q & A Highlights

Q: Are you seeing much of a normalization in your pace of hiring for the sales force, and has competition shifted given the tough macro environment? A: George Holm, CEO: We've been consistent with our sales force growth, running in the 5% to 6% range, which aligns with our recent growth. There haven't been significant changes in compensation as our salespeople are commission-based, allowing them to influence their earnings.

Q: Can you elaborate on the signs of stability you're seeing in consumer behavior across different channels? A: George Holm, CEO: It's challenging to determine how much of our growth is due to market conditions versus our efforts. We've consistently gained market share in the independent sector, despite the market being down about 3% year-over-year. Growth hasn't come from casual dining chains, but more from high-end QSRs and independents.

Q: What is the integration timeline for the Cheney acquisition, and what synergies do you expect over the next few years? A: George Holm, CEO: We're focusing on necessary integrations and maintaining Cheney's operational integrity. Synergies, particularly from private brands, will develop over the second and third years. We're not rushing synergies to avoid negatively impacting the company.

Q: Can you discuss the impact of the hurricanes on Cheney's operations and the speed of the acquisition's closure? A: George Holm, CEO: The hurricanes had minimal impact on Cheney's operations. The acquisition closed quickly due to our specialized business approach in Florida, focusing on areas we excel in. Despite some account losses, the overall financial impact was not significant.

Q: How do you view the potential for growth in independent case volumes, and what are your expectations for reaching your target growth range? A: George Holm, CEO: We're currently seeing organic independent growth between 1% and 2% above Q1 levels, with weekly improvements. We expect to reach our 6% growth target, though it may be more back-end loaded this year compared to last year.

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