Performance Food Group Company (PFG) announced its third-quarter and first nine months fiscal 2024 business results.
Third-quarter fiscal 2024 highlights
- Total case volume decreased 0.2%
- Organic independent foodservice case volume increased 4.3%
- Net sales increased 0.6% to $13.9 billion
- Gross profit improved 3.8% to $1.6 billion
- Net income decreased 12.3% to $70.4 million
- Adjusted EBITDA increased 1.9% to $320.7 million
- Diluted earnings per share (EPS) decreased 11.8% to $0.45
- Adjusted diluted EPS decreased 3.6% to $0.80
First-nine months fiscal 2024 highlights
- Total case volume grew 1.7%
- Organic independent foodservice case volume increased 6.9%
- Net sales increased 1.7% to $43.1 billion
- Gross profit improved 5.3% to $4.8 billion
- Net income increased 9.0% to $269.4 million
- Adjusted EBITDA increased 7.3% to $1,049.9 million
- Diluted EPS increased 8.9% to $1.72
- Adjusted diluted EPS increased 4.4% to $2.85
- Operating cash flow of $956.7 million
- Free cash flow of $712.3 million
“Despite a difficult operating environment in the fiscal third quarter, we are confident in our long-term outlook and I am proud of our organization’s resiliency,” George Holm, PFG’s chairman and chief executive officer, said in the announcement. “After a challenging January due to tough weather conditions, our business saw sequential improvement in February and March. Our independent restaurant case growth recovered nicely, increasing nearly 6% in the final two months of the quarter as we continue to gain market share. Solid execution drove Adjusted EBITDA to the midpoint of our guidance, and we are very pleased with our strong cash flow. Given our confidence, we are raising the bottom-end of our full year 2024 Adjusted EBITDA guidance to a $1.48 billion to $1.5 billion range.”
Third-quarter fiscal 2024 financial summary
Total case volume decreased 0.2% for the third quarter of fiscal 2024 compared to the prior year period. Total case volume growth was impacted by bad weather during the third quarter of fiscal 2024. Total organic case volume decreased 0.6% for the third quarter of fiscal 2024 compared to the prior year period. Total organic case volume benefited from a 4.3% increase in organic independent cases, including growth in Performance Brands cases.
Net sales for the third quarter of fiscal 2024 grew 0.6% to $13.9 billion compared to the prior year period. The increase in net sales was primarily attributable to case volume growth in our independent Foodservice business, as well as recent acquisitions, partially offset by case declines in its convenience business. Overall product cost inflation for the company was approximately 3.6%.
Gross profit for the third quarter of fiscal 2024 grew 3.8% to $1.6 billion compared to the prior year period. The gross profit increase was primarily attributable to a favorable shift in the mix of cases sold, including growth in the independent channel and Performance Brands, as well as cost of goods sold optimization through procurement efficiencies, and recent acquisitions.
Operating expenses rose 5.3% to $1.4 billion in the third quarter of fiscal 2024 compared to the prior year period. The increase in operating expenses were primarily due to increases in personnel expense, primarily related to wages, commissions, and benefits, insurance expense, and repairs and maintenance expense.
Net income for the third quarter of fiscal 2024 decreased $9.9 million year-over-year to $70.4 million. The decrease was primarily a result of the $13.9 million decrease in operating profit, partially offset by a decrease in income tax expense. The effective tax rate in the third quarter of fiscal 2024 was approximately 27.3% compared to 28.1% in the third quarter of fiscal 2023. The effective tax rate for the third quarter of fiscal 2024 differed from the prior year period primarily due to a decrease in foreign taxes as a percentage of income, partially offset by an increase in non-deductible expenses and state taxes as a percentage of income.
For the quarter, adjusted EBITDA rose 1.9% to $320.7 million compared to the prior year period.
Diluted EPS decreased 11.8% to $0.45 per share in the third quarter of fiscal 2024 compared to the prior year period. Adjusted diluted EPS decreased 3.6% to $0.80 per share in the third quarter of fiscal 2024 compared to the prior year period.
First-nine months fiscal 2024 financial summary
Total case volume increased 1.7% for the first nine months of fiscal 2024 compared to the prior year period. Total organic case volume increased 1.4% compared to the prior year period. Total organic case volume benefited from an 6.9% increase in organic independent cases, growth in Performance Brands cases, and case growth in vending and value store channels in Vistar.
Net sales for the first nine months of fiscal 2024 grew 1.7% to $43.1 billion compared to the prior year period. The increase in net sales was primarily attributable to an increase in cases sold.
Gross profit for the first nine months of fiscal 2024 grew 5.3% to $4.8 billion compared to the prior year period. The gross profit increase was primarily attributable to cost of goods sold optimization through procurement efficiencies, as well as growth in cases sold, including growth in the independent channel and recent acquisitions.
Operating expenses rose 5.0% to $4.3 billion in the first nine months of fiscal 2024 compared to the prior year period. The increase in operating expenses was primarily due to increases in personnel expense, insurance expense, and repairs and maintenance expense. Depreciation and amortization increased $42.7 million primarily as a result of recent acquisitions, amortization of certain customer relationships and trade names, and an increase in transportation equipment under finance leases.
Net income for the first nine months of fiscal 2024 increased $22.3 million year-over-year to $269.4 million. The increase was primarily a result of the $41.0 million increase in operating profit, partially offset by a $12.6 million increase in interest expense and a $11.6 million increase in income tax expense. The effective tax rate in the first nine months of fiscal 2024 was approximately 27.5% compared to 26.9% in the first nine months of fiscal 2023. The effective tax rate for the first nine months of fiscal 2024 differed from the prior year period primarily due to an increase in non-deductible expenses and state and foreign taxes as a percentage of income, partially offset by an increase in deductible discrete items related to stock-based compensation.
For the first nine-months of fiscal 2024, adjusted EBITDA rose 7.3% to $1,049.9 million compared to the prior year period.
Diluted EPS increased 8.9% to $1.72 per share in the first nine months of fiscal 2024 compared to the prior year period. Adjusted diluted EPS increased 4.4% to $2.85 per share in the first nine months of fiscal 2024 compared to the prior year period.
Third-quarter fiscal 2024 segment results
Foodservice
Third-quarter fiscal 2024 net sales for Foodservice increased 1.0% to $7.0 billion compared to the prior year period. This increase in net sales were driven by case volume growth in its independent business. Chain and other Foodservice business case volume was flat for the third quarter of fiscal 2024 compared to the prior year period. Total Foodservice case volume growth was impacted by bad weather in January. Overall product cost inflation for Foodservice was approximately 0.6% for the third quarter of fiscal 2024. Securing new and expanding business with independent customers resulted in organic independent case growth of 4.3% for the third quarter of fiscal 2024 compared to the prior year period. For the third quarter of fiscal 2024, independent sales as a percentage of total segment sales were 38.8%.
Third-quarter fiscal 2024 adjusted EBITDA for Foodservice decreased 0.3% to $219.3 million compared to the prior year period. The decrease was the result of an increase in operating expenses for the third quarter of fiscal 2024 compared to the prior year period, partially offset by an increase in gross profit. Gross profit contributing to Foodservice's adjusted EBITDA increased 3.0% driven by a favorable shift in the mix of cases sold to independent customers and growth in cases sold, including more Performance Brands products sold to independent customers. Operating expenses impacting Foodservice's adjusted EBITDA increased 4.0% primarily as a result of an increase in personnel and insurance expenses as compared to the prior year period.
Vistar
For the third quarter of fiscal 2024, net sales for Vistar increased 1.7% to $1.1 billion compared to the prior year period. This increase was driven primarily by a recent acquisition.
Third-quarter fiscal 2024 Adjusted EBITDA for Vistar decreased 0.3% to $72.9 million versus the prior year period. The decrease was the result of an 8.5% increase in operating expenses for the third quarter of fiscal 2024 compared to the prior year period, partially offset by a 5.4% increase in gross profit. The increase in gross profit contributing to Vistar's adjusted EBITDA was driven by a recent acquisition and pricing improvement from procurement efficiencies, partially offset by expected decreases in inventory holding gains. Operating expenses impacting Vistar's adjusted EBITDA increased primarily as a result of a recent acquisition and an increase in building rent expense.
Convenience
Third-quarter fiscal 2024 net sales for Convenience decreased 0.7% to $5.6 billion compared to the prior year period. The decrease in net sales was driven primarily by a decline in cigarette carton sales and food and foodservice related cases sold, partially offset by an increase in selling price per case as a result of cigarette manufacturers’ price increases and continued inflation for food and foodservice related products.
Third-quarter fiscal 2024 adjusted EBITDA for Convenience decreased 3.1% to $70.9 million compared to the prior year period. Gross profit contributing to Convenience's adjusted EBITDA decreased 2.1% in the third quarter of fiscal 2024 compared to the prior year period driven by expected decreases in inventory holding gains, partially offset by pricing improvement from procurement efficiencies. Operating expenses impacting Convenience's adjusted EBITDA decreased $7.6 million in the third quarter of fiscal 2024 compared to the prior year, primarily as a result of decreases in lease expense and personnel expenses from reduced contract labor and overtime, compared to the prior year period.
Fiscal 2024 and long-term outlook
For the fourth quarter of fiscal 2024, PFG expects net sales to be in a range of $15 billion to $15.4 billion. For the fourth quarter of fiscal 2024, PFG expects adjusted EBITDA to be in a range of $430 million to $450 million.
For the full fiscal year 2024, PFG now expects net sales to be in a range of approximately $58.1 billion to $58.5 billion compared to the prior expectation of a $59 billion to $60 billion range. For the full fiscal year 2024, PFG now expects adjusted EBITDA to be in a $1.48 billion to $1.5 billion range compared to the previously announced $1.45 billion to $1.5 billion range.
PFG is currently reviewing and updating its 3-year, fiscal 2025 net sales and adjusted EBITDA targets. Given the updated 2024 Adjusted EBITDA range, the company is on pace to be comfortably within the $1.5 billion to $1.7 billion range and will provide additional color on fiscal 2025 net sales and adjusted EBITDA targets in August along with fiscal fourth quarter 2024 earnings results.
