Performance Food Group Company (PFG) announced its first-quarter fiscal 2023 business results.
“Our results in the first quarter were well ahead of our prior, announced, expectations, leading to a strong start to the fiscal year,” George Holm, PFG’s chairman and chief executive officer, said in the announcement. “All of our operating segments are driving high-quality top-line performance and margin expansion. Within the Foodservice segment, we continue to outperform in the independent restaurant segment, picking up market share and adding new customers to our portfolio. Vistar's channel improvement continued, producing excellent profit growth compared to the prior year. In Convenience, we have now owned Core-Mark for just over a year and are extremely pleased with the integration and ongoing sales and profit performance. Our business is strong and delivered significant cash flow, which we used to reduce leverage and maintain a healthy balance sheet. Building upon our 1Q23 performance, we are confidently raising our sales and Adjusted EBITDA outlook for both the second quarter and the full fiscal year.”
First-quarter fiscal 2023 financial summary
Total case volume increased 16.3% for the first quarter of fiscal 2023 compared to the prior year period, including 6.9% independent case growth. Total organic case volume was flat in the first quarter of fiscal 2023 compared to the prior year period. Total organic case volume benefited from a 4.6% increase in organic independent cases, growth in Performance Brands cases, and broad-based growth across Vistar's channels, offset by declines in its Foodservice Chain business.
Net sales for the first quarter of fiscal 2023 grew 41.7% to $14.7 billion compared to the prior year period. The increase in net sales was primarily attributable to the acquisition of Core-Mark in the first quarter of fiscal 2022 and an increase in selling price per case as a result of inflation. The acquisition of Core-Mark contributed $4.7 billion of net sales for the first quarter of fiscal 2023 compared to $1.6 billion of net sales for the first quarter of fiscal 2022. Overall product cost inflation for the Company was approximately 12.3%.
Gross profit for the first quarter of fiscal 2023 grew 37.9% to $1.6 billion compared to the prior year period. The gross profit increase was primarily attributable the acquisition of Core-Mark and an increase in gross profit per case driven by procurement related gains and growth in the independent channel, partially offset by an increase in the last-in-first-out (LIFO) reserve. The Core-Mark acquisition contributed gross profit of $310.2 million in the first quarter of fiscal 2023 compared to gross profit of $89.1 million in the first quarter of fiscal 2022.
Net income for the first quarter of fiscal 2023 increased $91.0 million year-over-year to $95.7 million. The increase was primarily a result of the $143.0 million increase in operating profit, partially offset by a $33.4 million increase in income tax expense. The effective tax rate in the first quarter of fiscal 2023 was approximately 26.3% compared to 14.7% in the first quarter of fiscal 2022. The effective tax rate for the first quarter of fiscal 2023 differed from the prior year period due to a decrease in deductible discrete items related to stock-based compensation partially offset by a decrease in other taxable discrete items as a percentage of book income.
For the quarter, adjusted EBITDA rose 93.1% to $354.7 million compared to the prior year period. Diluted EPS increased 1966.7% to $0.62 per share in the first quarter of fiscal 2023 compared to the prior year period. Adjusted diluted EPS increased 151.2% to $1.08 per share in the first quarter of fiscal 2023 compared to the prior year period.
First-quarter fiscal 2023 segment results
Foodservice
First-quarter net sales for Foodservice increased 15.2% to $7.3 billion compared to the prior year period. This increase in net sales was driven by an increase in selling price per case as a result of inflation. Overall product cost inflation for Foodservice was approximately 13.6% for the first quarter of fiscal 2023. Securing new and expanding business with independent customers resulted in organic independent case growth of approximately 4.6% for the first quarter of fiscal 2023 compared to the prior year period. For the first quarter of fiscal 2023, independent sales as a percentage of total segment sales were 39.8%.
First-quarter adjusted EBITDA for Foodservice increased 38.8% to $236.1 million compared to the prior year period. Gross profit contributing to adjusted EBITDA increased 18.1% in the first quarter of fiscal 2023 compared to the prior year period driven by a favorable shift in the mix of cases sold to independent customers, including more Performance Brands products sold to its independent customers.
Vistar
For the first quarter of fiscal 2023, net sales for Vistar increased 28.8% to $1.1 billion compared to the prior year period. This increase was driven primarily by an increase in selling price per case as a result of inflation, as well as case volume growth.
First-quarter adjusted EBITDA for Vistar increased 146.4% to $74.4 million versus the prior year period. The increase was the result of a 42.2% increase in gross profit for the first quarter of fiscal 2023 compared to the prior year period, partially offset by an 11.6% increase in operating expenses. The increase is gross profit was driven by procurement related gains and growth in cases sold.
Convenience
First-quarter net sales for Convenience increased 98.2% to $6.3 billion compared to the prior year period. The increase in net sales was primarily attributable to the acquisition of Core-Mark, which contributed $4.7 billion of net sales for the first quarter of fiscal 2023, including $780.2 million related to excise taxes for the first quarter of fiscal 2023, compared to $1.6 billion of net sales, including $283.1 million related to excise taxes for the first quarter of fiscal 2022.
First-quarter adjusted EBITDA for Convenience increased 236.3% to $105.6 million compared to the prior year period. Gross profit contributing to Convenience's adjusted EBITDA increased 142.1% for the first quarter of fiscal 2023 compared to the prior year period and was fueled by the acquisition of Core-Mark, which contributed gross profit of $336.0 million to adjusted EBITDA in the first quarter of fiscal 2023 compared to gross profit of $97.9 million in the first quarter of fiscal 2022.
Fiscal 2023 and long-term outlook
For the fiscal second quarter of 2023, PFG now expects net sales to be in a range of $13.6 billion to $13.9 billion. The company had previously expected second quarter net sales to be in a range of $13.5 billion to $13.8 billion. For the fiscal second quarter of 2023, PFG now expects adjusted EBITDA to be in a range of $260 million to $280 million compared to the prior expectation for a range of $245 million to $265 million.
For the full fiscal year 2023, PFG now expects net sales to be in a range of $57 billion to $59 billion compared to the prior expectation for a range of $56 billion to $58 billion. For the full fiscal year of 2023, PFG now expects adjusted EBITDA to be in a range of $1.23 billion to $1.33 billion compared to the prior expectation for a range of $1.15 billion to $1.25 billion.
