Performance Food Group Company announced its second quarter and first-half fiscal 2023 business results.
Second-quarter fiscal 2023 highlights
- Total case volume grew 3%
- Net sales increased 8% to $13.9 billion
- Gross profit improved 17% to $1.5 billion
- Net income increased to $71.1 million
- Adjusted EBITDA increased 28% to $308.8 million
- Diluted earnings per share (EPS) increased to $0.46
- Adjusted diluted EPS increased 46% to $0.83
First-half fiscal 2023 highlights
- Total case volume grew 9%
- Net sales increased 23% to $28.6 billion
- Gross profit improved 27% to $3.1 billion
- Net income increased to $166.8 million
- Adjusted EBITDA increased 56% to $663.5 million
- Diluted EPS increased to $1.07
- Adjusted diluted EPS increased 89% to $1.91
“Our momentum continued into the fiscal second quarter, with another period of strong sales and profit results for our company,” George Holm, PFG’s chairman and chief executive officer, said in the announcement. “Our Foodservice segment produced organic independent restaurant case growth, leading to another quarter of market share gains. Our execution across all business segments, along with positive mix shift, led to margin expansion and strong cash flow generation. We are increasing the bottom end of our full year Adjusted EBITDA target as we look to complete the year with encouraging profit results. I am proud of how our organization has risen to the challenges in the external operating environment and believe we are well positioned to see continued success in the years ahead.”
Second-quarter fiscal 2023 financial summary
Total case volume increased 3.0% for the second quarter of fiscal 2023 compared to the prior year period, including 6.6% independent case growth. Total organic case volume was flat in the second quarter of fiscal 2023 compared to the prior year period. Total organic case volume benefited from a 4.3% increase in organic independent cases, growth in Performance Brands cases, and broad-based growth across Vistar's channels, offset by declines in foodservice chain business.
Net sales for the second quarter of fiscal 2023 grew 8.3% to $13.9 billion compared to the prior year period. The increase in net sales was primarily attributable to an increase in selling price per case as a result of inflation and channel mix. Overall product cost inflation continued to decline through the second quarter of fiscal 2023 and was approximately 10.3%.
Gross profit for the second quarter of fiscal 2023 grew 17.3% to $1.5 billion compared to the prior year period. The gross profit increase was primarily attributable to an increase in gross profit per case driven by a favorable shift in the mix of cases sold and growth in the independent channel.
Net income for the second quarter of fiscal 2023 increased $62.7 million year-over-year to $71.1 million. The increase was primarily a result of the $86.2 million increase in operating profit, partially offset by a $22.1 million increase in income tax expense. The effective tax rate in the second quarter of fiscal 2023 was approximately 26.1% compared to 26.5% in the second quarter of fiscal 2022. The effective tax rate for the second quarter of fiscal 2023 differed from the prior year period due to the relative size of stock-based compensation and other discrete permanent items as a percentage of book income.
For the quarter, adjusted EBITDA rose 28.1% to $308.8 million compared to the prior year period.
Diluted EPS increased $0.41 to $0.46 per share in the second quarter of fiscal 2023 compared to the prior year period. Adjusted diluted EPS increased 45.6% to $0.83 per share in the second quarter of fiscal 2023 compared to the prior year period.
First-half fiscal 2023 financial summary
Total case volume increased 9.4% for the first half of fiscal 2023 compared to the prior year period, including 6.7% independent case growth. Total organic case volume was flat in the first half of fiscal 2023 compared to the prior year period. Total organic case volume benefited from a 4.4% increase in organic independent cases, growth in Performance Brands cases, and broad-based growth across Vistar's channels, offset by declines in foodservice chain business.
Net sales for the first half of fiscal 2023 grew 23.2% to $28.6 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. Overall product cost inflation for the company was approximately 11.3%.
Gross profit for the first half of fiscal 2023 grew 27.0% to $3.1 billion compared to the prior year period. The gross profit increase was primarily attributable to an increase in gross profit per case driven by the acquisition of Core-Mark, procurement related gains, and growth in the independent channel, partially offset by an increase in the last-in-first-out (LIFO) reserve.
Net income for the first half of fiscal 2023 increased $153.7 million year-over-year to $166.8 million. The increase was primarily a result of the $229.2 million increase in operating profit, partially offset by a $55.5 million increase in income tax expense and a $16.9 million increase in interest expense. The effective tax rate in the first half of fiscal 2023 was approximately 26.2% compared to 22.6% in the first half of fiscal 2022. The effective tax rate for the first half of fiscal 2023 differed from the prior year period due to the relative size of stock-based compensation and other discrete permanent items as a percentage of book income.
For the first half of fiscal 2023, adjusted EBITDA rose 56.2% to $663.5 million compared to the prior year period.
Diluted EPS increased $0.98 to $1.07 per share in the first half of fiscal 2023 compared to the prior year period. Adjusted diluted EPS increased 89.1% to $1.91 per share in the first half of fiscal 2023 compared to the prior year period.
Second-quarter fiscal 2023 segment results
Vistar
For the second quarter of fiscal 2023, net sales for Vistar increased 23.3% 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 and channel mix, as well as case volume growth.
Second-quarter fiscal 2023 adjusted EBITDA for Vistar increased 85.5% to $92.2 million versus the prior year period. The increase was the result of a 34.8% increase in gross profit for the second quarter of fiscal 2023 compared to the prior year period, partially offset by an 10.5% increase in operating expenses. The increase in gross profit was driven by a favorable shift in the mix of cases sold, procurement related gains, and growth in cases sold. Operating expenses impacting Vistar's Adjusted EBITDA increased primarily as a result of the increased case volume described above, and the resulting impact on variable operational and selling expenses. Operating expenses also increased as a result of increases in personnel expenses and fuel expense.
Foodservice
Second-quarter fiscal 2023 net sales for foodservice increased 11.0% to $6.9 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 and a prior year acquisition. Overall product cost inflation for foodservice was approximately 9.6% for the second quarter of fiscal 2023. Securing new and expanding business with independent customers resulted in organic independent case growth of approximately 4.3% for the second quarter of fiscal 2023 compared to the prior year period. For the second quarter of fiscal 2023, independent sales as a percentage of total segment sales were 38.3%.
Second-quarter fiscal 2023 adjusted EBITDA for foodservice increased 27.9% to $214.2 million compared to the prior year period. Gross profit contributing to adjusted EBITDA increased 15.5% in the second 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 independent customers. The increase in gross profit was partially offset by expected decreases in procurement gains as the rate of inflation declines. Operating expenses impacting foodservice's adjusted EBITDA increased 12.2% for the second quarter of fiscal 2023 compared to the prior year period as a result of a prior year acquisition, as well as an increase in personnel expenses and fuel expense as compared to the prior year period.
Convenience
Second-quarter fiscal 2023 net sales for convenience increased 2.7% to $5.9 billion compared to the prior year period. Net sales related to cigarettes for the second quarter of fiscal 2023 was $3.6 billion, including $1.0 billion related to excise taxes, compared to net sales of cigarettes of $3.8 billion, including $1.1 billion of excise taxes, for the prior year period. The increase in net sales was primarily attributable to case growth in food and foodservice related products and an increase in selling price per case as a result of inflation.
Second-quarter fiscal 2023 adjusted EBITDA for convenience decreased 9.4% to $69.3 million compared to the prior year period. Gross profit contributing to convenience's adjusted EBITDA increased 5.5% in the second quarter of fiscal 2023 compared to the prior year period driven by a favorable shift in mix of products sold, partially offset by a decrease in procurement gains as a result of the timing of price increases and a decline in the rate of inflation. Operating expenses impacting convenience's adjusted EBITDA increased $27.3 million in the second quarter of fiscal 2023 compared to the prior year, primarily as a result of increased personnel expenses primarily related to related to salaries and commissions, and fuel expense.
Fiscal 2023 and long-term outlook
For the third quarter of fiscal 2023, PFG expects net sales to be in a range of $13.7 billion to $14.0 billion. For the third quarter of fiscal 2023, PFG expects adjusted EBITDA to be in a range of $270 million to $290 million.
For the full fiscal year 2023, PFG continues to expect net sales to be in a range of $57 billion to $59 billion. For the full fiscal year of 2023, PFG now expects adjusted EBITDA to be in a range of $1.27 billion to $1.35 billion compared to the prior expectation of $1.25 billion to $1.35 billion.
PFG reiterates its previously announced 3-year net sales and adjusted EBITDA targets. The Company continues to expect to achieve annual net sales of $62 to $64 billion and adjusted EBITDA between $1.5 and $1.7 billion in fiscal 2025.
