Recap of Foodservice Distribution Earnings Calls (May 2021)
Posted on May 14, 2021
Highlights from Earnings Calls, 5/4 – 5/10 2021
The foodservice distribution industry is undergoing tremendous volatility, resulting in increasing demand, supply chain struggles and labor challenges. Most of these themes were highlighted in recent earnings releases by Sysco, US Foods and Performance Food Group. The primary themes along with our takeaways from each of the calls are highlighted below.
- Industry is in the midst of a strong rebound, felt virtually everywhere in the United States.
- Product availability is challenging and many categories are experiencing cost inflation.
- Labor markets continue to be exceptionally tight.
Key Highlights from Sysco Earnings Call (5/4/21)
Management from Sysco shared key trends, strategies and insights impacting their business and the industry in general. Some of our noted observations include:
- Sysco stated that they have now won over $1.8 billion of net new national /contract sales wins since the start of the pandemic
- Sysco is serving 10% more local customers than they did in FY 2019
- Sysco expects to hire over 6,000 associates in the 2nd half of their fiscal year
- Inventory on hand and on order at Sysco is at levels greater than inventory position pre-COVID
- April US Foodservice segment sales for Sysco were down 5.3% vs. comparable FY 2019 and SYGMA was up 12% vs. comparable FY 2019
- To address shortages in certain job categories, it has increased advertising related to those openings, are offering sign-on bonuses, retention bonuses and referral bonuses.
- Management at Sysco believes that the largest distributors have been net winners thru the COVID period of capturing market share and expects this trend to continue
- Sysco continues to develop and focus its cuisine-based selling strategy (specifically mention Mexican, Asian and Italian cuisine)
- Additional insights will be shared at the upcoming analyst day on May 20th.
Key Highlights from Performance Food Group Earnings Call (5/5/21)
Management from Performance Food Group shared key trends, strategies and insights impacting their business and the industry in general. Some of our noted observations include:
- Net sales grew 2.9% in their third quarter to $7.2 billion
- PFG stated that they have now won over $1.8 billion of net new national /contract sales wins since the start of the pandemic
- PFG’s financial results now have a year of Reinhart’s performance starting in January
- During the last 2 weeks of March, dollar sales were larger than they have ever been and that continued into April
- Independent case sales were up 6.3% with considerable improvement late in April and early May
- Their chain business skews towards the casual dining space, which has been slower to recover.
- The recovery for Vistar is moving forward, at a slower pace than Foodservice. The Vistar segments doing well include convenience stores, retail, value stores and corrections with declines in the theater and office coffee service businesses.
- Some Vistar businesses like micro markets and micro kitchens may benefit from different work patterns over the long run.
- Legacy Performance Foodservice and Reinhart segments’ pro forma dollar sales turned to positive growth versus 2019 in the third week of March and have remained positive since. In April, pro forma dollar sales for Performance Foodservice and Reinhart accelerated to higher levels of growth compared to 2019.
Key Highlights from US Foods Earnings Call (5/10/21)
Management from US Foods shared key trends, strategies and insights impacting their business and the industry in general. Some of our noted observations include:
- USF Chain volume for March and April was ahead of 2019
- For their independent customers, volume for March was flat to 2019 and above 2019 for April
- The Mother’s Day week had the highest shipment to independent restaurants of any Mother’s Day week in 5 years, and reflected a 6% jump over 2019 Mother’s Day week
- The hotel part of their hospitality business has recovered as leisure travel returns and occupancy rates recover, with occupancy rates now being only 500 basis points below a year ago
- Health care case volumes continue to remain steady in the negative 10% range
- In the first quarter of 2021, US Foods added $200 million of new customer wins
- USF says their technology platform and service model are keys to gaining new customers
- The FSA or Food Group acquisition continues with warehouse integration and the company anticipates completing the warehouse integrations by the second half of the year
- The Smart Foodservice business has been rebranded as CHEF’STORE Brand and continues to outperform the delivered business as it has throughout the pandemic.
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