Aramark reported fourth quarter and full year fiscal 2023 results.
“This year represented a significant step forward in achieving our strategic and financial goals,” John Zillmer, Aramark's chief executive officer, said in the announcement. “Our hospitality, field-focused culture generated a third consecutive year of strong Net New Business, with rising Revenue and AOI resulting in significant Adjusted EPS growth. Throughout the year, we continued to opportunistically de-lever through diligent cash management and strategic asset optimization. Additionally, we completed a key milestone with the Uniform Services spin-off, which we believe enhances our performance and focus. We could not have accomplished these results without our extraordinary teams around the globe, who exemplify our 'Reach for Remarkable' mindset in all that they do.”
“With the spin-off now complete, fiscal '24 represents a new chapter in Aramark's history,” Zillmer continued. “The business is off to a strong start to the year in delivering profitable growth, and we believe it is well positioned for continued top- and bottom-line success. We remain confident in our ability to build upon the momentum we've worked hard to establish, rooted in the hospitality culture and growth mindset that now define all aspects of the organization.”
Q4 year-over-year summary
Revenue +12%; organic revenue +11%
Operating income +40%; adjusted operating income (AOI) +28%
EPS +169% to $0.78; adjusted EPS +34% to $0.64
Fiscal 2023 year-over-year summary
Net new business momentum continued in global FSS.
Annualized gross new business totaled $1.2 billion, representing 8.8% of prior year revenue.
Retention at 95.5%, maintained significant improvement vs. historical levels.
Revenue +15%; organic revenue +16%.
Performance driven by net new business, pricing actions, and base business growth.
Operating income +37%; adjusted operating income (AOI) +34%.
Well-positioned to drive expected AOI growth and margin expansion into fiscal '24.
EPS +243% to $2.57; adjusted EPS +50% to $1.70.
Subsequent to year-end, completed spin-off of Uniform Services business; now Vestis.
Consolidated revenue was $4.9 billion in the fourth quarter, a 12% increase year-over-year, driven by net new business, pricing actions, and base business growth. The effect of currency translation increased revenue by $19 million.
Organic revenue, which adjusts for the effect of currency translation, grew 11% year-over-year. Organic revenue growth for Global FSS exceeded 12% versus the fourth quarter last year and Uniform Services increased 5%.
FSS United States revenue growth benefited from net new business and pricing actions, as well as strong base business performance led by higher attendance and per capita spending in the Sports & Entertainment business, and favorable volume trends in the Business & Industry (B&I) sector.
FSS International grew revenue across all geographies resulting from net new business, pricing actions, and ongoing base business growth — primarily from a robust events calendar and greater B&I participation rates in Europe, mining activity in South America, and a strong start to the academic year for higher education in Canada.
Uniform & Career Apparel increased revenue largely through pricing actions, and growth in adjacency sales, partially offset by the rollback of an energy surcharge that was in effect during the fourth quarter last year.
Year-over-year profitability improvement was a result of the following segment performance:
FSS United States increased driven by the ongoing maturity of previous new business, improved supply chain economics and purchasing initiatives, and disciplined above-unit cost management across the segment, as well as actions taken to close the price-inflation lag within the Education sector and Corrections business.
FSS International benefited from scaling new business, pricing, higher base business volumes, improved supply chain economics, and reduced above-unit costs from personnel actions taken earlier in the fiscal year.
Uniform & Career Apparel improved through the execution on the strategic initiatives outlined at the Vestis Analyst Day in September.
Fiscal 2023 summary
Consolidated revenue was $18.9 billion, a 15% increase year-over-year, driven by net new business, pricing actions, and base business growth.
Organic revenue increased 16% year-over-year to $18.9 billion, which adjusted for $186 million from Union Supply Group through the anniversary of its acquisition in June 2023, as well as $207 million of currency translation associated with a stronger dollar compared to prior year. Organic Revenue for Global FSS grew 18% to $16.1 billion, and Uniforms Services increased 5.5% to $2.8 billion.
The company's earnings per share of $2.57 included a net gain on sales of non-controlling equity investments. Adjusted earnings per share increased 50% to $1.70, associated with the ongoing focus on profitable growth across the organization.
Aramark business update
With a growth mindset now firmly in place across the organization, Aramark continued its net new business momentum for the third consecutive year. In fiscal 2023, Annualized Net New Business for the Global FSS business was $582 million, representing 4.3% of its prior year revenue. The company's performance was a result of high retention rates of 95.5% and strength in new business signings that totaled nearly $1.2 billion across multiple lines of business and geographies. Entering fiscal 2024, Aramark is already off to a strong start and remains confident in the robust sales pipeline for the remainder of the year to achieve its target Net New Business at 4% to 5% of prior year revenue.
The company anticipates increased profitability in the near- and longer-term through:
Profitability ramp of new business booked in prior years as a result of operational maturity and efficiencies, following three consecutive strong years of adding new clients.
Benefits from early trends related to the slow moderation of inflation, paired with progress in pricing, most notably in the Education sector and Corrections business.
Run-rate of improved supply chain economics, as well as incremental optimization opportunities through purchasing, efficiencies from new deals, and benefits from greater scale.
Continued rebound of front-line margins as food and labor costs normalize, combined with leveraging a flexible operating model.
And, disciplined control and containment of above-unit overhead costs, including leveraging existing resources to support the lines of business in additional ways post-spin.