Performance Food Group Q2 2026 Performance Food Group Co Earnings Call | AllMind AI Earnings | AllMind AI
Q2 2026 Performance Food Group Co Earnings Call
Speaker #1: Welcome to BFG's Fiscal Year Q2, 2026 earnings conference call. If you would like to ask a question at the conclusion of the prepared remarks, please press the star key followed by the number one on your telephone keypad at any time.
Speaker #1: I would now like to turn the call over to Bill Marshall, Senior Vice President, Investor Relations for sir.
Speaker #2: Thank you, and good morning. We're here with Scott McPherson, PFG's CEO. And Patrick Hatcher, PFG's CFO. We issued a press release this morning regarding our 2026 fiscal second quarter results.
Speaker #2: Which can be found in the Investor Relations section of our website at pfgc.com. During our call today, unless otherwise stated, we are comparing results to the results in the same period in fiscal 2025.
Speaker #2: Any reference to 2025, 2026, or specific quarters refers to our fiscal calendar unless otherwise stated. The results discussed on this call will include GAAP and non-GAAP items.
Speaker #2: The reconciliation of these non-GAAP measures to the corresponding GAAP measures can be found at the back of the earnings call and in the earnings release contain forward-looking statements and projections of release.
Speaker #1: We outlined our three-year strategic vision, which the company. More specifically, this is a roadmap grounded by a balance of continued revenue growth and market share gains, gross margin enhancement initiatives, and improving operating leverage.
Speaker #2: Our remarks on this future results. Please review the cautionary forward-looking statement section in today's earnings release and our SEC filings for various factors that could cause our actual results to differ materially from our forward-looking statements and projections.
Speaker #1: The organization is off to a solid start in achieving our three-year plan and has strategies in place to give us a high level of confidence we will deliver.
Speaker #2: With that, I'd now like to turn the call over to
Speaker #2: Scott. Thanks,
Speaker #3: our call today. Before Bill. Good morning, everyone, and thank you for joining jumping into our second quarter results, I would like to recognize George Holm.
Speaker #1: Let's now turn to our results for the second quarter of our fiscal 2026. Despite a difficult macro environment, I'm proud of our organization's ability to overcome the challenges and the final months of the calendar year.
As we announced in December, after nearly 25 years with performance food group, George has retired from his role as CEO. Over his career, George built an impeccable reputation as an industry leader, a visionary, and an agent of growth.
Speaker #1: The quarter saw declining foot traffic, the impact of the government shutdown across our segments. Despite the challenging backdrop, our company was able to post solid revenue and profit performance within our previously stated guidance range.
Speaker #3: Since PFG's IPO in 2018, sales of more than quadrupled to over $60 billion and the market cap of PFG has increased sevenfold. Much of which can be attributed to the vision and influence George has had on the company.
Speaker #1: Breaking it down by segment, let's begin with food service. Our organization delivered. Account growth. During the quarter, we gained share across independent, regional, and national business, largely consistent with our gains in prior quarters.
Speaker #3: More importantly, because of George's stewardship, PFG has defined by more than just financial results. It is a place where people want to work, where customers and suppliers want to do business, and a preferred partner for strategic M&A.
Speaker #1: Share gains were broad-based across a range of concepts, with particular strength in chicken, burger, barbecue, and seafood restaurants. To elaborate further, after strongly in line with November results.
Speaker #3: There's a reason that PFG is often the first and sometimes only call from prospective acquisition opportunities. Many of you have had the opportunity to meet with George and experience his knowledge and insight firsthand.
Speaker #3: On behalf of our entire organization, I would like to share my heartfelt thanks to George for everything he has done for the many thousands of people who have crossed his path.
Speaker #1: According to foot traffic, the quarter with December traffic was down 3.5%. Our chain restaurant business followed a similar glide path, reflecting consistent industry pressures. Our total chain restaurant volume grew by low single digits year over year, as new business we've onboarded over the past several quarters offset the softer traffic environment.
Speaker #3: I'm also thrilled that George will continue to play an important role for PFG. As executive chair of our board, he will be heavily involved in the pursuit of strategic M&A, opportunities, maintain his connection to key customers, and be active in PFG's overarching strategy.
Speaker #3: Following an industry icon like George comes with great responsibility, and I'm excited to take the helm and lead PFG through our next chapter. George and I have worked together closely for the past four years, developed a powerful friendship, and collaborated on the vision for PFG.
Speaker #1: We attribute our consistent market share outperformance in part to our efforts behind growing, training, and supporting the best sales force in the food service industry.
Speaker #1: Our efforts in this area are proven out in the independent restaurant space. We continued to hire new associates during the period, ending December with nearly 6% more salespeople than we had at the end of calendar 2024.
Speaker #3: As I look ahead, I'm excited to lead this organization and am extremely confident in our ability to continue to drive growth and EBITDA performance by executing on our strategic priorities.
Speaker #3: In May, we outlined our three-year strategic vision, which the company and I are deeply committed to delivering. More specifically, this is a roadmap grounded by a balance of continued revenue growth and market share gains, gross margin enhancement initiatives, and improving operating leverage.
Speaker #1: As we have discussed on past calls, we do not have a corporate-wide hiring mandate, nor do we require artificial hiring goals. Instead, we emphasize the importance of expanding our sales force as a key driver of volume and market share growth, while empowering our local operating companies to hire according to their specific needs.
Speaker #3: The organization is off to a solid start in achieving our three-year plan and has strategies in place that give us a high level of confidence we will deliver.
Speaker #1: We still believe a rate of hiring at or above 6% makes sense for the long-term support of our growth rate, but expect this number to fluctuate in any given period.
Speaker #3: Let's now turn to our results for the second quarter of our fiscal 2026. Despite a difficult macro environment, I'm proud of our organization's ability to overcome the challenges and the final months of the calendar year.
Speaker #1: I want to take a moment to discuss the integration of Cheney Brothers. As we discussed last quarter, we are pleased with the work being done at Cheney and expect this company to be a significant contributor to PFG's revenue and profit growth long into the future.
Speaker #3: The quarter saw declining foot traffic, the impact of the government shutdown, and softer sales per location across our segments. Despite the challenging backdrop, our company was able to post solid revenue and profit performance within our previously stated guidance range.
Speaker #1: That said, we have been very consistent in our messaging around synergy timing and when we expect the financial performance of Cheney to accelerate. When we made the acquisition, Cheney was making meaningful investments in its infrastructure, to support growth.
Scott McPherson: We outlined our three-year strategic vision, which the company and I are deeply committed to delivering. More specifically, this is a roadmap grounded by a balance of continued revenue growth and market share gains, gross margin enhancement initiatives, and improving operating leverage. The organization is off to a solid start in achieving our three-year plan and have strategies in place to give us a high level of confidence we will deliver. Let's now turn to our results for Q2 of our fiscal 2026. Despite a difficult macro environment, I'm proud of our organization's ability to overcome the challenges in the final months of the calendar year. The quarter saw declining foot traffic, the impact of the government shutdown, and softer sales per location across our segments. Despite the challenging backdrop, our company was able to post solid revenue and profit performance within our previously stated guidance range.
Scott E. McPherson: We outlined our three-year strategic vision, which the company and I are deeply committed to delivering. More specifically, this is a roadmap grounded by a balance of continued revenue growth and market share gains, gross margin enhancement initiatives, and improving operating leverage. The organization is off to a solid start in achieving our three-year plan and have strategies in place to give us a high level of confidence we will deliver. Let's now turn to our results for Q2 of our fiscal 2026. Despite a difficult macro environment, I'm proud of our organization's ability to overcome the challenges in the final months of the calendar year. The quarter saw declining foot traffic, the impact of the government shutdown, and softer sales per location across our segments. Despite the challenging backdrop, our company was able to post solid revenue and profit performance within our previously stated guidance range.
Speaker #3: Breaking it down by segment, let's begin with food service. Our organization delivered $5.3% organic independent case growth, driven by a $5.8% independent account growth.
Speaker #1: More specifically, the addition of a new $350,000 square foot facility in Florence, South Carolina, and a new $42,000 square foot facility in St. Cloud, Florida, to expand its manufacturing capabilities.
Speaker #3: share across independent, regional, During the quarter, we gained and national business, largely consistent with our gains in prior quarters. Share gains were broad-based across a range of concepts, with particular strength in chicken, burger, barbecue, and seafood restaurants.
Speaker #1: These investments, along with other integration costs, have had a short-term impact on Cheney's performance and our overall P&L. Despite this activity, Cheney continues to grow independent cases at a rate consistent with the rest of our Foodservice operating companies.
Speaker #3: To elaborate further, after a strong start to October, volume trends moderated soon after the government shutdown took effect. We did see some recovery once the shutdown was lifted, and we finished the calendar year with case growth in December roughly in line with the November result.
Speaker #1: Gained share in its distribution markets and provide its customer base with great service. To close out my comments on Cheney, I want to remind you that we anticipate the majority of the synergies to start flowing through the income statement late in year two, through year three, after the close of the acquisition.
Speaker #3: According to Black Box data, industry-wide foot traffic decelerated through the quarter, with December traffic down 3.5%. Our chain restaurant business followed a similar glide path, reflecting consistent industry pressures.
Scott McPherson: Breaking it down by segment, let's begin with food service. Our organization delivered 5.3% organic growth, driven by a 5.8% independent account growth. During the quarter, we gained share across independent, regional, and national business, largely consistent with our gains in prior quarters. Share gains were broad-based across a range of concepts, with particular strength in chicken, burger, barbecue, and seafood restaurants. To elaborate further, after a strong start to October, volume trends moderated soon after the government shutdown took effect. We did see some recovery once the shutdown was, and we finished the calendar year with case growth in December, roughly in line with the November result. According to Black Box data, industry-wide foot traffic decelerated through the quarter, with December traffic down 3.5%. Our chain restaurant business followed a similar glide path, reflecting consistent industry pressures.
Scott E. McPherson: Breaking it down by segment, let's begin with food service. Our organization delivered 5.3% organic growth, driven by a 5.8% independent account growth. During the quarter, we gained share across independent, regional, and national business, largely consistent with our gains in prior quarters. Share gains were broad-based across a range of concepts, with particular strength in chicken, burger, barbecue, and seafood restaurants. To elaborate further, after a strong start to October, volume trends moderated soon after the government shutdown took effect. We did see some recovery once the shutdown was, and we finished the calendar year with case growth in December, roughly in line with the November result. According to Black Box data, industry-wide foot traffic decelerated through the quarter, with December traffic down 3.5%. Our chain restaurant business followed a similar glide path, reflecting consistent industry pressures.
Speaker #1: Profit performance for Cheney should begin accelerating accordingly. All in, our food service segment had a solid second quarter, growing volume through market share gains, new business wins, and expansion of our private brand portfolio.
Speaker #3: Our total chain restaurant volume grew by low single digits year over year, as new business we've onboarded over the past several quarters offset the softer traffic environment.
Speaker #1: We faced two meaningful EBITDA hurdles in the quarter that are likely to persist in the Q3, with my earlier comments on Cheney and the impact of cheese and poultry deflation.
Speaker #3: We attribute our consistent market share outperformance, in part, to our efforts behind growing, training, and supporting the best sales force in the food service industry.
Speaker #1: Despite the challenges, we remain confident in our strategy and expect our results to accelerate as we move through our fourth quarter setting us up for a strong fiscal 2027.
Speaker #3: Our efforts in this area are proven out in the independent restaurant space. We continued to hire new associates during the period, ending December with nearly 6% more salespeople than we had at the end of calendar 2024.
Speaker #1: Turning to the convenience segment, on our prior earnings calls, we disclosed the addition of sizable new business wins for Cormark. In the final weeks of September, we successfully onboarded over 500 love stores, contributing nicely to our second quarter results.
Speaker #3: As we have discussed on past calls, we do not have a corporate-wide hiring mandate, nor do we require artificial hiring goals. Instead, we emphasize the importance of expanding our sales force as a key driver of volume and market share growth, while empowering our local operating companies to hire according to their specific needs.
Speaker #1: Also joining the Cormark fold in December, we're over 600 racetrack locations, which we successfully integrated into our network, setting the segment up for a strong finish to fiscal 2026.
Speaker #3: We still believe a rate of hiring at or above 6% makes sense for the long-term support of our growth rate, but expect this number to fluctuate in any given period.
Speaker #1: Let's look at the convenience segment's performance during the second quarter. Net sales increased 6.1%, benefiting from market share gains and the onboarding of the new accounts just discussed.
Scott McPherson: Our total chain restaurant volume grew by low single digits year over year, as new business we've onboarded over the past several quarters offset the softer traffic environment. We attribute our consistent market share outperformance in part to our efforts behind growing, training, and supporting the best sales force in the food service industry. Our efforts in this area are proven out in the independent restaurant space. We continued to hire new associates during the period, ending December with nearly 6% more salespeople than we had at the end of calendar 2024. As we have discussed on past calls, we do not have a corporate-wide hiring mandate, nor do we require artificial hiring goals. Instead, we emphasize the importance of expanding our sales force as a key driver of volume and market share growth, while empowering our local operating companies to hire according to their specific needs.
Scott E. McPherson: Our total chain restaurant volume grew by low single digits year over year, as new business we've onboarded over the past several quarters offset the softer traffic environment. We attribute our consistent market share outperformance in part to our efforts behind growing, training, and supporting the best sales force in the food service industry. Our efforts in this area are proven out in the independent restaurant space. We continued to hire new associates during the period, ending December with nearly 6% more salespeople than we had at the end of calendar 2024. As we have discussed on past calls, we do not have a corporate-wide hiring mandate, nor do we require artificial hiring goals. Instead, we emphasize the importance of expanding our sales force as a key driver of volume and market share growth, while empowering our local operating companies to hire according to their specific needs.
Speaker #3: I want to take a moment to discuss the integration of Cheney Brothers. As we discussed last quarter, we are pleased with the work being done at Cheney and expect this company to be a significant contributor to PFG's revenue and profit growth long into the future.
Speaker #1: Our data shows a mid-single-digit industry decline in the key convenience categories, as persistent inflation continues to weigh on the channel. Cormark's positive volume results reflect the company's strong share gain outperformance and execution during the period.
Speaker #3: That said, we have been very consistent in our messaging around synergy timing and when we expect the financial performance of Cheney to accelerate. When we made the acquisition, Cheney was making meaningful investments in its infrastructure, to support growth.
Speaker #1: Convenience segment sales were driven by low single-digit dollar growth from food, foodservice, and related products, and mid-teen non-combustible nicotine product sales growth.
Speaker #1: Cigarette sales were flattish in the period. As a reminder, the mixed shift away from cigarettes towards other nicotine categories and growth in food, food service, and related products causes a revenue headwind that is nicely accreted to our gross margins.
Speaker #3: More specifically, the addition of a new $350,000 square foot facility in Florence, South Carolina, and a new $42,000 square foot facility in St. Cloud, Florida, to expand its manufacturing capabilities.
Speaker #3: These investments, along with other integration costs, have had a short-term impact on Cheney's performance and our overall P&L. Despite this activity, Cheney continues to grow independent cases at a rate consistent with the rest of our food service operating companies.
Speaker #1: This dynamic is a consistent secular tailwind for our profit growth, which we expect to gain momentum over time. Moving on to profit, in the second quarter, our convenience segment adjusted EBITDA increased 13.4% as a result of strong cost discipline and operating efficiencies in addition to business from Love's and Racetrack.
Scott McPherson: We still believe a rate of hiring at or above 6% makes sense for the long-term support of our growth rate, but expect this number to fluctuate in any given period. I want to take a moment to discuss the integration of Cheney Brothers. As we discussed last quarter, we are pleased with the work being done at Cheney and expect this company to be a significant contributor to PFG's revenue and profit growth long into the future. That said, we have been very consistent in our messaging around synergy timing and when we expect the financial performance of Cheney to accelerate. When we made the acquisition, Cheney was making meaningful investments in its infrastructure to support growth. More specifically, the addition of a new 350,000sq ft facility in Florence, South Carolina, and a new 42,000sq ft facility in St.
Scott E. McPherson: We still believe a rate of hiring at or above 6% makes sense for the long-term support of our growth rate, but expect this number to fluctuate in any given period. I want to take a moment to discuss the integration of Cheney Brothers. As we discussed last quarter, we are pleased with the work being done at Cheney and expect this company to be a significant contributor to PFG's revenue and profit growth long into the future. That said, we have been very consistent in our messaging around synergy timing and when we expect the financial performance of Cheney to accelerate. When we made the acquisition, Cheney was making meaningful investments in its infrastructure to support growth. More specifically, the addition of a new 350,000sq ft facility in Florence, South Carolina, and a new 42,000sq ft facility in St.
Speaker #3: Gained share in its service. To close out my comments on customer base with great distribution markets and provide its Cheney, I want to remind you that we anticipate the majority of the synergies to start flowing through the income statement late in year two, through year three, after the close of the acquisition.
Speaker #1: Once again, our great team at Cormark showed remarkable resilience and the ability to drive profit growth despite a challenging backdrop. Turning to Specialty, trends in the second quarter were broadly similar to the first quarter.
Speaker #1: With a modest improvement in top-line trends coupled with nice productivity gains, which produced segment-adjusted EBITDA margin expansion. Sales growth was tempered by another difficult quarter in theater, which was down over 30%, representing an approximate $50 million drag on overall sales.
Speaker #3: Profit performance for Cheney should begin accelerating accordingly. All in, our food service segment had a solid second quarter, growing volume through market share gains, new business wins, and expansion of our private brand portfolio.
Speaker #3: We faced two meaningful EBITDA hurdles in the quarter that are likely to persist in the Q3, with my earlier comments on Cheney and the impact of cheese and poultry deflation.
Speaker #1: Outside of theater, specialty performed well, growing sales at a high single to low double-digit rate in the vending, office coffee, retail, campus, and travel channels.
Scott McPherson: Cloud, Florida, to expand its manufacturing capabilities. These investments, along with other integration costs, have had a short-term impact on Cheney's performance and our overall PNL. Despite this activity, Cheney continues to grow independent cases at a rate consistent with the rest of our food service operating companies, gain share in its distribution markets, and provide its customer base with great service. To close out my comments on Cheney, I want to remind you that we anticipate the majority of the synergies to start flowing through the income statement late in year two through year three after the close of the acquisition. Profit performance for Cheney should begin accelerating accordingly. All in, our food service segment had a solid second quarter, growing volume through market share gains, new business wins, and expansion of our private brand portfolio.
Scott E. McPherson: Cloud, Florida, to expand its manufacturing capabilities. These investments, along with other integration costs, have had a short-term impact on Cheney's performance and our overall PNL. Despite this activity, Cheney continues to grow independent cases at a rate consistent with the rest of our food service operating companies, gain share in its distribution markets, and provide its customer base with great service. To close out my comments on Cheney, I want to remind you that we anticipate the majority of the synergies to start flowing through the income statement late in year two through year three after the close of the acquisition. Profit performance for Cheney should begin accelerating accordingly. All in, our food service segment had a solid second quarter, growing volume through market share gains, new business wins, and expansion of our private brand portfolio.
Speaker #3: Despite the challenges, we remain confident in our strategy and expect our results to accelerate as we move through our fourth quarter setting us up for a strong fiscal 2027.
Speaker #1: Proactive management of operating expenses produced nearly 7% segment-adjusted EBITDA growth in the quarter, representing 40 basis points of margin expansion. Closing out my remarks, it's certainly been a dynamic operating environment to take over as PFG CEO.
Speaker #3: Turning to the convenience segment, on our prior earnings calls, we disclosed the addition of sizable new business wins for Cormorc in the final weeks of September.
Speaker #3: We successfully onboarded over 500 love stores, contributing nicely to our second quarter results. Also joining the Cormorc fold in December were over 600 racetrack locations, which we successfully integrated into our network, setting the segment up for a strong finish to fiscal 2026.
Speaker #1: That said, I'm inspired by our organization's ability to consistently gain share across our business segments, operate safely while delivering exceptional customer service, and enhance our operating leverage.
Speaker #1: Driving sustained growth and EBITDA dollars and margins for our shareholders. Our diversification seeks to provide consistent performance in a range of economic scenarios, and our strong pipeline of new potential business should result in consistent long-term revenue and profit growth for PFG.
Speaker #3: Let's look at the convenience segment's performance during the second quarter. Net sales increased 6.1%, benefiting from market share gains and the onboarding of the new accounts just discussed.
Scott McPherson: We faced two meaningful EBITDA hurdles in the quarter that are likely to persist into Q3, with my earlier comments on Cheney and the impact of cheese and poultry deflation. Despite the challenges, we remain confident in our strategy and expect our results to accelerate as we move through our fourth quarter, setting us up for a strong fiscal 2027. Turning to the convenience segment, on our prior earnings calls, we disclosed the addition of sizable new business wins for CoreMark. In the final weeks of September, we successfully onboarded over 500 Love Stores, contributing nicely to our second quarter results. Also joining the CoreMark fold in December, were over 600 RaceTrac locations, which we successfully integrated into our network, setting the segment up for a strong finish to fiscal 2026. Let's look at the convenience segment's performance during the second quarter.
Scott E. McPherson: We faced two meaningful EBITDA hurdles in the quarter that are likely to persist into Q3, with my earlier comments on Cheney and the impact of cheese and poultry deflation. Despite the challenges, we remain confident in our strategy and expect our results to accelerate as we move through our fourth quarter, setting us up for a strong fiscal 2027. Turning to the convenience segment, on our prior earnings calls, we disclosed the addition of sizable new business wins for CoreMark. In the final weeks of September, we successfully onboarded over 500 Love Stores, contributing nicely to our second quarter results. Also joining the CoreMark fold in December, were over 600 RaceTrac locations, which we successfully integrated into our network, setting the segment up for a strong finish to fiscal 2026. Let's look at the convenience segment's performance during the second quarter.
Speaker #3: Our data shows a mid-single digit industry decline in the key convenience categories as persistent inflation continues to weigh on the channel. Cormorc's positive volume results reflect the company's strong share gain outperformance and execution during the period.
Speaker #1: I'll now turn it over to Patrick, who will review our financial performance and outlook. Patrick?
Speaker #2: Thank you, Scott, and good morning. Today, I will review our financial results from our second quarter, provide color on our financial position, and review our updated guidance for 2026.
Speaker #3: Convenience segment sales were driven by low single digit dollar growth from food, food service, and related products in mid-teen non-combustible nicotine product sales growth.
Speaker #2: To echo Scott's comments, despite challenges in the quarter, we are very pleased with our progress through the first six months of 2026. Through December, we continued to make progress on our financial position as our strong cash flow was used to invest behind our business to drive growth and reduce leverage.
Speaker #3: Cigarette sales were flattish in the period. As a reminder, the mixed shift away from cigarettes towards other nicotine categories and growth in food, food service, and related products causes a revenue headwind but is nicely accretive to our gross margins.
Speaker #2: We believe that the investments we are making today will pay off nicely as we execute our strategy. In a moment, I will provide additional color on our financial position and capital allocation priorities.
Speaker #3: This dynamic is a consistent secular tailwind for our profit growth, which we expect to gain momentum over time. Moving on to profit, in the second quarter, our convenience segment adjusted EBITDA increased 13.4% as a result of strong cost discipline and operating efficiencies in addition to business from loves and racetrack.
Speaker #2: First, let's review our results for the second quarter. PFG's total net sales grew 5.2% in the second quarter, with growth in all three operating segments and particular strength in food service, convenience.
Scott McPherson: Net sales increased 6.1%, benefiting from market share gains and the onboarding of the new accounts just discussed. Our data shows a mid-single-digit industry decline in the key convenience categories as persistent inflation continues to weigh on the channel. Core-Mark's positive volume results reflect the company's strong share gain outperformance and execution during the period. Convenience segment sales were driven by low single-digit dollar growth from food, food service, and related products, and mid-teen non-combustible nicotine product sales growth. Cigarette sales were flattish in the period. As a reminder, the mix shift away from cigarettes towards other nicotine categories and growth in food, food service, and related products causes a revenue headwind, but is nicely accretive to our gross margins. This dynamic is a consistent secular tailwind for our profit growth, which we expect to gain momentum over time. Moving on to profit.
Scott E. McPherson: Net sales increased 6.1%, benefiting from market share gains and the onboarding of the new accounts just discussed. Our data shows a mid-single-digit industry decline in the key convenience categories as persistent inflation continues to weigh on the channel. Core-Mark's positive volume results reflect the company's strong share gain outperformance and execution during the period. Convenience segment sales were driven by low single-digit dollar growth from food, food service, and related products, and mid-teen non-combustible nicotine product sales growth. Cigarette sales were flattish in the period. As a reminder, the mix shift away from cigarettes towards other nicotine categories and growth in food, food service, and related products causes a revenue headwind, but is nicely accretive to our gross margins. This dynamic is a consistent secular tailwind for our profit growth, which we expect to gain momentum over time. Moving on to profit.
Speaker #3: Once again, our great team at Cormorc showed remarkable resilience and the ability to drive profit growth despite a challenging backdrop. Turning to specialty, trends in the second quarter were broadly similar to the first quarter.
Speaker #2: Total company cases increased 3.4% during the quarter, highlighted by a 5.3% organic independent restaurant case growth and a 6.3% organic case gain in our convenience segment.
Speaker #3: With a modest improvement in top-line trends coupled with nice productivity gains, which produced segment-adjusted EBITDA margin expansion. Sales growth was tempered by another difficult quarter in theater, which was down over 30%, representing an approximate $50 million drag on overall sales.
Speaker #2: As a reminder, having fully lapped the Cheney Brothers acquisition as of the second week of the second quarter, Cheney was reported as a business for the vast majority of the period.
Speaker #2: As Scott mentioned, in our convenience business, we are very pleased with the contribution from the addition of Love's and are looking forward to the benefit of the Racetrack business, which started onboarding late in the second quarter.
Speaker #3: Outside of theater, specialty performed well, growing sales at a high single to low double-digit rate in the vending, office coffee, retail, campus, and travel channels.
Speaker #2: These businesses are expected to deliver incremental sales and profit dollars over the next several quarters. Total company cost inflation was approximately 4.5% for the quarter, just slightly higher than what we experienced in the prior quarter.
Speaker #3: Proactive management of operating expenses produced nearly 7% segment-adjusted EBITDA growth in the quarter, representing 40 basis points of margin expansion. Closing out my remarks, it's certainly been a dynamic operating environment to take over as PFG's CEO.
Scott McPherson: In Q2, our convenience segment Adjusted EBITDA increased 13.4% as a result of strong cost discipline and operating efficiencies, in addition to business from Love's and RaceTrac. Once again, our great team at Core-Mark showed remarkable resilience and the ability to drive profit growth despite a challenging backdrop. Turning to specialty, trends in Q2 were broadly similar to Q1, with a modest improvement in top-line trends, coupled with nice productivity gains, which produced segment Adjusted EBITDA margin expansion. Sales growth was tempered by another difficult quarter in theater, which was down over 30%, representing an approximate $50 million drag on overall sales. Outside of theater, specialty performed well, growing sales at a high single- to low double-digit rate in the vending, office coffee, retail, campus, and travel channels.
Scott E. McPherson: In Q2, our convenience segment Adjusted EBITDA increased 13.4% as a result of strong cost discipline and operating efficiencies, in addition to business from Love's and RaceTrac. Once again, our great team at Core-Mark showed remarkable resilience and the ability to drive profit growth despite a challenging backdrop. Turning to specialty, trends in Q2 were broadly similar to Q1, with a modest improvement in top-line trends, coupled with nice productivity gains, which produced segment Adjusted EBITDA margin expansion. Sales growth was tempered by another difficult quarter in theater, which was down over 30%, representing an approximate $50 million drag on overall sales. Outside of theater, specialty performed well, growing sales at a high single- to low double-digit rate in the vending, office coffee, retail, campus, and travel channels.
Speaker #2: With that said, there were some items moving around within our cost basket. Food service inflation of 1.8% was below recent trends, with notable deflation in the cheese and poultry categories, somewhat offset by higher inflation in beef.
Speaker #3: That said, I'm inspired by our organization's ability to consistently gain share across our business segments, operate safely while delivering exceptional customer service, and enhance our operating leverage.
Speaker #3: Driving sustained growth and EBITDA dollars and margins for our shareholders. Our diversification seeks to provide consistent performance in a range of economic scenarios and our strong pipeline of new potential business should result in consistent long-term revenue and profit growth for PFG.
Speaker #2: Specialty segment cost inflation was 5.4% year over year, about $140 basis points higher than the prior quarter. Mainly, the result of candy and hot drink price inflation.
Speaker #2: Convenience cost inflation increased 7.4%, again, slightly higher than the prior quarter due to inflation in tobacco and candy. As Scott mentioned, the inflation impact on the convenience segment sales growth is offset by the revenue mix shift away from cigarettes.
Speaker #3: turn it over to Patrick, who will review our financial performance and outlook. I'll now Patrick?
Speaker #2: Thank you, Scott, and good morning. Today, I will review our financial results from our second quarter, provide color on our financial position, and review our updated guidance for 2026.
Scott McPherson: Proactive management of operating expenses produced nearly 7% segment adjusted EBITDA growth in the quarter, representing 40 basis points of margin expansion. Closing out my remarks, it's certainly been a dynamic operating environment to take over as PFG's CEO. That said, I'm inspired by our organization's ability to consistently gain share across our business segments, operate safely while delivering exceptional customer service, and enhance our operating leverage, driving sustained growth in EBITDA dollars and margins for our shareholders. Our diversification seeks to provide consistent performance in a range of economic scenarios, and our strong pipeline of new potential business should result in consistent long-term revenue and profit growth for PFG. I'll now turn it over to Patrick, who will review our financial performance and outlook. Patrick?
Scott E. McPherson: Proactive management of operating expenses produced nearly 7% segment adjusted EBITDA growth in the quarter, representing 40 basis points of margin expansion. Closing out my remarks, it's certainly been a dynamic operating environment to take over as PFG's CEO. That said, I'm inspired by our organization's ability to consistently gain share across our business segments, operate safely while delivering exceptional customer service, and enhance our operating leverage, driving sustained growth in EBITDA dollars and margins for our shareholders. Our diversification seeks to provide consistent performance in a range of economic scenarios, and our strong pipeline of new potential business should result in consistent long-term revenue and profit growth for PFG. I'll now turn it over to Patrick, who will review our financial performance and outlook. Patrick?
Speaker #2: inflationary environment has been volatile over the The past several years, but as a company, we have demonstrated our ability to handle a range of outcomes.
Speaker #2: To echo Scott's comments, despite challenges in the quarter, we are very pleased with our progress through the first six months of 2026. Through December, we continued to make progress on our financial position as our strong cash flow was used to invest behind our business to drive growth and reduce leverage.
Speaker #2: We continue to model inflation rates remaining in the low single to mid-single digit range, throughout 2026. Moving down the P&L, total company gross profit increased 7.6% in the second quarter.
Speaker #2: We believe that the investments we are making today will pay off nicely as we execute our strategy. In a moment, I will provide additional color on our financial position and capital allocation priorities.
Speaker #2: Representing a gross profit per case increase of $0.20 as compared to the prior year's period. We are very pleased with our gross profit results, which shows our organization's resilience and long-term growth opportunity.
Speaker #2: First, let's review our results for the second quarter. PFG's total net sales grew 5.2% in the second quarter, with growth in all three operating segments and particular strength in food service, convenience.
Speaker #2: In the second quarter of 2026, PFG reported net income of $61.7 million, a 45.5% increase year over year. Adjusted EBITDA increased 6.7% to $451 million, with all three operating segments contributing to our adjusted EBITDA growth.
Speaker #2: Total company cases increased 3.4% during the quarter, highlighted by a 5.3% organic independent restaurant case growth and a 6.3% organic case gain in our convenience segment.
Patrick Hagerty: Thank you, Scott, and good morning. Today, I will review our financial results from our Q2, provide color on our financial position, and review our updated guidance for 2026. To echo Scott's comments, despite challenges in the quarter, we are very pleased with our progress through the first six months of 2026. Through December, we continued to make progress on our financial position as our strong cash flow was used to invest behind our business to drive growth and reduce leverage. We believe that the investments we are making today will pay off nicely as we execute our strategy. In a moment, I will provide additional color on our financial position and capital allocation priorities. First, let's review our results for the Q2.
Patrick Hatcher: Thank you, Scott, and good morning. Today, I will review our financial results from our Q2, provide color on our financial position, and review our updated guidance for 2026. To echo Scott's comments, despite challenges in the quarter, we are very pleased with our progress through the first six months of 2026. Through December, we continued to make progress on our financial position as our strong cash flow was used to invest behind our business to drive growth and reduce leverage. We believe that the investments we are making today will pay off nicely as we execute our strategy. In a moment, I will provide additional color on our financial position and capital allocation priorities. First, let's review our results for the Q2.
Speaker #2: Diluted earnings per share in the fiscal second quarter was $0.39, while adjusted diluted earnings per share was $0.98, flat year over year.
Speaker #2: As a reminder, having fully lapped the Cheney Brothers acquisition as of the second week of the second quarter, Cheney was reported as part of our organic business for the vast majority of the period.
Speaker #2: Our EPS was impacted by several below-the-line items, including higher interest expense, and effective tax rate in the period. Our interest expense increased due to higher finance lease costs, offsetting lower debt balances and more favorable interest rates.
Speaker #2: As Scott mentioned, in our convenience business, we are very pleased with the contribution from the addition of loves and are looking forward to the benefit of the racetrack business, which started onboarding late in the second quarter.
Speaker #2: Looking ahead, we anticipate a very modest sequential decline in the net interest expense. Our effective tax rate was 28.8% in the second quarter, an increase from 25.2% last year.
Speaker #2: These businesses are expected to deliver incremental sales and profit dollars over the next several quarters. Total company cost inflation was approximately 4.5% for the quarter.
Patrick Hagerty: PFG's total net sales grew 5.2% in the second quarter, with growth in all three operating segments, in particular, strength in food service and convenience. Total company cases increased 3.4% during the quarter, highlighted by a 5.3% organic independent restaurant case growth and a 6.3% organic case gain in our convenience segment. As a reminder, having fully lapped the Cheney Brothers acquisition, as of the second week of the second quarter, Cheney was reported as part of our organic business for the vast majority of the period. As Scott mentioned, in our convenience business, we are very pleased with the contribution from the addition of Love's and are looking forward to the benefit of the RaceTrac business, which started onboarding late in the second quarter.
Patrick Hatcher: PFG's total net sales grew 5.2% in the second quarter, with growth in all three operating segments, in particular, strength in food service and convenience. Total company cases increased 3.4% during the quarter, highlighted by a 5.3% organic independent restaurant case growth and a 6.3% organic case gain in our convenience segment. As a reminder, having fully lapped the Cheney Brothers acquisition, as of the second week of the second quarter, Cheney was reported as part of our organic business for the vast majority of the period. As Scott mentioned, in our convenience business, we are very pleased with the contribution from the addition of Love's and are looking forward to the benefit of the RaceTrac business, which started onboarding late in the second quarter.
Speaker #2: The increase in our quarterly effective tax rate was due to a decrease in deductible items, which led to stock-based compensation and an increase in foreign taxes as a percentage of income.
Speaker #2: Just slightly higher than what we experienced in the prior quarter. With that said, there were some items moving around within our cost basket. Food service inflation of 1.8% was below recent trends, with notable deflation in the cheese and poultry categories, somewhat offset by higher inflation in beef.
Speaker #2: Partially offset by an increase in tax credits. We continue to expect our 2026 tax rate to be close to our historical average. Turning to our financial position and cash flow performance.
Speaker #2: Especially segment cost inflation was 5.4% year over year, about $140 basis points higher than the prior quarter, mainly the result of candy and hot drink price inflation.
Speaker #2: In the first six months of 2026, PFG generated 456 million dollars of operating cash flow, an increase of 77 million dollars compared to the same period last year.
Speaker #2: Convenience cost inflation increased 7.4%, again slightly higher than the prior quarter due to inflation in tobacco and candy. As Scott mentioned, the inflation impact on the convenience segment sales growth is offset by the revenue mix shift away from cigarettes.
Speaker #2: We invested about $192 million in capital expenditures during the first six months. We continue to anticipate full-year 2026 CapEx to be approximately 70 basis points of net revenue, in line with our long-term target.
Patrick Hagerty: These businesses are expected to deliver incremental sales and profit dollars over the next several quarters. Total company cost inflation was approximately 4.5% for the quarter, just slightly higher than what we experienced in the prior quarter. With that said, there were some items moving around within our cost basket. Food service inflation of 1.8% was below recent trends, with notable deflation in the cheese and poultry categories, somewhat offset by higher inflation in beef. Specialty segment cost inflation was 5.4% year-over-year, about 140 basis points higher than the prior quarter, mainly the result of candy and hot drink price inflation. Convenience cost inflation increased 7.4%, again, slightly higher than the prior quarter due to inflation in tobacco and candy.
Patrick Hatcher: These businesses are expected to deliver incremental sales and profit dollars over the next several quarters. Total company cost inflation was approximately 4.5% for the quarter, just slightly higher than what we experienced in the prior quarter. With that said, there were some items moving around within our cost basket. Food service inflation of 1.8% was below recent trends, with notable deflation in the cheese and poultry categories, somewhat offset by higher inflation in beef. Specialty segment cost inflation was 5.4% year-over-year, about 140 basis points higher than the prior quarter, mainly the result of candy and hot drink price inflation. Convenience cost inflation increased 7.4%, again, slightly higher than the prior quarter due to inflation in tobacco and candy.
Speaker #2: Our investments in CapEx are primarily focused on maintaining and supporting growth within our infrastructure, and on high-return projects that we believe will support our long-term growth goals.
Speaker #2: The inflationary environment has been volatile over the past several years, but as a company, we have demonstrated our ability to handle a range of outcomes.
Speaker #2: We continue to model inflation rates remaining in the low single to 2026. Moving down the P&L, total company gross profit increased 7.6% in the second quarter.
Speaker #2: In the first half of 2026, we generated about 264 million dollars of free cash flow. Up nearly 89 million dollars compared to last year.
Speaker #2: We did not repurchase any shares under our share repurchase program in the quarter. We will be opportunistic around share repurchase, for our priority remains debt reduction.
Speaker #2: Representing a gross profit per case increase of $0.20 as compared to the prior year's period. We are very pleased with our gross profit results, which shows our organization's resilience and long-term growth opportunity.
Speaker #2: The M&A pipeline remains robust, and we continue to evaluate strategic M&A. PFG has a history of successful acquisitions to drive growth and shareholder value, and we expect that to continue.
Speaker #2: In the second quarter of 2026, PFG reported net income of $61.7 million, a 45.5% increase year over year. Adjusted EBITDA increased 6.7% to $451 million, with all three operating segments contributing to our adjusted EBITDA growth.
Speaker #2: At the same time, we will apply our typical high standards and robust due diligence to evaluate high-quality acquisition opportunities. Turning to our guidance, today we announced guidance for the third quarter of 2026, and updated our range for the full year.
Patrick Hagerty: As Scott mentioned, the inflation impact on the convenience segment sales growth is offset by the revenue mix shift away from cigarettes. The inflationary environment has been volatile over the past several years, but as a company, we have demonstrated our ability to handle a range of outcomes. We continue to model inflation rates remaining in the low single to mid-single digit range throughout 2026. Moving down the P&L, total company gross profit increased 7.6% in the second quarter, representing a gross profit per case increase of $0.20 as compared to the prior year's period. We are very pleased with our gross profit results, which shows our organization's resilience and long-term growth opportunity. In the second quarter of 2026, PFG reported net income of $61.7 million, a 45.5% increase year over year.
Patrick Hatcher: As Scott mentioned, the inflation impact on the convenience segment sales growth is offset by the revenue mix shift away from cigarettes. The inflationary environment has been volatile over the past several years, but as a company, we have demonstrated our ability to handle a range of outcomes. We continue to model inflation rates remaining in the low single to mid-single digit range throughout 2026. Moving down the P&L, total company gross profit increased 7.6% in the second quarter, representing a gross profit per case increase of $0.20 as compared to the prior year's period. We are very pleased with our gross profit results, which shows our organization's resilience and long-term growth opportunity. In the second quarter of 2026, PFG reported net income of $61.7 million, a 45.5% increase year over year.
Speaker #2: Diluted earnings per share in the fiscal second quarter was $0.39, while adjusted diluted earnings per share was $0.98, flat year over year. Our EPS was impacted by several below-the-line items, including higher interest expense and effective tax rate in the period.
Speaker #2: For the third quarter, we expect net sales to be in a range of 16 to 16.3 billion dollars, and adjusted EBITDA between 390 and 410 million dollars.
Speaker #2: These ranges include continued deflation in cheese and poultry, the investment in our business including onboarding of new capacity at Cheney, and continuation of a difficult backdrop for our specialty segment.
Speaker #2: Our interest expense increased due to higher finance lease costs, offsetting lower debt balances and more favorable interest rates. Looking ahead, we anticipate a very modest sequential decline in the net interest expense.
Speaker #2: We have also contemplated the impact of the recent winter storms in our outlook for the third quarter. For the full fiscal year, our sales target is now a range of 67.25 to 68.25 billion dollars.
Speaker #2: Our effective tax rate was 28.8% in the second quarter, an increase from 25.2% last year. The increase in our quarterly effective tax rate was due to a decrease in deductible items related to stock-based compensation and an increase in foreign taxes as the percentage of income.
Speaker #2: We now expect full year adjusted EBITDA in a range of 1.875 to 1.975 billion dollars for 2026. The adjustments in our full year projections are largely a flow-through of the more difficult second quarter period.
Patrick Hagerty: Adjusted EBITDA increased 6.7% to $451 million, with all three operating segments contributing to our adjusted EBITDA growth. Diluted earnings per share in the fiscal second quarter was $0.39, while adjusted diluted earnings per share was $0.98, flat year-over-year. Our EPS was impacted by several below-the-line items, including higher interest expense, and effective tax rate in the period. Our interest expense increased due to higher finance lease costs, offsetting lower debt balances and more favorable interest rates. Looking ahead, we anticipate a very modest sequential decline in the net interest expense. Our effective tax rate was 28.8% in the second quarter, an increase from 25.2% last year.
Patrick Hatcher: Adjusted EBITDA increased 6.7% to $451 million, with all three operating segments contributing to our adjusted EBITDA growth. Diluted earnings per share in the fiscal second quarter was $0.39, while adjusted diluted earnings per share was $0.98, flat year-over-year. Our EPS was impacted by several below-the-line items, including higher interest expense, and effective tax rate in the period. Our interest expense increased due to higher finance lease costs, offsetting lower debt balances and more favorable interest rates. Looking ahead, we anticipate a very modest sequential decline in the net interest expense. Our effective tax rate was 28.8% in the second quarter, an increase from 25.2% last year.
Speaker #2: Partially offset by an increase in tax credits. We continue to expect our 2026 tax rate to be close to our historical average. Turning to our financial position and cash flow performance, in the first six months of 2026, PFG generated $456 million of operating cash flow, an increase of 77 million compared to the same period last year.
Speaker #2: Our results keep us on track to achieve the three-year projections we announced at Investor Day with sales in the range of 73 to 75 billion dollars and adjusted EBITDA between 2.3 and 2.5 billion dollars in fiscal 2028.
Speaker #2: To summarize, we are pleased with our progress despite a difficult operating environment in the second quarter. We are in a solid financial position, which supports our growth investments and capital return to our shareholders, and expects strong execution in the second half of the year.
Speaker #2: We invested about $192 million in capital expenditures during the first six months, we continue to anticipate full year 2026 CapEx to be approximately 70 basis points of net revenue, in line with our long-term target.
Speaker #2: Thank you for your time today. We appreciate your interest in performance Food Group, and with that, Scott and I would be happy to take your questions.
Speaker #2: Our investments in CapEx are primarily focused on maintaining and supporting growth within our infrastructure, and high return projects that we believe will support our long-term growth goals.
Speaker #1: Thank you. At this time, if you would like to ask a question, please press star one on your keypad. To leave the queue, press star two.
Patrick Hagerty: The increase in our quarterly effective tax rate was due to a decrease in deductible items related to stock-based compensation and an increase in foreign taxes as a percentage of income, partially offset by an increase in tax credits. We continue to expect our 2026 tax rate to be close to our historical average. Turning to our financial position and cash flow performance. In the first six months of 2026, PFG generated $456 million of operating cash flow, an increase of $77 million compared to the same period last year. We invested about $192 million in capital expenditures during the first six months. We continue to anticipate full year 2026 CapEx to be approximately 70 basis points of net revenue, in line with our long-term target.
Patrick Hatcher: The increase in our quarterly effective tax rate was due to a decrease in deductible items related to stock-based compensation and an increase in foreign taxes as a percentage of income, partially offset by an increase in tax credits. We continue to expect our 2026 tax rate to be close to our historical average. Turning to our financial position and cash flow performance. In the first six months of 2026, PFG generated $456 million of operating cash flow, an increase of $77 million compared to the same period last year. We invested about $192 million in capital expenditures during the first six months. We continue to anticipate full year 2026 CapEx to be approximately 70 basis points of net revenue, in line with our long-term target.
Speaker #2: In the first half of 2026, we generated about $264 million of free cash flow. Up nearly $89 million compared to last year. We did not repurchase any shares under our share repurchase program in the quarter.
Speaker #1: Once again, that is star one to ask a question and star two to remove yourself. We'll pause for just a moment to allow questions to queue.
Speaker #1: We'll take our first question from Mark Cardin with UBS. Please go ahead.
Speaker #2: We will be opportunistic around share repurchase, but our priority remains debt reduction. The M&A pipeline remains robust, and we continue to evaluate strategic M&A.
Speaker #2: Great. Good morning. Thanks so much for taking the questions. So to start, organic independent case growth, you started the quarter with some solid momentum, called out the shutdown, any additional color you can add on performance by month, and then you also just called out some of the recent weather headwinds and the impact of guidance.
Speaker #2: PFG has a history of successful acquisitions to drive growth and shareholder value, and we expect that to continue. At the same time, we will apply our typical high standards and robust due diligence to evaluate high-quality acquisition opportunities.
Speaker #2: How is January lined up relative to your initial expectations? And do you still see a path to that 6% organic independent case growth for the full year?
Speaker #2: Turning to our guidance, today we announced guidance for the third quarter of 2026, an updated our range for the full year. For the third quarter, we expect net sales to be in a range of $16 to $16.3 billion and adjusted EBITDA between $390 and $410 million.
Speaker #3: Hi Mark, this is Scott. Great questions. And as you talked about in Q2, we started the quarter in October fairly strong. That was the strongest period of the quarter.
Patrick Hagerty: Our investments in CapEx are primarily focused on maintaining and supporting growth within our infrastructure and high return projects that we believe will support our long-term growth goals. In the first half of 2026, we generated about $264 million of free cash flow, up nearly $89 million compared to last year. We did not repurchase any shares under our share repurchase program in the quarter. We will be opportunistic around share repurchase, but our priority remains debt reduction. The M&A pipeline remains robust, and we continue to evaluate strategic M&A. PFG has a history of successful acquisitions to drive growth and shareholder value, and we expect that to continue. At the same time, we will apply our typical high standards and robust due diligence to evaluate high-quality acquisition opportunities. Turning to our guidance.
Patrick Hatcher: Our investments in CapEx are primarily focused on maintaining and supporting growth within our infrastructure and high return projects that we believe will support our long-term growth goals. In the first half of 2026, we generated about $264 million of free cash flow, up nearly $89 million compared to last year. We did not repurchase any shares under our share repurchase program in the quarter. We will be opportunistic around share repurchase, but our priority remains debt reduction. The M&A pipeline remains robust, and we continue to evaluate strategic M&A. PFG has a history of successful acquisitions to drive growth and shareholder value, and we expect that to continue. At the same time, we will apply our typical high standards and robust due diligence to evaluate high-quality acquisition opportunities. Turning to our guidance.
Speaker #3: And then, obviously, the shutdown certainly had an impact the longer it carried on. We saw our November and December months as relatively equivalent. Definitely some choppiness week to week.
Speaker #2: These ranges include continued deflation in cheese and poultry, the investment in our business including onboarding of new capacity at Cheney, and continuation of a difficult backdrop for our specialty segment.
Speaker #3: And then as we moved into January, we saw really nice rebound, nice performance in January, and then certainly as you know, the start of February has been materially impacted by weather.
Speaker #2: We have also contemplated the impact of the recent winter storms in our outlook for the third quarter. For the full fiscal year, our sales target is now a range of $67.25 to $68.25 billion, we now expect full year adjusted EBITDA in a range of $1.875 to $1.975 billion for 2026.
Speaker #3: Last week, really a good portion of the country was impacted, and this week a little more isolated to the eastern half and the southeast.
Speaker #3: But it certainly had an impact, and it's something we factored into guidance. When I look at the big picture, we're very optimistic about the full year.
Speaker #2: The adjustments in our full year projections are largely a flow-through of the more difficult second quarter period. Our results keep us on track to achieve the three-year projections we announced at Investor Day with sales in the range of $73 to $75 billion and adjusted EBITDA between $2.3 and $2.5 billion in fiscal 2028.
Speaker #3: And I think you called out the 6% target. That's always what we aspire to. That's kind of how our sales organization is geared: we want to be 6% or above.
Patrick Hagerty: Today, we announced guidance for Q3 2026 and updated our range for the full year. For the third quarter, we expect net sales to be in a range of $16 to 16.3 billion and adjusted EBITDA between $390 and 410 million. These ranges include continued deflation in cheese and poultry, the investment in our business, including onboarding of new capacity at Cheney, and a continuation of a difficult backdrop for our specialty segment. We have also contemplated the impact of the recent winter storms in our outlook for the third quarter. For the full fiscal year, our sales target is now a range of $67.25 to 68.25 billion.
Patrick Hatcher: Today, we announced guidance for Q3 2026 and updated our range for the full year. For the third quarter, we expect net sales to be in a range of $16 to 16.3 billion and adjusted EBITDA between $390 and 410 million. These ranges include continued deflation in cheese and poultry, the investment in our business, including onboarding of new capacity at Cheney, and a continuation of a difficult backdrop for our specialty segment. We have also contemplated the impact of the recent winter storms in our outlook for the third quarter. For the full fiscal year, our sales target is now a range of $67.25 to 68.25 billion.
Speaker #3: So we're certainly fighting to get there.
Speaker #2: Great. And then, on the sales force front, have you guys seen much of an impact on either new hiring or on retention on the back of some of the earlier uncertainty relating to U.S.?
Speaker #2: To summarize, we are pleased with our progress despite a difficult operating environment in the second quarter. We are in a solid financial position, which supports our growth investments and capital return to our shareholders, and expect strong execution in the second half of the year.
Speaker #2: foods discussions, perhaps early in the quarter? And then just how did the pace of your sales force growth compare to the recent
Speaker #2: quarters? No, that's a great question.
Speaker #3: Really, what I look at when I think about sales force hiring and performance is really market share. And as I look at the sales force's market share performance, not just over the last couple of quarters, but over the last five or six quarters, we've been very consistent in our independent market share gains.
Speaker #2: Thank you for your time today. We appreciate your interest in performance Food Group, and with that, Scott and I would be happy to take your
Speaker #2: questions. Thank you.
Speaker #1: At this time, if you would like to ask a question, please press star one on your keypad. To leave the queue, press star two.
Patrick Hagerty: We now expect full-year Adjusted EBITDA in a range of $1.875 to 1.975 billion for 2026. The adjustments in our full-year projections are largely a flow-through of the more difficult second quarter period. Our results keep us on track to achieve the three-year projections we announced at Investor Day, with sales in the range of $73 to 75 billion and Adjusted EBITDA between $2.3 and 2.5 billion in fiscal 2028. To summarize, we are pleased with our progress despite a difficult operating environment in the second quarter. We are in a solid financial position, which supports our growth investments and capital return to our shareholders and expect strong execution in the second half of the year. Thank you for your time today. We appreciate your interest in Performance Food Group.
Patrick Hatcher: We now expect full-year Adjusted EBITDA in a range of $1.875 to 1.975 billion for 2026. The adjustments in our full-year projections are largely a flow-through of the more difficult second quarter period. Our results keep us on track to achieve the three-year projections we announced at Investor Day, with sales in the range of $73 to 75 billion and Adjusted EBITDA between $2.3 and 2.5 billion in fiscal 2028. To summarize, we are pleased with our progress despite a difficult operating environment in the second quarter. We are in a solid financial position, which supports our growth investments and capital return to our shareholders and expect strong execution in the second half of the year. Thank you for your time today. We appreciate your interest in Performance Food Group.
Speaker #1: Once again, that is star one to ask a question and star two to remove yourself. We'll pause for just a moment to allow questions to queue.
Speaker #3: As far as actual headcount, we've been right at that 6% range for the first two quarters. Of this year, I'm totally comfortable at that level.
Speaker #3: To see them continue to grow share to demonstrate through new account acquisition, we're at 5.8% net new account gains this quarter. Same last quarter.
Speaker #1: We'll take our first question from Mark Carden with UBS. Please go ahead.
Speaker #3: Great. Good morning. Thanks so much for taking the questions. So to start, organic independent solid momentum, called out the shutdown. Any additional color you can add on performance by month?
Speaker #3: But at the end of the day, and I talked about this in my comments, we are decentralized around that hiring. We certainly have opcos that are hiring in the double-digit range, and some that are probably below that 6% range.
Speaker #3: And then you also just called out some of the recent weather headwinds and the impact of guidance. How has January lined up relative to your initial expectations?
Speaker #3: And we really leave that up to them. But what I use as my gauge is really anchoring back to market share. So I feel really good about where we're at right now and the availability of
Speaker #3: And do you still see a path to that 6% organic independent case growth for the full year?
Speaker #3: talent.
Speaker #4: Hi, Mark. This is Scott. Great questions. And as you talked about in Q2, we started the quarter in October fairly strongest period of the quarter.
Speaker #2: Great. Thanks so much. Good
Patrick Hagerty: With that, Scott and I would be happy to take your questions.
Patrick Hatcher: With that, Scott and I would be happy to take your questions.
Speaker #2: luck. We'll hear next from Alex
Speaker #1: Flagel with Jefferies. Please go
Operator: Thank you. At this time, if you would like to ask a question, please press star one on your keypad. To leave the queue, press star two. Once again, that is star one to ask a question and star two to remove yourself. We'll pause for just a moment to allow questions to queue. We'll take our first question from Mark Carden with UBS. Please go ahead.
Operator: Thank you. At this time, if you would like to ask a question, please press star one on your keypad. To leave the queue, press star two. Once again, that is star one to ask a question and star two to remove yourself. We'll pause for just a moment to allow questions to queue. We'll take our first question from Mark Carden with UBS. Please go ahead.
Speaker #1: ahead.
Speaker #4: And then obviously, the shutdown certainly had an impact, a longer it carried on. We saw our November and December months relatively equivalent. Definitely some choppiness week to week.
Speaker #4: Thanks.
Speaker #4: And good morning. I was wondering if you could dissect the dynamics at play for the food service business in the second quarter. It seemed like really strong independent growth and independent mix sales jumped a lot, but the OPEX was elevated.
Speaker #4: And then as we moved into January, we saw really nice rebound, nice performance in January, and then certainly, as you know, the start of February has been materially impacted by weather.
Speaker #4: And you called out the Cheney investments and the cheese and poultry deflation, but maybe you could kind of talk a little bit more about how impactful that was and kind of the cadence of the investments behind Cheney, and how that maybe differed from expectations, or if that was sort of similar to what you expected.
Mark Carden: Great, good morning. Thanks so much for taking the questions. So, to start, on organic independent case growth, you started the quarter with some solid momentum, called out the shutdown. Any additional color you can add on performance by month? And then you also just called out some of the recent weather headwinds and the impact to guidance. How has January lined up relative to your initial expectations? And do you still see a path to that 6% organic independent case growth for the full year?
Mark Carden: Great, good morning. Thanks so much for taking the questions. So, to start, on organic independent case growth, you started the quarter with some solid momentum, called out the shutdown. Any additional color you can add on performance by month? And then you also just called out some of the recent weather headwinds and the impact to guidance. How has January lined up relative to your initial expectations? And do you still see a path to that 6% organic independent case growth for the full year?
Speaker #4: Last week, really a good portion of the country was impacted, and this week, a little more isolated to the eastern half and the southeast.
Speaker #4: But certainly had an impact and something we factored into guidance. When I look at the big picture, we're very optimistic about the full year.
Speaker #3: Yeah, let me just start off with Cheney. I want to take a step back and just say that acquisition is something that we pursued for a long time.
Speaker #4: And I think you called out the 6% target. That's always what we aspire to. That's kind of how our sales organization is geared, is we want to be 6% or above.
Speaker #3: It's been a great acquisition to date. It's a great cultural fit that fills in the geography that is really strategic for us. So we're really happy with the progress of the acquisition.
Scott McPherson: Hi, Mark, this is Scott. Great questions. And as you talked about in Q2, we started the quarter in October, you know, fairly strong. That was the strongest period of the quarter, and then obviously the shutdown certainly had an impact the longer it carried on. We saw our November and December months, you know, relatively equivalent, definitely some choppiness week to week. And then as we moved into January, we saw, you know, a really nice rebound, nice performance in January. And then, you know, certainly, as you know, you know, the start of February has been, you know, materially impacted by weather. Last week, you know, really a good portion of the country was impacted, and this week, you know, a little more isolated to the eastern half and the Southeast.
Scott E. McPherson: Hi, Mark, this is Scott. Great questions. And as you talked about in Q2, we started the quarter in October, you know, fairly strong. That was the strongest period of the quarter, and then obviously the shutdown certainly had an impact the longer it carried on. We saw our November and December months, you know, relatively equivalent, definitely some choppiness week to week. And then as we moved into January, we saw, you know, a really nice rebound, nice performance in January. And then, you know, certainly, as you know, you know, the start of February has been, you know, materially impacted by weather. Last week, you know, really a good portion of the country was impacted, and this week, you know, a little more isolated to the eastern half and the Southeast.
Speaker #4: So we're certainly fighting to get
Speaker #4: there. Great.
Speaker #3: As I called out in my remarks, we knew going in that we were going to make some material investments in their infrastructure. We have a brand new building that is just completed.
Speaker #3: And then on the sales force front, have you guys seen much of an impact on either new hiring or in retention on the back of some of the earlier uncertainty relating to U.S.
Speaker #3: food discussions, perhaps early in the quarter? And then just how did the pace of your sales force growth compare to recent
Speaker #3: We just started receiving product this week. It will start shipping probably over the next three to four weeks. So certainly there is some cost related to that.
Speaker #3: quarters? No, that's a great
Speaker #4: question. Really, what I look at when I think about sales force hiring and performance is really market share. And as I look at the sales force's market share performance, not just over the last couple of quarters, but over the last five or six quarters, we've been very consistent in our independent market share gains.
Speaker #3: We also opened a new manufacturing facility for them. So overall, I would say their costs are running a little bit higher than we anticipated.
Speaker #3: And the other thing that we're taking them through right now as they transition into being part of a public company is the integration cost—to our benefits, to our payroll, to our financial mapping.
Scott McPherson: But certainly had an impact and something we factored into guidance. When I look at the big picture, you know, we're very optimistic about the full year. And I think, you know, you called out the 6% target. That's always what we aspire to. That's kind of how our sales organization is geared, is we want to be 6% or above, so we're certainly fighting to get there.
Scott E. McPherson: But certainly had an impact and something we factored into guidance. When I look at the big picture, you know, we're very optimistic about the full year. And I think, you know, you called out the 6% target. That's always what we aspire to. That's kind of how our sales organization is geared, is we want to be 6% or above, so we're certainly fighting to get there.
Speaker #4: As far as actual headcount, we've been right at that 6% range for the first two quarters. Of this year, I'm totally comfortable with that level.
Speaker #3: So again, really happy with the acquisition. Certainly, expenses are running a little bit higher than we anticipated. And then just kind of asked about the overall cadence in foodservice.
Speaker #4: To see them continue to grow share to demonstrate through new account acquisition, we're at 5.8%. Net new account gains this quarter, same last quarter.
Speaker #3: As you pointed out, really happy with our market share growth, both in independent and chain. From a margin standpoint, as we continue to grow that independent market share, that mix really helps our margin.
Speaker #4: But at the end of the day, and I talked about this in my comments, we are decentralized around that hiring. We certainly have opcos that are hiring in the double-digit range, and some that are probably below that 6% range.
Mark Carden: Great. And then on the sales force front, have you guys seen much of an impact on either new hiring or on retention on the back of some of the earlier uncertainty relating to US Foods discussions, perhaps earlier in the quarter? And then, just how did the pace of your sales force growth compare to recent quarters?
Mark Carden: Great. And then on the sales force front, have you guys seen much of an impact on either new hiring or on retention on the back of some of the earlier uncertainty relating to US Foods discussions, perhaps earlier in the quarter? And then, just how did the pace of your sales force growth compare to recent quarters?
Speaker #3: So that's performed really well. And then I think from an OPEX standpoint, in the core food service, ex-Cheney, we had leverage, but I'd say definitely there's some opportunity in leveraging OPEX in that area as well.
Speaker #4: And we really leave that up to them. But what I use as my gauge is really anchoring back to market share. So I feel really good about where we're at right now.
Scott McPherson: ... No, that's a great question. You know, really, what I look at when I think about sales force, hiring, and performance is really market share. And as I look at the sales force's market share performance, not just over the last couple of quarters, but over the last, you know, five or six quarters, we've been very consistent in our independent market share gains. You know, as far as actual headcount, we've been right at that 6% range for the first two quarters of this year. I'm totally comfortable at that level, you know, to see them continue to grow share, you know, to, to demonstrate through new account acquisition. We're at 5.8% net new account gains this quarter, same last quarter.
Scott E. McPherson: No, that's a great question. You know, really, what I look at when I think about sales force, hiring, and performance is really market share. And as I look at the sales force's market share performance, not just over the last couple of quarters, but over the last, you know, five or six quarters, we've been very consistent in our independent market share gains. You know, as far as actual headcount, we've been right at that 6% range for the first two quarters of this year. I'm totally comfortable at that level, you know, to see them continue to grow share, you know, to, to demonstrate through new account acquisition. We're at 5.8% net new account gains this quarter, same last quarter.
Speaker #4: And the availability of
Speaker #4: talent. Great.
Speaker #3: But really, pretty happy with how the core food service segment performed. And then we talked about the deflation in those two couple of categories.
Speaker #3: Thanks so much. Good
Speaker #3: Thanks so much. Good luck. We'll hear next
Speaker #1: from Alex Lagle with Jeffries. Please go ahead.
Speaker #3: It did have an impact on margins, for sure. We over-indexed in those two categories. So really, summing it all up, Cheney and the deflation were really, at the end of the day, really the miss in the quarter that would have gotten us to the upper half of guidance.
Speaker #5: Thanks. And good morning. I was wondering if you could dissect the dynamics at play for the food service business in the second quarter. It seemed like really strong independent growth and the independent mix sales jumped a lot, but the OPEX was elevated.
Speaker #5: And you called out the Cheney investments and the cheese and poultry deflation, but maybe you could kind of talk a little bit more about how impactful that was and kind of the cadence of the investments behind Cheney and how that maybe differed from expectations or if that was sort of similar to what you
Speaker #4: Okay, and then I guess along the same lines, at least in terms of the improving mix, the convenience EBITDA margin opportunity—I wanted to ask about that.
Scott McPherson: But at the end of the day, and I talked about this in my comments, you know, we are decentralized around that hiring. We certainly have opcos that are hiring in the double-digit range and some that are, you know, probably below that 6% range. And we really leave that up to them. But, you know, what I use as my gauge is really anchoring back to market share. So I feel really good about where we're at right now and the availability of talent.
Scott E. McPherson: But at the end of the day, and I talked about this in my comments, you know, we are decentralized around that hiring. We certainly have opcos that are hiring in the double-digit range and some that are, you know, probably below that 6% range. And we really leave that up to them. But, you know, what I use as my gauge is really anchoring back to market share. So I feel really good about where we're at right now and the availability of talent.
Speaker #4: I mean, it's expanded nicely and some of that is the food service growth. And some other mixed items. But I mean, the food service penetration actually is still seems to have a long way to go and kind of curious what that could mean over time for the overall convenience EBITDA margins as we look out a few years and you continue to grow that portion of your business there.
Speaker #4: Yeah. Let me just start off with Cheney. I want to take a step back and just that acquisition is something that we pursued for a long time.
Speaker #4: It's been a great acquisition to date. It's a great cultural fit that fills in the geography that is really strategic for us. So we're really happy with the progress of the acquisition.
Speaker #3: Yeah, that's a great call out, Alex. There's a lot of things going on in the convenience segment that really, I think, help our margin profile over time.
John Heinbockel: Great. Thanks so much. Goodbye.
John Heinbockel: Great. Thanks so much. Goodbye.
Operator: We'll hear next from Alex Slagle with Jefferies. Please go ahead.
Operator: We'll hear next from Alex Slagle with Jefferies. Please go ahead.
Speaker #4: As I called out in my remarks, we knew going in that we were going to make some material investments in their infrastructure. We have a brand new building that is just completed.
Speaker #3: You certainly called out food service and I agree with you. There's a long runway ahead. We continue to grow food service in that high single-digit, low double-digit range.
Alexander Slagle: Thanks, and good morning. I was wondering if you could dissect the dynamics at play for the food service business in the second quarter. Seemed like really strong independent growth and the independent mix, you know, sales jumped a lot, but the OpEx was elevated. You called out the Cheney investments and the cheese and poultry deflation. But maybe if you can talk a little bit more about how impactful that was and, and the cadence of the investments behind Cheney and, you know, how that maybe differed from expectations or if that, that was sort of similar to what you expected.
Alexander Slagle: Thanks, and good morning. I was wondering if you could dissect the dynamics at play for the food service business in the second quarter. Seemed like really strong independent growth and the independent mix, you know, sales jumped a lot, but the OpEx was elevated. You called out the Cheney investments and the cheese and poultry deflation. But maybe if you can talk a little bit more about how impactful that was and, and the cadence of the investments behind Cheney and, you know, how that maybe differed from expectations or if that, that was sort of similar to what you expected.
Speaker #4: receiving product this week. It will start We just started shipping probably over the next three to four weeks. So certainly, there is some cost related to that.
Speaker #3: Both in our convenience segment and our food service segment into convenience. So kind of hitting that from two ends. So that's performing really well.
Speaker #4: We also opened a new manufacturing facility for them. So overall, I would say their costs are running a little bit higher than we anticipated.
Speaker #3: When you look at the macro of convenience, though, one of the things that's, I think, really encouraging is what's happening in the non-combustible space.
Speaker #4: And the other thing that we're taking them through right now is they transitioned into being part of a public company. The integration costs to our benefits, to our payroll, to our financial mapping.
Speaker #3: So non-combustible nicotine that we're all nicotine and other forms of nicotine that aren't combustible are growing at a rapid pace. Those have a nicer margin profile than combustible cigarettes.
Scott McPherson: Yeah, let me just start off with Cheney. You know, I, I want to take a step back and just, you know, that, that acquisition is something that we pursued for a long time. It's been a great acquisition to date. It's a great cultural fit, it fills in a geography that, that is really strategic for us. So we're really happy with the progress of the acquisition. As I called out in my remarks, we knew going in that we were going to make some material investments in their infrastructure. We have a brand new building that is just completed. We just started receiving product this week. It will start shipping, you know, probably over the next three to four weeks. So certainly, there are some costs related to that. We also opened a new manufacturing facility for them.
Scott E. McPherson: Yeah, let me just start off with Cheney. You know, I, I want to take a step back and just, you know, that, that acquisition is something that we pursued for a long time. It's been a great acquisition to date. It's a great cultural fit, it fills in a geography that, that is really strategic for us. So we're really happy with the progress of the acquisition. As I called out in my remarks, we knew going in that we were going to make some material investments in their infrastructure. We have a brand new building that is just completed. We just started receiving product this week. It will start shipping, you know, probably over the next three to four weeks. So certainly, there are some costs related to that. We also opened a new manufacturing facility for them.
Speaker #4: So again, really happy with the acquisition. Certainly, expenses are running a little bit higher than we anticipated. And then just kind of asked about the overall cadence in food service.
Speaker #3: So as we see that migration, there's a natural benefit to our margins in mix. So that's been a great progression and I think that's going to continue for a long time.
Speaker #4: As you pointed out, really happy with our market share growth, both in independent and chain. From a margin standpoint, as we continue to grow that independent market share, that mix really helps our margin.
Speaker #3: So we feel really good about how we're set up in convenience from a margin standpoint.
Speaker #4: Thanks. We'll hear next from John.
Speaker #1: Heimbachel with Guggenheim. Please go ahead.
Speaker #4: So that's performed really well. And then I think from an OPEX standpoint, in the core food service, ex-Cheney, we had leverage, but I'd say definitely there's some opportunity in leveraging OPEX in that area as well.
Speaker #5: Hey, guys. Scott, maybe you can touch on some of the self-help that you referenced back at the investor day, particularly strategic procurement. In that journey, and then maybe as a related question for Patrick, just the impact of deflation on margin comes from where?
Speaker #4: But really, pretty happy with how the core food service segment performed. And then we talked about the deflation in those two couple of categories.
Scott McPherson: So overall, I would say, you know, their costs are running a little bit higher than we anticipated. And the other thing that we're taking them through right now is, you know, they transitioning into being part of a public company is, is, you know, the integration costs to our benefits, to our payroll, to our financial mapping. So again, really happy with the acquisition. Certainly, you know, expenses are running a little bit higher than we anticipated. And then just, you know, you kind of asked about the overall cadence in food service. You know, as you pointed out, really happy with our market share growth, both in independent and chain. You know, from a margin standpoint, you know, as we continue to grow that independent market share, that mix really helps our margin. So that's performed really well.
Scott E. McPherson: So overall, I would say, you know, their costs are running a little bit higher than we anticipated. And the other thing that we're taking them through right now is, you know, they transitioning into being part of a public company is, is, you know, the integration costs to our benefits, to our payroll, to our financial mapping. So again, really happy with the acquisition. Certainly, you know, expenses are running a little bit higher than we anticipated. And then just, you know, you kind of asked about the overall cadence in food service. You know, as you pointed out, really happy with our market share growth, both in independent and chain. You know, from a margin standpoint, you know, as we continue to grow that independent market share, that mix really helps our margin. So that's performed really well.
Speaker #5: I don't know if that's mixed.
Speaker #5: or. Yeah.
Speaker #4: Did have an impact on margins, for sure. We over-indexed in those two categories. So really, summing it all up, Cheney and the deflation were really at the end of the day, really the miss in the quarter that would have gotten us to the upper half of guidance.
Speaker #3: So I'll take the first half of that and let Patrick talk to procurement. Opportunity to really—we're going to be able to get $5 million of procurement synergies over our three-year plan.
Speaker #5: Okay. And then I guess along the same lines, at least in terms of the improving mix, the convenience EBITDA margin opportunity I wanted to ask about.
Speaker #5: I mean, it's expanded nicely, and some of that is the food service growth. And some other mixed items. But I mean, the food service penetration actually is still seems to have a long way to go and kind of curious what that could mean over time for the overall convenience EBITDA margins as we look out a few years and you continue to grow that portion of your business there.
Speaker #3: The cadence of that, I'd say it's fairly linear. I think we're starting to capture some of that in the back half of this year.
Scott McPherson: And then, you know, I think from an OpEx standpoint, in the core food service, you know, ex Cheney, you know, we have leverage, but I'd say, you know, definitely there's some opportunity in leveraging OpEx in that area as well. But really, you know, pretty happy with how the core food service segment performed. And then we talked about the deflation in those two couple categories. Did have an impact on margins for sure. We overindexed in those two categories. So really, you know, summing it all up, you know, Cheney and the deflation were really, you know, at the end of the day, they're really the miss in the quarter that would have gotten us to the upper half of guidance.
Scott E. McPherson: And then, you know, I think from an OpEx standpoint, in the core food service, you know, ex Cheney, you know, we have leverage, but I'd say, you know, definitely there's some opportunity in leveraging OpEx in that area as well. But really, you know, pretty happy with how the core food service segment performed. And then we talked about the deflation in those two couple categories. Did have an impact on margins for sure. We overindexed in those two categories. So really, you know, summing it all up, you know, Cheney and the deflation were really, you know, at the end of the day, they're really the miss in the quarter that would have gotten us to the upper half of guidance.
Speaker #3: We'll definitely see capture in year three and get us to that end number. So we feel really confident about that.
Speaker #6: Yeah. And John, thanks for the question. I'll jump in here. Yeah. So where we're going to see the impact from the deflation is largely going to be—I mean, you have to remember, we have a very large basket of commodity goods that are constantly moving around.
Speaker #4: Yeah, that's a great call out, Alex. There's a lot of things going on in the convenience segment that really I think help our margin profile over time.
Speaker #4: You certainly called out food service and I agree with you. There's a long runway ahead. We continue to grow food service in that high single-digit, low double-digit range.
Speaker #6: We called out cheese and poultry because our expectations for the quarter were higher than what we actually saw come through with the inflation. So that's the reason we called it out.
Speaker #4: Both in our convenience segment and our food service segment into convenience. So kind of hitting that from two ends. So that's performing really well.
Speaker #6: And it's because we also over-indexed in those two commodities versus the rest of the
Alexander Slagle: Okay. And then, I guess, along the same lines, at least in terms of the improving mix, the convenience EBITDA margin opportunity, I wanted to ask about. I mean, it's expanded nicely, and some of that is the food service growth, and some other mix items. But, I mean, the food service penetration actually still seems to have a long way to go. I'm kind of curious what that could mean over time, for the overall convenience EBITDA margins as we look out a few years, you know, and you continue to grow that portion of your business there.
Alexander Slagle: Okay. And then, I guess, along the same lines, at least in terms of the improving mix, the convenience EBITDA margin opportunity, I wanted to ask about. I mean, it's expanded nicely, and some of that is the food service growth, and some other mix items. But, I mean, the food service penetration actually still seems to have a long way to go. I'm kind of curious what that could mean over time, for the overall convenience EBITDA margins as we look out a few years, you know, and you continue to grow that portion of your business there.
Speaker #4: When you look at the macro of convenience, though, one of the things that I think really encouraging is what's happening in the non-combustible space.
Speaker #6: basket. All right.
Speaker #5: Follow-up for Scott. I know as part of the US food process, right, there were some chain business that had sort of gotten tabled. Does that come back?
Speaker #4: So non-combustible nicotine that we're all nicotine and other forms of nicotine that aren't combustible are growing at a rapid pace. Those have a nicer margin profile than combustible cigarettes.
Speaker #5: When does that come back? And how material is
Speaker #5: When does that come back? And how material is that? Yeah.
Speaker #4: So as we see that migration, there's a natural benefit to our margins in mix. So that's been a great progression. And I think that's going to continue for a long time.
Speaker #3: I think as George mentioned on prior earnings call, we had two or three folks in the pipeline. I'd say fairly material pieces of business that we felt like we had a really good shot at picking up.
Scott McPherson: Yeah, it's a great call out, Alex. There's a lot of things going on in the convenience segment that really I think help our margin profile over time. You know, you certainly called out food service, and I agree with you, there's a long runway ahead. You know, we continue to grow food service in that high single-digit, low double-digit range, both in our convenience segment and our food service segment into convenience. So, you know, kind of hitting that from two ends. So that's performing really well. When you look at the macro of convenience, though, you know, one of the things that's, you know, I think really encouraging is what's happening in the non-combustible space. So non-combustible nicotine, oral nicotine, and other forms of nicotine that aren't combustible are growing at a rapid pace.
Scott E. McPherson: Yeah, it's a great call out, Alex. There's a lot of things going on in the convenience segment that really I think help our margin profile over time. You know, you certainly called out food service, and I agree with you, there's a long runway ahead. You know, we continue to grow food service in that high single-digit, low double-digit range, both in our convenience segment and our food service segment into convenience. So, you know, kind of hitting that from two ends. So that's performing really well. When you look at the macro of convenience, though, you know, one of the things that's, you know, I think really encouraging is what's happening in the non-combustible space. So non-combustible nicotine, oral nicotine, and other forms of nicotine that aren't combustible are growing at a rapid pace.
Speaker #4: So we feel really good about how we're set up in convenience from a margin standpoint.
Speaker #3: And as we said, we felt like they were on the fence. Most of those, what they do in that situation is they will renew for the short term.
Speaker #1: We'll hear next from Thanks. John Heinbockel with Guggenheim. Please go
Speaker #3: And that's what happened with a couple of these. They signed one-year extensions on their agreements. So we're certainly still in dialogue. But I would just step back and say, overall, in the food service space, we feel really good about our pipeline, both independent and chain, in the convenience space, obviously, they're performing exceptionally well from a market share standpoint.
Speaker #1: ahead. Hey,
Speaker #6: guys. Scott, maybe you can touch on some of the self-help that you referenced back at the investor day, particularly strategic procurement. Where are we in that journey?
Speaker #6: And then maybe as a related question for Patrick, just the impact of deflation on margin comes from where? I don't know if that's mix or inventory gains or how does that flow through?
Speaker #6: And then maybe as a related question for Patrick, just the impact of deflation on margin comes from where? I don't know if that's mix or inventory gains or how does that flow through?
Speaker #3: And I'd even step back and look at specialty and say, we definitely called out the headwind in theater. That's been certainly a challenge. That challenge will really persist for us in the next quarter.
Speaker #4: Yeah. So I'll take the first half of that and let Patrick tackle the second. So John, at investor day, talked about procurement opportunities. And we've done a lot of work on that.
Speaker #3: That's when we lap at the end of this next or I guess this third quarter that we're in, we lap a pretty material loss in theater but the rest of the specialty segments are really performing well.
Scott McPherson: Those have a nicer margin profile than combustible cigarettes. So as we see that migration, there's a natural benefit to our margins in mix. So, you know, that's been a great progression, and I think that's going to continue for a long time. So we feel really good about how we're set up in convenience from a margin standpoint.
Scott E. McPherson: Those have a nicer margin profile than combustible cigarettes. So as we see that migration, there's a natural benefit to our margins in mix. So, you know, that's been a great progression, and I think that's going to continue for a long time. So we feel really good about how we're set up in convenience from a margin standpoint.
Speaker #4: And certainly, in the clean room environment that we had over the last few months, that allowed us to really dig into our own side of the procurement ledger.
Speaker #3: I look at vending and retail, our e-commerce platform. We're starting to see some momentum there. So I feel really good as we get into Q4 that you're going to start out of the specialty from a growth
Speaker #3: I look at vending and retail, our e-commerce platform. We're starting to see some momentum there. So I feel really good as we get into Q4 that you're going to start out of the specialty from a growth standpoint.
Speaker #4: And really, at the end of the day, it gave us that much more confidence that we're going to be able to get to that top end of the 100 to 125 million of procurement synergies over our three-year plan.
Alexander Slagle: Thanks.
Alexander Slagle: Thanks.
Operator: We'll hear next from John Heinbockel with Guggenheim. Please go ahead.
Operator: We'll hear next from John Heinbockel with Guggenheim. Please go ahead.
Speaker #5: Thank you.
John Heinbockel: Hey, guys. Scott, maybe you can touch on some of the self-help that you referenced back at the Investor Day, particularly strategic procurement. Where are we in that journey? And then maybe as a related question for Patrick, just the impact of deflation on margin comes from where? I don't know if that's mix or, you know, inventory gains, or how does that flow through?
John Heinbockel: Hey, guys. Scott, maybe you can touch on some of the self-help that you referenced back at the Investor Day, particularly strategic procurement. Where are we in that journey? And then maybe as a related question for Patrick, just the impact of deflation on margin comes from where? I don't know if that's mix or, you know, inventory gains, or how does that flow through?
Speaker #1: We'll move now to Jeffrey Bernstein with Barclays. Please go ahead.
Speaker #4: The cadence of that, I'd say it's fairly linear. I think we're starting to capture some of that in the back half of this year.
Speaker #7: Great. Thank you very much. First question is just on the topic. Scott, you mentioned just wondering whether there's any change in performance-specific indexes. That seems like your word about chain integration may be a little higher than if there's any change to the approach to that M&A, maybe with George stepping back, how we kind of prioritize that process.
Speaker #4: capture in year three and get us to that end number. So we feel We'll definitely see really confident about that.
Speaker #3: Yeah. And John, thanks for the question. I'll jump in here. Yeah. So where we're going to see the impact from the deflation is largely going to be in margin, but it could also be a little bit in inventory gains.
Speaker #3: I mean, you have to remember we have a very large basket of commodity goods that are constantly moving around. We called out cheese and poultry because our expectations for the quarter were higher than what we actually saw come through with the inflation.
Scott McPherson: Yeah. So I'll take the first half of that and let Pat tackle the second. So John, we, you know, at Investor Day, talked about procurement opportunity. And we've done a lot of work on that. And, you know, certainly in the clean room environment that we had over the last few months, you know, that'll really dig into our own side of the procurement ledger. And really, at the end of the day, it gave us, you know, that much more confidence that, you know, we're gonna be able to get to that top end of the $100 to 125 million of procurement synergies over our three-year plan. You know, the cadence of that, I'd say it's fairly, you know, linear. I think, you know, we're starting to capture some of that in the back half of this year.
Scott E. McPherson: Yeah. So I'll take the first half of that and let Pat tackle the second. So John, we, you know, at Investor Day, talked about procurement opportunity. And we've done a lot of work on that. And, you know, certainly in the clean room environment that we had over the last few months, you know, that'll really dig into our own side of the procurement ledger. And really, at the end of the day, it gave us, you know, that much more confidence that, you know, we're gonna be able to get to that top end of the $100 to 125 million of procurement synergies over our three-year plan. You know, the cadence of that, I'd say it's fairly, you know, linear. I think, you know, we're starting to capture some of that in the back half of this year.
Speaker #7: And then I had one follow-up.
Speaker #3: Yeah. Overall, really no gains to our approach M&A. I mean, for the last four years, we'll continue to collaborate moving forward on that. We certainly are looking at things in our pipeline.
Speaker #3: So that's the reason we called it out. And it's because we also over-indexed in those two commodities versus the rest of the
Speaker #6: All right. Follow-up for Scott. I know as part of the US food process, right, there was some chain business that had sort of gotten tabled.
Speaker #3: Cheney, I think, has progressed really well. We're really excited about what that's going to bring. And we called out early on that the synergies that we'll see in Cheney really come at the end of year two and year three.
Speaker #6: Does that come back? When does that come back? And how material is
Speaker #3: And that's really the way we approach M&A. We try not to make a drastic in those first couple of years to really let them acclimate to the organization.
Speaker #6: that?
Speaker #4: Yeah. I think as George mentioned on prior earnings call, we had two or three folks in the pipeline I'd say fairly material pieces of business that we felt like we had a really good shot at picking up.
Speaker #3: We try and learn what we can from them. For a much long-term approach to M&A, and that's with Ryan Hart's paid-off core and certainly going to help Cheney.
Speaker #4: And as we said, we felt like they were on the fence. Most of those, what they do in that situation is they will renew for the short term.
Scott McPherson: We'll definitely see capture in year two, in year three and get us to that end number. So we feel really confident about that.
Scott E. McPherson: We'll definitely see capture in year two, in year three and get us to that end number. So we feel really confident about that.
Speaker #7: Understood. And then to follow up on the independent organic case growth, I know you talked about always targeting kind of that 6% type range.
Speaker #4: And that's what happened with a couple of these. They signed one-year extensions on their agreements. So we're certainly still in dialog. But I would just step back and say, overall, in the food service space, we feel really good about our pipeline both independent and chain in the convenience space.
Patrick Hagerty: Yeah, and John, thanks for the question. I'll jump in here. Yeah, so where we're gonna see the impact from the deflation is largely gonna be in margin, but it could also be a little bit in inventory gains. I mean, you have to remember, we have a very large basket of commodity goods that are constantly moving around. We called out cheese and poultry because our expectations for the quarter were higher than what we actually saw come through with the inflation. So that's the reason we called it out, and it's because we also over-index in those two commodities versus the rest of the basket.
Patrick Hatcher: Yeah, and John, thanks for the question. I'll jump in here. Yeah, so where we're gonna see the impact from the deflation is largely gonna be in margin, but it could also be a little bit in inventory gains. I mean, you have to remember, we have a very large basket of commodity goods that are constantly moving around. We called out cheese and poultry because our expectations for the quarter were higher than what we actually saw come through with the inflation. So that's the reason we called it out, and it's because we also over-index in those two commodities versus the rest of the basket.
Speaker #7: But I got the impression it's going to be a little bit more of a fight to get there in the fiscal quarter. So I'm wondering if you could share any kind of current run rate or your expectation for that third quarter?
Speaker #4: Obviously, they're performing exceptionally well from a market share standpoint. And I'd even step back and look at specialty and say, we definitely called out the headwind in theater.
Speaker #7: And there was a passing mention where I was expecting to hear something more material. I was wondering whether you could quantify how much potentially that weather impact has had on sales, which were modest below street exposures to the third quarter, which was well below Trump gauge primary driver of that shortfall weather.
Speaker #4: That's been certainly a challenge. That challenge will really persist for us in the next quarter. That's when we lap at the end of this next or I guess this third quarter that we're in, we lap a pretty material loss in theater.
Speaker #7: Whether weather had a more outsized impact, or whether it's primarily
Speaker #7: Cheney. Thank you. Well, I'll talk
John Heinbockel: All right. Maybe a follow up for Scott. I know as part of the US Foods process, right, there was some chain business, you know, that had sort of gotten tabled. Does that come back? When does that come back, and you know, how material is that?
John Heinbockel: All right. Maybe a follow up for Scott. I know as part of the US Foods process, right, there was some chain business, you know, that had sort of gotten tabled. Does that come back? When does that come back, and you know, how material is that?
Speaker #3: to the cadence of the quarter and Patrick might want to fill in a couple of things here. We actually started January off really nicely.
Speaker #4: But the rest of the specialty segments are really performing pretty well. And I look at vending and retail, our e-commerce platform. We're starting to see some momentum there.
Speaker #3: I would say it was a call to a rebound from where we remember. It picked up nicely in January. And then certainly, last week's weather was impactful.
Speaker #4: So I feel really good as we get into Q4 that you're going to start to see some nice performance out of the specialty from a growth standpoint.
Scott McPherson: Yeah, I think as George mentioned on a prior earnings call, you know, we had two or three folks in the pipeline, you know, I'd say fairly material pieces of business that we felt like we had a really good shot at picking up. And as we said, you know, we felt like they were on the fence. Most of those, what they do in that situation is they will renew for the short term, and that's what happened with a couple of these. They signed one-year extensions on their agreements. You know, so we're certainly still in dialogue, but I would just step back and say, overall, in the food service space, we feel really good about our pipeline, both independent and chain. In the convenience space, obviously, you know, they're performing exceptionally well from a market share standpoint.
Scott E. McPherson: Yeah, I think as George mentioned on a prior earnings call, you know, we had two or three folks in the pipeline, you know, I'd say fairly material pieces of business that we felt like we had a really good shot at picking up. And as we said, you know, we felt like they were on the fence. Most of those, what they do in that situation is they will renew for the short term, and that's what happened with a couple of these. They signed one-year extensions on their agreements. You know, so we're certainly still in dialogue, but I would just step back and say, overall, in the food service space, we feel really good about our pipeline, both independent and chain. In the convenience space, obviously, you know, they're performing exceptionally well from a market share standpoint.
Speaker #3: And I think going into this, certainly having an impact as well. And that's certainly something that we took into consideration when we talked about our guide for the third quarter and the full year.
Speaker #6: Thank
Speaker #6: you.
Speaker #1: We'll move
Speaker #1: Please go now to Jeffrey Bernstein with Barclays.
Speaker #1: ahead. Great.
Speaker #3: Patrick, anything you want to?
Speaker #6: Yeah. Just a couple of comments on the guidance for Q3. Really, what we have embedded in that guidance in the EBITDA is we expect to see some continuation of the OPEX challenges that we've had to Cheney that we saw in Q2 and Q3.
Speaker #7: Thank you very much. My first question is just on the M&A topic. Scott, you mentioned the pipeline is robust. Just wondering whether there's any change in performances, specific interest seems like you're still working hard on the chain integration, maybe costs are coming a little higher than you thought.
Speaker #6: We also are seeing that deflation impact from continuing to Q3. Scott touched on specialty and then obviously the weather. We contemplate that. We've had bad weather last year, two years ago during this quarter.
Speaker #7: So just wondering if there's any change to the approach to that M&A, maybe with George stepping back, how we kind of prioritize that process.
Speaker #7: And then I had one follow-up.
Scott McPherson: I'd even step back and look at specialty and say, you know, we definitely called out the headwind in theater. That's been certainly a challenge. That challenge will really persist for us in the next quarter. That's when we lap at the end of this next, or I guess, this third quarter that we're in, we lap a pretty material loss in theater. But the rest of the specialty segments are really performing pretty well. When I look at vending and retail, our e-commerce platform, you know, we're starting to see some momentum there. So I feel really good as we get into, you know, Q4, that you're gonna start to see some nice performance out of the specialty from a growth standpoint.
Scott E. McPherson: I'd even step back and look at specialty and say, you know, we definitely called out the headwind in theater. That's been certainly a challenge. That challenge will really persist for us in the next quarter. That's when we lap at the end of this next, or I guess, this third quarter that we're in, we lap a pretty material loss in theater. But the rest of the specialty segments are really performing pretty well. When I look at vending and retail, our e-commerce platform, you know, we're starting to see some momentum there. So I feel really good as we get into, you know, Q4, that you're gonna start to see some nice performance out of the specialty from a growth standpoint.
Speaker #4: Yeah. I would say overall, really no change to our approach to M&A. I mean, George and I have collaborated on M&A for the last four years.
Speaker #6: It is our smaller. It's fair to obviously nail down weather, but we have recently experienced two weeks of impact from weather. And as Scott mentioned, we did see an uptick in independent cases as we entered this quarter.
Speaker #4: We'll continue to collaborate moving forward on that. We certainly are looking at things in our pipeline. To your point, Cheney, I think has progressed really well.
Speaker #6: And we have the convenience with their new racetrack customer being for the full quarter. So we have some tailwinds as well. And that's really kind of how we built out the guidance for the
Speaker #4: We're really excited about what that's going to bring. And we called out early on that the synergies that we'll see in Cheney really come at the end of year two and year three.
Speaker #6: quarter. Thank
Speaker #4: And that's really the way we approach M&A. We try not to make any really let them acclimate to the organization. We try and learn what we can from them, as well.
Speaker #7: you.
Speaker #1: We'll turn next to Edward Kelly with Wells Fargo. Please go
John Heinbockel: Thank you.
John Heinbockel: Thank you.
Speaker #8: Yeah. Hi. Good morning, everyone. I'm sure George is listening. If he is, he will be missed. And Scott just wants to say congratulations. I wanted to follow up on the cost side.
Operator: We'll move now to Jeffrey Bernstein with Barclays. Please go ahead.
Operator: We'll move now to Jeffrey Bernstein with Barclays. Please go ahead.
Speaker #4: And we think that just makes for a much better long-term approach to M&A. And that's paid off with Reinhart. It's paid off with Cormorant.
Jeffrey Bernstein: Great. Thank you very much. My first question is just on the M&A topic. Scott, you mentioned the pipeline is robust. Just wondering whether there's any change in Performance's specific interest? It seems like you're still working hard on the Cheney integration. Maybe costs are coming in a little higher than you thought. So I was wondering if there's any change to the approach to that M&A, maybe with George stepping back, how we kind of prioritize that process. And then I had one follow-up.
Jeffrey Bernstein: Great. Thank you very much. My first question is just on the M&A topic. Scott, you mentioned the pipeline is robust. Just wondering whether there's any change in Performance's specific interest? It seems like you're still working hard on the Cheney integration. Maybe costs are coming in a little higher than you thought. So I was wondering if there's any change to the approach to that M&A, maybe with George stepping back, how we kind of prioritize that process. And then I had one follow-up.
Speaker #8: For you, as it pertains to some of the higher-than-expected costs related to Cheney, I would think that the weather disruption probably adds some added cost too.
Speaker #4: And it's certainly going to pay off with Cheney.
Speaker #7: Understood. And then just to follow up on the independent organic case growth, I know you talked about always targeting kind of that 6% type range.
Speaker #8: I'm curious, as we think about when the business normalizes and we look out into the next fiscal year, are there tailwinds associated with that stuff? Just kind of curious as to how we sort with lapping this type of one-time in nature—some of this stuff.
Speaker #7: But I got the impression it's going to be a little bit more of a fight to get there in the fiscal third quarter. So I'm wondering if you could share any kind of current run rate or your expectation for that third quarter?
Speaker #7: And there was a passing mention on the weather. I was expecting to hear something more material. I was wondering whether you could quantify how much potentially that weather impact has had on sales, which were modest below street expectations for the third quarter, but EBITDA, which was well below.
Speaker #8: is. No, it's a great
Scott McPherson: Yeah, I would say overall, you know, really no change to our approach to M&A. I mean, George and I have collaborated on M&A for the last four years. We'll continue to collaborate moving forward on that. We certainly are looking at things in our pipeline. You know, to your point, you know, Cheney, I think, has progressed really well. We're really excited about what that's gonna bring, and we called out early on that, you know, the synergies that we'll see in Cheney really come at the end of year two and year three, and that's really the way we approach M&A. You know, we try not to make any drastic changes in those first couple of years to really, you know, let them acclimate to the organization. We try and learn what we can from them as well.
Scott E. McPherson: Yeah, I would say overall, you know, really no change to our approach to M&A. I mean, George and I have collaborated on M&A for the last four years. We'll continue to collaborate moving forward on that. We certainly are looking at things in our pipeline. You know, to your point, you know, Cheney, I think, has progressed really well. We're really excited about what that's gonna bring, and we called out early on that, you know, the synergies that we'll see in Cheney really come at the end of year two and year three, and that's really the way we approach M&A. You know, we try not to make any drastic changes in those first couple of years to really, you know, let them acclimate to the organization. We try and learn what we can from them as well.
Speaker #3: question, Ed. And certainly, as we talked about Cheney, the major investment in a facility that's a $350,000 square foot facility that we're staffing and have been staffing over the last couple of months.
Speaker #7: Just trying to gauge the primary driver of that EBITDA shortfall weather, whether weather had a more outsized impact or whether it's primarily Cheney. Thank you.
Speaker #3: And that won't be fully online until probably two months from now. So you've definitely got some expense involved with that. And then as you called out, certainly weather creates some expense challenges.
Speaker #4: Well, I'll talk to the cadence of the quarter and Patrick might want to fill in a couple of things here. We actually started January off really nicely.
Speaker #4: I would say it was called a rebound from where we were at in December. It picked up nicely in January. And then certainly, last week's weather was impactful.
Speaker #3: As I look at the three-year guidance, I think that's really where we contemplated what those tailwinds look like. And certainly, our synergies in Cheney, we expect to come in year two and really into year three.
Speaker #4: And I think going into this, we certainly having an impact as well. And that's certainly something that we took into consideration when we talked about our guide for the third quarter and the full year.
Scott McPherson: And we think that just makes for a much better long-term approach to M&A, and that's paid off with Reinhardt, it's paid off with Core-Mark, and it's certainly gonna pay off with Cheney.
Scott E. McPherson: And we think that just makes for a much better long-term approach to M&A, and that's paid off with Reinhardt, it's paid off with Core-Mark, and it's certainly gonna pay off with Cheney.
Speaker #3: And that's going to be a nice contributor to our three-year guidance, and we feel really strong about delivering that.
Speaker #4: Patrick,
Speaker #4: anything you want to?
Speaker #3: Yeah.
Speaker #3: Just a couple of comments on the guidance for Q3. Really, what we have embedded in that guidance in the EBITDA is we do expect to see some continuation of the OPEX challenges that we've had to Cheney that we saw in Q2 will continue in Q3.
Speaker #8: All right. And then just a follow-up for you. And it pertains to the three-year guide that you referenced, Scott. There's been concern about disinflation.
Jeffrey Bernstein: Understood. And then just to, to follow up on the independent organic case growth, I know you talked about always targeting kind of that 6% type range, but I think the impression is gonna be a little bit more of a fight to get there in the fiscal Q3. So I'm wondering if you could share any kind of current run rate or your expectation for that Q3. And there was a passing mention on the weather. I was expecting to hear something more material. I was wondering whether you could quantify how much potentially that weather impact has had on sales, which were modestly below street expectations for the Q3, but EBITDA, which was well below, just trying to gauge the primary driver of that EBITDA shortfall, whether, whether weather had a more outsized impact or whether it's primarily Cheney. Thank you.
Jeffrey Bernstein: Understood. And then just to, to follow up on the independent organic case growth, I know you talked about always targeting kind of that 6% type range, but I think the impression is gonna be a little bit more of a fight to get there in the fiscal Q3. So I'm wondering if you could share any kind of current run rate or your expectation for that Q3. And there was a passing mention on the weather. I was expecting to hear something more material. I was wondering whether you could quantify how much potentially that weather impact has had on sales, which were modestly below street expectations for the Q3, but EBITDA, which was well below, just trying to gauge the primary driver of that EBITDA shortfall, whether, whether weather had a more outsized impact or whether it's primarily Cheney. Thank you.
Speaker #8: You've mentioned it on the call today. I guess first, what's embedded in that three-year guide in terms of an inflation outlook? If food service is just sort of plodding along at 1 to 2 percent, is there any issue with hitting the three-year guidance if it's a low, level of inflation?
Speaker #3: We also are seeing that deflation impact from cheese and poultry continue into Q3. Scott touched on specialty. And then obviously, the weather, we contemplate that.
Speaker #3: We've had bad weather last year, two years ago during this quarter. It is our smaller quarter. It's very hard to obviously nail down weather, but we have recently experienced two weeks of impact from mentioned, we did see a nice uptick in weather.
Speaker #8: Just kind of curious as to how you contemplated all that in that outlook.
Speaker #6: Yeah. This is Patrick. And it's a great question. And as we think about the three-year guidance and inflation, we embedded into our models what we thought would be a consistent number.
Speaker #3: And as Scott independent cases as we entered this quarter. And we have the convenience with their new racetrack customer being for the full quarter.
Speaker #6: And we've always said where we are right now is pretty good. We're calling out the deflation discord just because as I mentioned, our expectations were cheese and poultry specifically were going to not be as deflationary as they are.
Scott McPherson: ... Well, I'll talk to the cadence of the quarter, and Patrick might wanna fill in a couple things here. We actually started January off really nicely. I would say it was a, you know, call it a rebound from where we were at in December. It picked up nicely in January, and then certainly, you know, last week's weather was impactful. And, you know, I think going into this week, certainly having an impact as well. And that's certainly something that we took into consideration when we talked about our guide for the third quarter and the full year. Patrick, anything you wanna?
Speaker #3: So we have some tailwinds as well. And that's really kind of how we built out the guidance for the quarter.
Scott E. McPherson: Well, I'll talk to the cadence of the quarter, and Patrick might wanna fill in a couple things here. We actually started January off really nicely. I would say it was a, you know, call it a rebound from where we were at in December. It picked up nicely in January, and then certainly, you know, last week's weather was impactful. And, you know, I think going into this week, certainly having an impact as well. And that's certainly something that we took into consideration when we talked about our guide for the third quarter and the full year. Patrick, anything you wanna?
Speaker #6: So when we think about the three-year guidance, we have a lot of confidence in hitting that guidance. We're very much on track. If you look at where we're projecting this full year, guidance to be, and then as we enter next year, we have just a lot of confidence in executing our strategy continuing to take market share.
Speaker #7: Thank
Speaker #7: you. We'll turn
Speaker #1: next to Edward Kelly with Wells Fargo. Please go ahead.
Speaker #8: Yeah. Hi. Good morning, everyone. I'm sure George is listening if he is. He will be missed. And Scott just wanted to say congratulations. I wanted to follow up on the cost side.
Speaker #6: And then everything else that we've talked
Speaker #6: about. Great.
Speaker #8: For you, as it pertains to some of the higher-than-expected costs related to Cheney, I would think that the weather disruption probably adds some added costs too.
Patrick Hagerty: Yeah, just a couple of comments on the guidance for Q3. You know, really what we have embedded in that guidance, in the EBITDA is, you know, we do expect to see some continuation of the OpEx challenges that we've had at Cheney, that we saw in Q2, will continue in Q3. We also are seeing that deflation impact from cheese and poultry continue into Q3. Scott touched on specialty, and then obviously, the weather, we contemplate that. You know, we've had bad weather last year, two years ago, during this quarter. It is our smaller quarter. It's very hard to, you know, obviously nail down weather, but we have recently experienced two weeks of impact from weather.
Patrick Hatcher: Yeah, just a couple of comments on the guidance for Q3. You know, really what we have embedded in that guidance, in the EBITDA is, you know, we do expect to see some continuation of the OpEx challenges that we've had at Cheney, that we saw in Q2, will continue in Q3. We also are seeing that deflation impact from cheese and poultry continue into Q3. Scott touched on specialty, and then obviously, the weather, we contemplate that. You know, we've had bad weather last year, two years ago, during this quarter. It is our smaller quarter. It's very hard to, you know, obviously nail down weather, but we have recently experienced two weeks of impact from weather.
Speaker #8: Thank you.
Speaker #1: We'll move now to Kelly Banya with BMO, Capital Markets. Please go ahead.
Speaker #8: I'm curious as we think about when the business normalizes and we look out into the year, are there tailwinds associated with next fiscal lapping this type of stuff?
Speaker #9: Hi, good morning. This is Ben Wood. On behalf of Kelly Banya, thank you for taking our questions. Could you provide any more detail on the monthly cadence of volume trends you saw in convenience?
Speaker #8: Just kind of curious as to how sort of one-time in nature some of this stuff is.
Speaker #9: Some of the industry data we look at suggests that sales trends really accelerated into December and through year-end. Is that consistent with what you guys saw in?
Speaker #4: No, it's a great question, Ed. And certainly, as we talked about Cheney, the major investment in a facility that's a $350,000 square foot facility that we're staffing and have been staffing over the last couple of months.
Speaker #9: If so, how are you thinking about the possibility of some of those key categories in Convenience inflecting positive going forward?
Speaker #9: forward? No, it's a great
Speaker #3: question. As I look back over the full second quarter, those results were I would say fairly consistent with what we've seen historically, which was kind of low to mid-single-digit declines in a number of categories.
Patrick Hagerty: And as Scott mentioned, you know, we did see a nice uptick in independent cases as we entered this quarter, and we have the convenience with our new RaceTrac customer being for the full quarter. So we have some tailwinds as well, and that's really kind of how we built out the guidance for the quarter.
Patrick Hatcher: And as Scott mentioned, you know, we did see a nice uptick in independent cases as we entered this quarter, and we have the convenience with our new RaceTrac customer being for the full quarter. So we have some tailwinds as well, and that's really kind of how we built out the guidance for the quarter.
Speaker #4: And that won't be fully online until probably two months from now. So you've definitely got some expense involved with that. And then as you called out, certainly weather creates some expense challenges.
Speaker #3: To your point, though, as we exited the second quarter in December and maybe even into January, I think one of the things that we benefit from in the convenience segment is when you get fuel pricing that drops down in some markets into the $2 range. That certainly helps car travel and people being out on the road.
Speaker #4: As I look at the three-year guidance, I think that's really where we contemplated what those tailwinds look like. And certainly, our synergies in Cheney we expect really into year three.
Danilo Gargiulo: Thank you.
Danilo Gargiulo: Thank you.
Operator: We'll turn next to Edward Kelly with Wells Fargo. Please go ahead.
Operator: We'll turn next to Edward Kelly with Wells Fargo. Please go ahead.
Edward Kelly: Yeah. Hi, good morning, everyone. I'm sure George is listening. If he is, you know, he will be missed, and Scott, just wanted to say congratulations. I wanted to follow up on the cost side, you know, for you. As it pertains to, you know, some of the higher than expected costs related to Cheney, I would think that the weather disruption probably adds, you know, some added costs, too. I'm curious, as we think about when the business normalizes and we look out, you know, into the next fiscal year, are there, you know, tailwinds associated with lapping this type of stuff? You know, just kind of curious as to how sort of like one time in nature, you know, some of this stuff is.
Edward Kelly: Yeah. Hi, good morning, everyone. I'm sure George is listening. If he is, you know, he will be missed, and Scott, just wanted to say congratulations. I wanted to follow up on the cost side, you know, for you. As it pertains to, you know, some of the higher than expected costs related to Cheney, I would think that the weather disruption probably adds, you know, some added costs, too. I'm curious, as we think about when the business normalizes and we look out, you know, into the next fiscal year, are there, you know, tailwinds associated with lapping this type of stuff? You know, just kind of curious as to how sort of like one time in nature, you know, some of this stuff is.
Speaker #4: And that's to come in years two and going to be a nice contributor to our three-year guidance. And we feel really strong about delivering that.
Speaker #3: Obviously, we were really propelled by new account wins, but even taking that away, we continue to gain share in our convenience segment—both at the chain level and the regional level. So, our segment's performing well.
Speaker #8: All right. And then just a follow-up for you. And it pertains to the three-year guide that you referenced, Scott. There's been concern about disinflation.
Speaker #8: You've mentioned it on the call today. I guess first, what's embedded in that three-year guide in terms of an inflation outlook? If food service is just sort of plodding along at 1 to 2 percent, is there any issue with hitting the three-year guidance if it's a low level of inflation?
Speaker #3: And to your point, I think there are some signs of improved performance and traffic in.
Speaker #3: convenience. Great.
Speaker #9: Thank you. And then, just kind of following up on that—in light of the announcement yesterday from Pepsi to pretty majorly lower pricing on some of their key snack brands—do you expect others to follow suit?
Speaker #8: Just kind of curious as to how you contemplated all that in that outlook.
Speaker #9: And is there a possibility that some of the snack and convenience categories might become deflationary off of this? And how does that impact your different—
Scott McPherson: No, it's a great, great question, Ed. And, you know, certainly as we talked about Cheney, the, you know, the major investment in a facility, you know, that's a 350,000sq ft facility that, you know, we're staffing and have been staffing over the last couple of months. And, you know, that won't be fully online, you know, until probably two months from now. So you, you've definitely got some expense involved with that. And then, you know, as you called out, certainly weather creates some expense challenges. You know, as I look at the, the three-year guidance, I think that's really where we contemplated, you know, what those tailwinds look like. And, and certainly, you know, our, our synergies in Cheney, we expect to come in years two and, and really into year three.
Scott E. McPherson: No, it's a great, great question, Ed. And, you know, certainly as we talked about Cheney, the, you know, the major investment in a facility, you know, that's a 350,000sq ft facility that, you know, we're staffing and have been staffing over the last couple of months. And, you know, that won't be fully online, you know, until probably two months from now. So you, you've definitely got some expense involved with that. And then, you know, as you called out, certainly weather creates some expense challenges. You know, as I look at the, the three-year guidance, I think that's really where we contemplated, you know, what those tailwinds look like. And, and certainly, you know, our, our synergies in Cheney, we expect to come in years two and, and really into year three.
Speaker #3: Yeah. This is Patrick. And it's a great question. And as we think about the three-year guidance and inflation, we embedded into our models what we thought would be a consistent number.
Speaker #9: businesses? I wouldn't want to
Speaker #3: Whether other snack categories make predictions on would become deflationary—that would be, I've been in this space for 30 years. I've never seen those categories become deflationary.
Speaker #3: And we've always said where we are right now is pretty good. We're calling out the deflation discord just because as I mentioned, our expectations were cheese and poultry specifically were going to not be as deflationary as they are.
Speaker #3: Yesterday's announcement was very interesting. What I have since heard is that that's primarily just on the big bag. So right now, we don't see that as being a big impact on our convenience segment.
Speaker #3: So when we think about the three-year guidance, we have a lot of confidence in hitting that guidance. We're very much on track. If you look at where we're projecting this full year guidance to be and then as we enter next year, we have just a lot of confidence in executing our strategy, continue to take market share, and then everything else that we've talked
Speaker #3: Certainly, that could change in the past along with some other SKUs. But I don't see that becoming an industry trend just based on my historical experience.
Scott McPherson: That's gonna be a nice contributor to our three-year guidance. You know, we feel really strong about delivering that.
Scott E. McPherson: That's gonna be a nice contributor to our three-year guidance. You know, we feel really strong about delivering that.
Speaker #3: about. Great.
Speaker #9: Great. Thank you.
Speaker #8: Thank
Speaker #8: you. We'll
Speaker #1: We'll move now to Lauren Silberman with Deutsche Bank. Please go
Edward Kelly: All right. And then just a follow-up for you, and it, you know, pertains to the three-year guide that you referenced, Scott. You know, there's been concern about disinflation. You mentioned it on the call today. I guess first, you know, what's embedded in the, in that three-year guide in terms of, like, an inflation outlook? If food service, you know, is just sort of like plodding along at 1% to 2%, is there any issue with hitting the three-year, you know, guidance if it's a low level of inflation? Just kind of curious as to how you contemplated all that in, in that outlook.
Edward Kelly: All right. And then just a follow-up for you, and it, you know, pertains to the three-year guide that you referenced, Scott. You know, there's been concern about disinflation. You mentioned it on the call today. I guess first, you know, what's embedded in the, in that three-year guide in terms of, like, an inflation outlook? If food service, you know, is just sort of like plodding along at 1% to 2%, is there any issue with hitting the three-year, you know, guidance if it's a low level of inflation? Just kind of curious as to how you contemplated all that in, in that outlook.
Speaker #1: move now to Kelly Banya with BMO, Capital Markets. Please go ahead.
Speaker #1: ahead. Thank you.
Speaker #10: So I wanted to go back on the OPEC side. Can you help us understand how core underlying OPEC is growing ex-Cheney? I guess I'm trying to understand how much of the growth is investments in the core business—Salesforce—versus some of the noise with Cheney, with the new facilities coming online?
Speaker #9: Hi. Good morning. This is Ben Wood. On behalf of Kelly Banya, thank you for taking our questions. Could you provide any more detail on the monthly cadence of volume trends you saw in convenience?
Speaker #3: No, it's a great question, Lauren. I would say, and I think I said a little earlier in the call, I would say there's certainly always opportunity in getting more expense leverage across all of our segments.
Speaker #9: Some of the industry data we look at suggests that sales trends really accelerated into December and through year-end. Is that consistent with what you guys saw?
Speaker #9: And if so, how are you thinking about the possibility of some of those key categories in convenience inflecting positive going forward?
Speaker #3: I would say in the core Foodservice segment, quarter over quarter, our expense performance was fairly consistent. We are certainly seeing leverage, as a percent of gross profit dollars, in our expenses.
Patrick Hagerty: Yeah, this is Patrick. It's a great question, and as we think about the three-year guidance and inflation, you know, we embedded into our models what we thought would be a consistent number. And, you know, we've always said, you know, where we are right now is pretty good. We're calling out the deflation this quarter just because, as I mentioned, our expectations were, cheese and poultry specifically, were gonna not be as deflationary as they are. So, you know, when we think about the three-year guidance, we have a lot of confidence in hitting that guidance. We're very much on track if you look at where we're projecting this full year guidance to be.
Patrick Hatcher: Yeah, this is Patrick. It's a great question, and as we think about the three-year guidance and inflation, you know, we embedded into our models what we thought would be a consistent number. And, you know, we've always said, you know, where we are right now is pretty good. We're calling out the deflation this quarter just because, as I mentioned, our expectations were, cheese and poultry specifically, were gonna not be as deflationary as they are. So, you know, when we think about the three-year guidance, we have a lot of confidence in hitting that guidance. We're very much on track if you look at where we're projecting this full year guidance to be.
Speaker #4: No, it's a great question. As I look back over the full second quarter, those results were I would say fairly consistent with what we've seen historically, which was kind of low to mid-single-digit declines in a number of categories.
Speaker #3: So, feel good about how the core is performing. Certainly, opportunities to improve, but the bulk of our miss in OPEX from what we anticipated was really just the overrun we saw in—
Speaker #4: To your point, though, as we exited the second quarter in December and maybe even into January, I think one of the things that we benefit from in the convenience segment is when you get fuel pricing that drops down in some markets into the $2 range, that's certainly helps car travel and people being out on the road.
Speaker #3: Cheney. Okay.
Speaker #10: I guess in the back half of the year, any way to frame how we should be thinking about that growth now that it's in the full segment year-over-year clean?
Patrick Hagerty: And then, as we enter next year, you know, we have just a lot of confidence in executing our strategy, continuing to take market share, and then, you know, everything else that we've talked about.
Patrick Hatcher: And then, as we enter next year, you know, we have just a lot of confidence in executing our strategy, continuing to take market share, and then, you know, everything else that we've talked about.
Speaker #4: Obviously, we were really propelled by new account wins but even taking that away, we continue to gain share in our level, so our convenience segment.
Speaker #10: And I guess, is the overrun more of a pull-forward of expenses, or higher overall?
Speaker #10: Expenses? No, I think it was really...
Speaker #3: situational just to Cheney. And as I talked about with new buildings coming on, some of the things that we're doing to get them to be part of our overall public organization is certainly added some cost to them.
Speaker #4: at the chain level, the regional Both segment's performing well. And to your point, I think there are some signs of improved performance and traffic in convenience.
Edward Kelly: Great. Thank you.
Edward Kelly: Great. Thank you.
Operator: We'll move now to Kelly Bania with BMO Capital Markets. Please go ahead.
Operator: We'll move now to Kelly Bania with BMO Capital Markets. Please go ahead.
Ben Wood: Hi, good morning. This is Ben Wood, on behalf of Kelly Bania, thank you for taking our questions. Could you provide any more detail on the monthly cadence of volume trends you saw in convenience? Some of the industry data we look at suggests that sales trends really accelerated into December and through year-end. Is that consistent with what you guys saw? And if so, how are you thinking about the possibility of some of those key categories, in convenience, inflecting positive going forward?
Benjamin Wood: Hi, good morning. This is Ben Wood, on behalf of Kelly Bania, thank you for taking our questions. Could you provide any more detail on the monthly cadence of volume trends you saw in convenience? Some of the industry data we look at suggests that sales trends really accelerated into December and through year-end. Is that consistent with what you guys saw? And if so, how are you thinking about the possibility of some of those key categories, in convenience, inflecting positive going forward?
Speaker #3: So we expect that to continue a little bit into the third quarter, but in the long run, we're a company that's really focused on getting OPEX leverage across all our segments.
Speaker #9: Great. Thank you. And then just kind of following up on that, in light of the announcement yesterday from Pepsi to pretty majorly lower price in some of their key snack brands, do you expect others to follow suit?
Speaker #3: And if you're very comfortable that in our full year, we'll get that in a position that we feel really comfortable with. And that was all obviously contemplated in our guidance for the full year.
Speaker #9: And is there a possibility that some of the snack and convenience categories might become deflationary off of this? And how does that impact your different
Speaker #10: Okay. And then if I could just go on the promotional environment, can you talk about what you're seeing in amongst competitors? Any changes in the promotional environment, especially as one of your big competitors seems to be building some momentum and then there's just a moving pieces of product inflation and how different peers
Speaker #10: Okay, and then if I could just go on the promotional environment, can you talk about what you're seeing among competitors? Any changes in the promotional environment, especially as one of your big competitors seems to be building some momentum? And then there's just the moving pieces of product inflation and how different peers react?
Speaker #9: businesses? I wouldn't want to make
Speaker #4: predictions on whether other snack categories would become deflationary. That would be I've been in this space for 30 years. I've never seen those categories become deflationary.
Scott McPherson: No, it's a great question. As I look back over the full Q2, those results were, you know, I would say, fairly consistent with what we've seen historically, which was kind of, you know, low to mid-single digit declines in a number of categories. To your point, though, as we exited the Q2 in December and maybe even into January, I think one of the things that we benefit from in the convenience segment is when you get fuel pricing that drops down, you know, in some markets into the $2 range, that certainly helps car travel and people being out on the road. You know, obviously, we were really propelled by new account wins.
Scott E. McPherson: No, it's a great question. As I look back over the full Q2, those results were, you know, I would say, fairly consistent with what we've seen historically, which was kind of, you know, low to mid-single digit declines in a number of categories. To your point, though, as we exited the Q2 in December and maybe even into January, I think one of the things that we benefit from in the convenience segment is when you get fuel pricing that drops down, you know, in some markets into the $2 range, that certainly helps car travel and people being out on the road. You know, obviously, we were really propelled by new account wins.
Speaker #4: Yesterday's announcement was very interesting. What I have since heard is that that's primarily just on the big bag. So right now, we don't see that as being a big impact on our convenience segment.
Speaker #3: Certainly. What I said earlier and what I consistently look at is market share gains. And I think we have performed exceptionally well. This quarter, last quarter, and now as I look back over a number of quarters, our market share gains have been very consistent across the independent space, across the chain space as well.
Speaker #4: Certainly, that could change in the past along to some other SKUs. But I don't see that becoming an industry trend just based on my historical experience.
Speaker #3: So from that perspective, I feel good about how we're performing. That's really my focus. As far as the competitive environment, I would say it's always competitive.
Speaker #9: Great. Thank
Speaker #9: you.
Speaker #1: We'll move now
Scott McPherson: But even taking that away, you know, we continue to gain share in our convenience segment, you know, both at the chain level, the regional level. So, you know, our segment's performing well. And to your point, I think there are some signs of improved performance, traffic, and convenience.
Speaker #1: to Lauren Silberman with Deutsche Bank. Please go
Scott E. McPherson: But even taking that away, you know, we continue to gain share in our convenience segment, you know, both at the chain level, the regional level. So, you know, our segment's performing well. And to your point, I think there are some signs of improved performance, traffic, and convenience.
Speaker #10: Thank you. So I wanted to go back on the OPEC side. Can you help us understand how core underlying OPEC is growing ex-Cheney? I guess I'm trying to understand how much of the growth is investments in the core business: Salesforce, versus some of the noise with Cheney with the new facilities coming online?
Speaker #3: I wouldn't say that I saw anything different this quarter or last quarter than I've seen from prior.
Speaker #3: quarters. You Thank you very much. bet. Thank
Speaker #3: Thank you. We'll move next to Brian Harper with...
Patrick Hagerty: Great. Thank you. And then just kind of following up on that, in light of the announcement yesterday from Pepsi to pretty majorly lower price in some of their key snack brands, do you expect others to follow suit? And is there a possibility that some of the snack and convenience categories might become deflationary off of this? And how does that impact your different businesses?
Patrick Hatcher: Great. Thank you. And then just kind of following up on that, in light of the announcement yesterday from Pepsi to pretty majorly lower price in some of their key snack brands, do you expect others to follow suit? And is there a possibility that some of the snack and convenience categories might become deflationary off of this? And how does that impact your different businesses?
Speaker #1: Morgan Stanley. Please go ahead.
Speaker #4: No, it's a great question, Lauren. I would say, and I think I said a little earlier in the call, I would say there's certainly always opportunity in getting more expense leverage across all of our segments.
Speaker #11: Good. Thanks. Good morning.
Speaker #12: Brian, Brian, we can't hear
Speaker #12: You. Yeah, your line is difficult.
Speaker #4: I would say in the core food service segment, quarter over quarter, our expense performance was fairly consistent. We are certainly seeing leverage as a percent of gross profit dollars in our expenses.
Speaker #10: Are you able to pick up a
Speaker #10: handset? Can you hear me now?
Speaker #12: Yes.
Speaker #11: Okay, great. On your deflation comments—perfect. Can you remind us how those products get marked up? And, I guess for cheese, for example, how much is this sort of a category issue—if you think about pizza in contrast to chicken?
Scott McPherson: I wouldn't want to make predictions on whether other snack, you know, categories would become deflationary. That would be, you know, I've been in this space for 30 years. I've never seen those categories become deflationary. Yesterday's announcement was very interesting. You know, what I have since heard is that that's primarily just on the big bag. So right now, we don't see that as being a big impact on our convenience segment. Certainly, that could change and pass along to some other SKUs, but, you know, I don't see that becoming an industry trend, just based on my historical experience.
Scott E. McPherson: I wouldn't want to make predictions on whether other snack, you know, categories would become deflationary. That would be, you know, I've been in this space for 30 years. I've never seen those categories become deflationary. Yesterday's announcement was very interesting. You know, what I have since heard is that that's primarily just on the big bag. So right now, we don't see that as being a big impact on our convenience segment. Certainly, that could change and pass along to some other SKUs, but, you know, I don't see that becoming an industry trend, just based on my historical experience.
Speaker #4: So feel good about how the core is performing. Certainly, opportunities to improve but the bulk of our miss in OPEX from what we anticipated was really just the overrun we saw in Cheney.
Speaker #11: I would think that that demand is still very good there. Could you just elaborate on that?
Speaker #10: Okay. I guess in the back half of the year, any way to frame how we should be thinking about that growth now that it's in the full segment year-over-year clean?
Speaker #12: Yeah. So just I'll try to keep this high level, but we're going to if we take our independent customers, we're going to have a markup on cost and our salespeople are the ones that determine that.
Speaker #10: And I guess is the overrun more of a pull forward of expenses or higher overall expenses?
Speaker #12: And deflationary environment, what's happening with these two commodities is there's this oversupply. There's a lot of supply, a lot of capacity came on with cheese.
Speaker #4: No, I think it was really situational just to Cheney. And as I talked about with new buildings coming on, some of the things that we're doing to get them to be part of our overall public organization is certainly added some cost to them.
Patrick Hagerty: Great. Thank you.
Patrick Hatcher: Great. Thank you.
Speaker #12: And so it's at a very low point. And same thing with poultry. They're able to increase their supply significantly. They do this from time to time, and they go oversupply, and then they go undersupply.
Operator: We'll move now to Lauren Silberman with Deutsche Bank. Please go ahead.
Operator: We'll move now to Lauren Silberman with Deutsche Bank. Please go ahead.
Lauren Silberman: Thank you. So I wanted to go back on the OpEx side. Can you help us understand how core underlying OpEx is growing ex Cheney? I guess I'm trying to understand how much of the growth is investments in the core business sales force versus some of the noise of Cheney with the new facilities coming online.
Lauren Silberman: Thank you. So I wanted to go back on the OpEx side. Can you help us understand how core underlying OpEx is growing ex Cheney? I guess I'm trying to understand how much of the growth is investments in the core business sales force versus some of the noise of Cheney with the new facilities coming online.
Speaker #4: So we expect that to quarter. As we called out, but continue a little bit into the third in the long run, we're a company that's really focused on getting OPEX leverage across all our segments.
Speaker #12: So again, it's really just our over-indexing because of our customer base in those two commodities that we called this out.
Speaker #11: Yep. Okay. Understood. And then just an inconvenience, I guess I would assume that there's sort of secular pressure on snack foods and that it's not just the inflation that's happened there, but sort of preferences.
Speaker #4: And if you're very comfortable that in our full year, we'll get that in a position that we feel really comfortable with. And that was all obviously contemplated in our guidance for the full year.
Scott McPherson: No, it's a great question, Lauren. I would say, and I think I said a little earlier in the call, I would say there's certainly always opportunity in getting more expense leverage, you know, across all of our segments. I would say in the core food service segment, you know, quarter-over-quarter, our expense performance was fairly consistent. We are certainly seeing leverage, as a percent of gross profit dollars in our, in our expenses. So, you know, feel good about how the core is performing, certainly opportunities to improve. But, you know, the, the bulk of our miss in OpEx, from what we anticipated, was really just the, the overrun we saw in Cheney.
Scott E. McPherson: No, it's a great question, Lauren. I would say, and I think I said a little earlier in the call, I would say there's certainly always opportunity in getting more expense leverage, you know, across all of our segments. I would say in the core food service segment, you know, quarter-over-quarter, our expense performance was fairly consistent. We are certainly seeing leverage, as a percent of gross profit dollars in our, in our expenses. So, you know, feel good about how the core is performing, certainly opportunities to improve. But, you know, the, the bulk of our miss in OpEx, from what we anticipated, was really just the, the overrun we saw in Cheney.
Speaker #10: Okay. And then if I could just go on the promotional environment, can you talk about what you're seeing amongst competitors, any changes in the promotional environment, especially as one of your big there's just a moving pieces of product inflation and how different peers
Speaker #11: I think we're seeing that in grocery stores. So, how much do you agree with that? And do you think that the convenience stores are sort of committed to replacing some of those products with perhaps healthier options or more on-trend options?
Speaker #10: react? Certainly.
Speaker #11: Do you think that's happening fast enough such that it sort of improves sales in that segment versus what you've been seeing?
Speaker #4: What I said earlier and what I consistently look at as market share gains. And I think we have performed exceptionally well. This quarter, last quarter, and now as I look back for a number of quarters, our market share gains have been very consistent across the independent space, across the chain space as well.
Lauren Silberman: Okay. I guess in the back half of the year, any way to frame how we should be thinking about that growth now that it's in the full segment year over year clean? And I guess, is the overrun more of a pull forward of expenses or higher overall expenses?
Lauren Silberman: Okay. I guess in the back half of the year, any way to frame how we should be thinking about that growth now that it's in the full segment year over year clean? And I guess, is the overrun more of a pull forward of expenses or higher overall expenses?
Speaker #3: No, it's a great question. There's a lot to unpack there. The first thing I'd say is just looking at product inflation. If you look at snack and candy, I guess since pre-COVID until today, those are two of the categories that had the highest inflationary increases of any consumable product that's out there.
Speaker #4: So from that perspective, I feel good about how we're performing. That's really my focus. As far as the competitive environment, I would say it's always competitive.
Scott McPherson: No, I think it was really situational just to Cheney. And as I talked about with new buildings coming on, some of the things that, you know, we're doing to get them to be part of our overall, you know, public organization has certainly added some cost to them. So, you know, we expect that to continue a little bit into Q3, as we called out. But, you know, in the long run, you know, we're a company that's really focused on getting OpEx leverage across all our segments. And, you know, feel very comfortable that in our full year, we'll get that in a position that we feel really comfortable with. And that was all obviously contemplated in our guidance for the full year.
Scott E. McPherson: No, I think it was really situational just to Cheney. And as I talked about with new buildings coming on, some of the things that, you know, we're doing to get them to be part of our overall, you know, public organization has certainly added some cost to them. So, you know, we expect that to continue a little bit into Q3, as we called out. But, you know, in the long run, you know, we're a company that's really focused on getting OpEx leverage across all our segments. And, you know, feel very comfortable that in our full year, we'll get that in a position that we feel really comfortable with. And that was all obviously contemplated in our guidance for the full year.
Speaker #3: I think that price elevation had So certainly, an impact on demand. And so Frito's response like I said is surprised me a little bit because I do think the consumer is catching up.
Speaker #4: I wouldn't say that I saw anything different this quarter or last quarter than I've seen from prior
Speaker #10: Thank you
Speaker #10: very much.
Speaker #4: You bet. Thank quarters.
Speaker #4: you. We'll
Speaker #3: And so, as we talked about, we've seen a little heightened demand over the last couple of periods in convenience. As far as the mix of products, I think the one real opportunity for us is really in food service.
Speaker #1: move next to Brian Harbor with Morgan Stanley. Please go
Speaker #1: ahead. Good thing this
Speaker #11: morning. Brian, Brian,
Speaker #3: I think the convenience store more and more is becoming a relevant option for high-quality food options. And so as we think about consumer behavior changing, they want fresher, they want healthier.
Speaker #1: Yeah, your we can't hear you. line is difficult. Are you able to pick up a handset?
Speaker #11: Can you
Speaker #11: hear me now? Okay.
Speaker #12: Yes.
Speaker #1: Perfect.
Lauren Silberman: Okay. If I could just go on the promotional environment, can you talk about what you're seeing among competitors, any changes in the promotional environment, especially as one of your big competitors seems to be building some momentum, and then there's just the moving pieces of product inflation and how different peers react?
Lauren Silberman: Okay. If I could just go on the promotional environment, can you talk about what you're seeing among competitors, any changes in the promotional environment, especially as one of your big competitors seems to be building some momentum, and then there's just the moving pieces of product inflation and how different peers react?
Speaker #11: Great. On your deflation comments, can you remind us how those products get marked up? And I guess for cheese, for example, I mean, how much is this sort of category issue if you think about that that's demand is still very good there.
Speaker #3: And convenience stores have an opportunity to fill that need, and we feel that we're somebody that can certainly fill that. As far as consumer packaged goods and that mix changing, there's been a shift in general to more healthier options and convenience.
Scott McPherson: Certainly. You know, what I said earlier and what I consistently look at is market share gains. You know, I think we have performed exceptionally well, you know, this quarter, last quarter, and now as I look back for a number of quarters, our market share gains have been very consistent across the independent space, across the chain space as well. You know, so from that perspective, I feel good about how we're performing. That's really my focus. You know, as far as the competitive environment, you know, I would say it's always competitive. I wouldn't say that I saw anything different, you know, this quarter or last quarter than I've seen, you know, from prior quarters.
Scott E. McPherson: Certainly. You know, what I said earlier and what I consistently look at is market share gains. You know, I think we have performed exceptionally well, you know, this quarter, last quarter, and now as I look back for a number of quarters, our market share gains have been very consistent across the independent space, across the chain space as well. You know, so from that perspective, I feel good about how we're performing. That's really my focus. You know, as far as the competitive environment, you know, I would say it's always competitive. I wouldn't say that I saw anything different, you know, this quarter or last quarter than I've seen, you know, from prior quarters.
Speaker #3: And to your point, I think could this kind of dynamic accelerate it? Certainly, it could. But I think as we all know, it takes consumer packaged companies a while to get products to market.
Speaker #11: Could you just elaborate on that?
Speaker #12: Yeah. So just I'll try to keep this high level, but we're going to if we take our independent customers, we're going to have a markup on cost and our salespeople are the ones that determine that.
Speaker #3: So I don't see anything dramatically happening.
Speaker #3: quickly. We'll move next
Speaker #12: And deflationary environment, what's happening with these two commodities is there's this oversupply. There's a lot of supply, a lot of capacity came on with cheese.
Speaker #1: To Peter Slay with BTIG, please go ahead.
Speaker #13: Great. Thanks for taking the question. I didn't want to come back to maybe Jeff's question on the forward guide. Can you just talk a little bit about maybe what's embedded from a macro perspective going forward?
Speaker #12: And so it's at a very low point. And same thing with poultry. They're able to increase their supply significantly. They do this from time to time, and they go oversupply, and then they go undersupply.
Speaker #12: So again, it's really just our over-indexing because of our customer base in those two commodities that we called this
Speaker #13: I mean, we do have some much higher tax refunds coming through. That should benefit this quarter and maybe into the first calendar half of the year.
Lauren Silberman: Thank you very much.
Lauren Silberman: Thank you very much.
Speaker #12: out. Yep.
Scott McPherson: You bet. Thank you.
Scott E. McPherson: You bet. Thank you.
Speaker #11: Okay. Understood. And then just an inconvenience, I guess I would assume that there's sort of secular pressure on snack foods and that it's not just the inflation that's happened there, but sort of preferences.
Operator: We'll move next to Brian Harbour with Morgan Stanley. Please go ahead.
Operator: We'll move next to Brian Harbour with Morgan Stanley. Please go ahead.
Brian Harbour: Thanks. Good morning.
Brian Harbour: Thanks. Good morning.
Speaker #13: Have you embedded any of that into your guide? Have you thought about that? I know you said January was a pretty good month. February, I guess, starting off pretty slow.
Scott McPherson: Brian, we can't hear you.
Scott E. McPherson: Brian, we can't hear you.
Operator: Yeah, your line is difficult. Are you able to pick up a handset?
Operator: Yeah, your line is difficult. Are you able to pick up a handset?
Speaker #13: But I think the quarter is really defined by how March performs, so any thoughts on that would be helpful.
Speaker #11: I think we're seeing that in grocery stores. So how much do you think that do you agree with that? And do you think that the convenience stores are sort of committed to replacing some of those products with perhaps healthier options or more on-trend options?
Brian Harbour: Can you hear me now?
Brian Harbour: Can you hear me now?
Scott McPherson: Yes.
Scott E. McPherson: Yes.
Operator: Perfect.
Operator: Perfect.
Brian Harbour: Okay, great. On your deflation comments, can you remind us how those products, you know, get marked up? And I guess, you know, for like cheese, for example, I mean, how much is this sort of, like, category issue if you think about pizza? You know, in contrast to chicken, I would think that, you know, that's demand is still very good there. Could you just elaborate on that?
Brian Harbour: Okay, great. On your deflation comments, can you remind us how those products, you know, get marked up? And I guess, you know, for like cheese, for example, I mean, how much is this sort of, like, category issue if you think about pizza? You know, in contrast to chicken, I would think that, you know, that's demand is still very good there. Could you just elaborate on that?
Speaker #12: Yeah, Peter, it is a really good question. I spent a lot of time looking into the tax refunds, the no taxes on tips or overtime that are going to start coming through.
Speaker #11: Do you think that's happening fast enough such that it sort of improves sales in that segment versus what you've been seeing?
Speaker #12: And other tailwinds, honestly. I mean, what's the World Cup going to do? All these things as we go through Q3 and Q4. We did not embed those in our guidance mainly because it's very hard to know what that flow through is going to be.
Speaker #4: No, it's a great question. There's a lot to unpack there. The first thing I'd say is just looking at product inflation. If you look at snack and candy, I guess since pre-COVID until today, those are two of the categories that had the highest inflationary increases of any consumable product that's out there.
Patrick Hagerty: Yeah. So just... I'll try to keep this high level, but, you know, we're gonna-- if we take our independent customers, we're gonna have a markup on cost, and our salespeople are the ones that determine that. In a deflationary environment, what's happening with these two commodities is there's just oversupply. There's a lot of supply, a lot of capacity came on with cheese, and so it's, it's at a very low point. And same thing with poultry. They're able to increase their supply significantly. They do this from time to time, and they go oversupply, and then they go undersupply. So, again, it's really just our overindexing because of our customer base in those two commodities that we called this out.
Patrick Hatcher: Yeah. So just... I'll try to keep this high level, but, you know, we're gonna-- if we take our independent customers, we're gonna have a markup on cost, and our salespeople are the ones that determine that. In a deflationary environment, what's happening with these two commodities is there's just oversupply. There's a lot of supply, a lot of capacity came on with cheese, and so it's, it's at a very low point. And same thing with poultry. They're able to increase their supply significantly. They do this from time to time, and they go oversupply, and then they go undersupply. So, again, it's really just our overindexing because of our customer base in those two commodities that we called this out.
Speaker #12: But we do know that putting more money in the consumer's pocket especially the folks that are maybe on the lower end will see how much of that goes into the market and how much they use that for discretionary spend and to restaurants.
Speaker #12: But we do know that's a very positive thing. And then we know that the World Cup should also be another tailwind. But we didn't put that in the
Speaker #4: So certainly, I think that price elevation had an impact on demand. And so Frito's response like I said is surprised me a little bit because I do think the consumer is catching up.
Speaker #13: Great. I appreciate that.
Speaker #13: Can you provide guidance? Also, can you comment? I think last quarter, George commented that there could be some changes to the SNAP benefits, and that could have an impact.
Speaker #4: And so as we talked about, we've seen a little heightened demand over the last couple of periods in convenience. As far as the mix of products, I think the one real opportunity for us is really in food service.
Speaker #13: Have you seen any change on that front, and any impact to date?
Brian Harbour: ... Yep, okay, understood. And then just in convenience, I guess I would assume that there's sort of, you know, secular pressure on snack foods, and that it's not just the inflation that's happened there, but sort of preferences. I think we're seeing that in grocery stores. So, you know, how much do you think that do you agree with that? And do you think that, you know, the convenience stores are sort of committed to replacing some of those products with perhaps healthier options or more on-trend options? Do you think that's happening fast enough such that it sort of, you know, improves sales in that segment versus what you've been seeing?
Brian Harbour: ... Yep, okay, understood. And then just in convenience, I guess I would assume that there's sort of, you know, secular pressure on snack foods, and that it's not just the inflation that's happened there, but sort of preferences. I think we're seeing that in grocery stores. So, you know, how much do you think that do you agree with that? And do you think that, you know, the convenience stores are sort of committed to replacing some of those products with perhaps healthier options or more on-trend options? Do you think that's happening fast enough such that it sort of, you know, improves sales in that segment versus what you've been seeing?
Speaker #3: And there's some recently contemplated changes as well. But no, I can't say that we have seen any material impact on any of the changes or contemplated changes in SNAP at this—
Speaker #4: I think the convenience store more and more is becoming a relevant option for high-quality food options. And so as we think about consumer behavior changing, they want fresher, they want healthier.
Speaker #3: point. Thank you very
Speaker #3: point. Thank you very
Speaker #13: much. We'll move now to Karen
Speaker #4: And convenience stores have an opportunity to fill that need. And we feel that we're somebody that can certainly fill that. As far as consumer packaged goods and that mix changing, there's been a shift in general to more healthier options in convenience.
Speaker #1: Holthaus. Hi.
Speaker #1: Citi. Please go ahead.
Speaker #14: for taking the question. I wanted
Speaker #14: to dig into Holthaus, excuse me, with Florida a little bit. And just kind of excluding Cheney Brothers or noise from that, your sense of just the underlying health of that market.
Speaker #4: And to your point, I think could this kind of dynamic accelerate it? Certainly, it could. But I think as we all know, it takes consumer packaged companies a while to get products to market.
Speaker #14: I think we're hearing some concerns around travel tourism particularly international tourism around theme parks and whatnot. Being down pretty materially. And then just as snowbird season has gotten away, has gotten underway, any risk that Canadians are avoiding the market this year?
Scott McPherson: Yeah, it's a great question. There's a lot to unpack there. The first thing I'd say is just looking at product inflation. If you look at snack and candy, you know, I guess since pre-COVID until today, you know, those are two of the categories that had the highest inflationary increases of any consumable product that's out there. So certainly I think that price elevation had an impact on demand. And so, you know, I- Frito's response, you know, like I said, has surprised me a little bit because I do think the consumer is catching up. And, you know, so as we talked about, we've seen a little heightened demand over the last couple of periods in convenience.
Scott E. McPherson: Yeah, it's a great question. There's a lot to unpack there. The first thing I'd say is just looking at product inflation. If you look at snack and candy, you know, I guess since pre-COVID until today, you know, those are two of the categories that had the highest inflationary increases of any consumable product that's out there. So certainly I think that price elevation had an impact on demand. And so, you know, I- Frito's response, you know, like I said, has surprised me a little bit because I do think the consumer is catching up. And, you know, so as we talked about, we've seen a little heightened demand over the last couple of periods in convenience.
Speaker #4: So I don't see anything dramatically happening quickly.
Speaker #1: We'll move next to Peter Slay with BTIG. Please go ahead.
Speaker #13: Great. Thanks for taking the question. I did want to come back to maybe Jeff's question on the forward guide. Can you just talk a little bit about maybe what's embedded from a macro perspective going forward?
Speaker #3: No, I think it's a great question. And certainly, we have our finger on that pulse pretty closely. The one thing that I would say that I've been very pleased about with Cheney is their independent share gain.
Speaker #3: They continue to grow independent share at a rate consistent with the rest of our business. And definitely, we've been following very closely the travel patterns and I saw the recent theme park attendance.
Speaker #13: I mean, higher tax refunds coming through that should benefit this quarter and maybe into the first calendar half of the year. Have you embedded any of that into your guide?
Scott McPherson: As far as the mix of products, you know, I think the one real opportunity for us is really in food service. You know, I think the convenience store more and more is becoming a relevant option for high quality food options. And, you know, so as we think about consumer behavior changing, they want fresher, they want healthier, and, you know, convenience stores have an opportunity to fill that need, and we feel that, you know, we're somebody that can certainly fill that. As far as consumer packaged goods and that mix changing, there's been a shift in general to more healthier options and convenience. And to your point, I think, could this, you know, kind of dynamic accelerate it?
Scott E. McPherson: As far as the mix of products, you know, I think the one real opportunity for us is really in food service. You know, I think the convenience store more and more is becoming a relevant option for high quality food options. And, you know, so as we think about consumer behavior changing, they want fresher, they want healthier, and, you know, convenience stores have an opportunity to fill that need, and we feel that, you know, we're somebody that can certainly fill that. As far as consumer packaged goods and that mix changing, there's been a shift in general to more healthier options and convenience. And to your point, I think, could this, you know, kind of dynamic accelerate it?
Speaker #3: So I do think there's been a little bit of a slowdown with international travel and the Canadian travel in the marketplace. But I'll tell you, we have a ton of confidence in Florida overall.
Speaker #13: Have you thought about that? I know you said January was a pretty good month. February, I guess, starting off pretty slow, but I think the quarter is really defined by how March performs.
Speaker #13: So any thoughts on that would be
Speaker #3: I mean, that's been a state that's been growing consistently for a number of years, and I feel like they're poised for a big rebound in that state.
Speaker #13: helpful. Yeah, Peter, it
Speaker #12: is a really good question. I spent a lot of time looking into the tax refunds, the no taxes on tips or overtime that are going to start coming through.
Speaker #3: But we're performing really pretty well in the state, all things considered.
Speaker #14: And then one quick follow-up that just prior to the bigger weather events that we saw the last week or so, anything to comment in terms of geographic performance in the quarter to
Speaker #12: And other tailwinds, honestly. I mean, what's the World Cup going to do? All these things as we go through Q3 and Q4. We did not embed those in our guidance mainly because it's very hard to know what that flow through is going to be.
Speaker #14: date? Oh, it's a really good
Scott McPherson: Certainly, it could, but I think, as we all know, it takes consumer packaged companies a while to get products to market, so I don't see anything dramatically happening quickly.
Scott E. McPherson: Certainly, it could, but I think, as we all know, it takes consumer packaged companies a while to get products to market, so I don't see anything dramatically happening quickly.
Speaker #12: But we do know that putting more money in the consumer's pocket especially the folks that are maybe on the lower end will see how much of that goes into the market and how much they use that for discretionary spend and to restaurants.
Speaker #3: on prior earnings calls that we saw some question. We had called out slowness in the Midwest. And we'd also called out areas where we had fringe travel from Canada.
Speaker #3: But as I think back to last quarter, the start of this quarter—particularly the start of this quarter, January—which, January isn't the bellwether month because it's a smaller month.
Operator: We'll move next to Peter Saleh with BTIG. Please go ahead.
Operator: We'll move next to Peter Saleh with BTIG. Please go ahead.
Speaker #12: But we do know that's a very positive thing. And then we know that the World Cup should also be another tailwind. But we didn't put that in the guidance.
Peter Saleh: Great. Thanks for taking the question. I did wanna come back to maybe Jeff's question on the forward guide. Can you just talk a little bit about maybe what's embedded from a macro perspective going forward? I mean, we do have some, you know, much higher tax refunds coming through that should benefit this quarter or maybe into the, you know, first calendar half of the year. Have you embedded any of that into your, into your guide? Have you thought about that? I know you said January was a pretty good month. February, I guess, started off pretty slow, but I think the quarter is really defined by how March performs. So, any thoughts on that would be helpful.
Peter Saleh: Great. Thanks for taking the question. I did wanna come back to maybe Jeff's question on the forward guide. Can you just talk a little bit about maybe what's embedded from a macro perspective going forward? I mean, we do have some, you know, much higher tax refunds coming through that should benefit this quarter or maybe into the, you know, first calendar half of the year. Have you embedded any of that into your, into your guide? Have you thought about that? I know you said January was a pretty good month. February, I guess, started off pretty slow, but I think the quarter is really defined by how March performs. So, any thoughts on that would be helpful.
Speaker #13: Great. I appreciate that. Can you also comment? I think last quarter, George commented that there could be some changes to the SNAP benefits and that could have an impact.
Speaker #3: But really saw pretty consistent performance across the map. Didn’t see any markets that had any material lulls or surges.
Speaker #13: Have you seen any change on that front and any impact to
Speaker #14: Great. Thank
Speaker #14: you. And once again, ladies
Speaker #13: date?
Speaker #4: And there's
Speaker #1: and gentlemen, that is star one if you would like to signal for a question. We'll turn next to Danielle with Gargiulio with Bernstein. Please go ahead.
Speaker #4: some recently contemplated changes as well. But no, I can't say that we have seen any material impact on any of the changes or contemplated changes in SNAP at this
Speaker #15: Great. Scott, once again, congratulations on your new role. I want to ask you a more strategic question to begin with. As you're embarking on this new role, how would you like your era to be remembered?
Speaker #4: point. Thank you very
Speaker #1: We'll move now to Karen much. Holtohouse, excuse me, with City. Please go ahead.
Patrick Hagerty: Yeah, Peter, that's it. It is a really good question. I spent a lot of time looking into the, you know, the tax refunds, the no taxes on tips or overtime that are gonna start coming through. Yeah, and other tailwinds, honestly. I mean, what's the World Cup gonna do? All these things as we go through Q3 and Q4. We did not embed those in our guidance, mainly because it's very hard to know what that flow through is gonna be. But we do know that putting more money in the consumer's pocket, especially the folks that are maybe on the lower end, we'll see how much of that goes into the market and how much they use that for discretionary spend into restaurants.
Patrick Hatcher: Yeah, Peter, that's it. It is a really good question. I spent a lot of time looking into the, you know, the tax refunds, the no taxes on tips or overtime that are gonna start coming through. Yeah, and other tailwinds, honestly. I mean, what's the World Cup gonna do? All these things as we go through Q3 and Q4. We did not embed those in our guidance, mainly because it's very hard to know what that flow through is gonna be. But we do know that putting more money in the consumer's pocket, especially the folks that are maybe on the lower end, we'll see how much of that goes into the market and how much they use that for discretionary spend into restaurants.
Speaker #15: In other words, where do you see incremental opportunities for performance going
Speaker #14: Hi, thanks for taking the question. I wanted to dig into Florida a little bit and just kind of excluding Cheney Brothers or noise from that.
Speaker #15: forward? I really appreciate the
Speaker #3: question. I think it's a great question. One of the reasons that I'm at performance food group, it's one of the reasons that as I was running Cormorc that we decided to merge with them is culturally, I truly foundationally believed in what George and performance food group were doing as a company.
Speaker #14: Your sense of just the underlying health of that market, I think we're hearing some concerns around travel tourism, particularly international tourism around theme parks and whatnot, being down pretty materially.
Speaker #14: And then gotten away, has gotten underway, any just as snowboard season has risk that Canadians are avoiding the market this year?
Speaker #3: So, as I've worked with George over the last four years, I would say that we very much align in how we look at the business. I think, fundamentally, we're both believers in driving growth.
Speaker #4: No, I think it's a great question. And certainly, we have our finger on that pulse pretty closely. The one thing that I would say that I've been very pleased about with Cheney is their independent share gain.
Patrick Hagerty: But, we do know that's a very positive thing, and then we know that the World Cup should also be another tailwind, but we didn't put that in the guidance.
Patrick Hatcher: But, we do know that's a very positive thing, and then we know that the World Cup should also be another tailwind, but we didn't put that in the guidance.
Speaker #3: Both organically and through M&A. I think we both pay particular attention to margin and how mix can help and drive margin. Culture is very important.
Peter Saleh: Great. I appreciate that. Can you also comment? I think last quarter, George commented that there could be some changes to the SNAP benefits and that could have an impact. Have you seen any change on that front and any impact to date?
Peter Saleh: Great. I appreciate that. Can you also comment? I think last quarter, George commented that there could be some changes to the SNAP benefits and that could have an impact. Have you seen any change on that front and any impact to date?
Speaker #4: They continue to grow independent share at a rate consistent with the rest of our business. And definitely, we've been following very closely the travel patterns and I've saw the recent theme park attendance.
Speaker #3: To me, and then I'd say if there's anything that maybe is a little different, it's I probably have a little slant towards how are we going to leverage technology?
Speaker #4: So I do think there's been a little bit of a slowdown with international travel and the Canadian travel in the marketplace. But I'll tell you, we have a ton of confidence in Florida overall.
Scott McPherson: And there's some, you know, recently contemplated changes as well. But no, I can't say that we have seen any material impact on any of the changes or contemplated changes in SNAP at this point.
Scott E. McPherson: And there's some, you know, recently contemplated changes as well. But no, I can't say that we have seen any material impact on any of the changes or contemplated changes in SNAP at this point.
Speaker #3: How are we going to leverage that to be more efficient as a company? But outside of that, I'd say George and I are approached to the business as very consistent.
Speaker #4: I mean, that's been a state that's been growing consistently for a number of years. And I feel like that they're poised for a big rebound in that state.
Speaker #3: And my priority for this company is to continue to drive that top-line growth, but make sure that everything that we do allows it to flow to the bottom line, and that we do it with a great culture and make sure it's a great place for people to
Peter Saleh: Thank you very much.
Peter Saleh: Thank you very much.
Operator: We'll move now to Karen Holthouse, Holthouse, excuse me, with Citi. Please go ahead.
Operator: We'll move now to Karen Holthouse, Holthouse, excuse me, with Citi. Please go ahead.
Speaker #4: But we're the state, all things considered.
Karen Holthouse: Hi, thanks for taking the question. I wanted to dig into, you know, Florida a little bit and just kind of excluding Cheney Brothers or noise from that, your sense of just the underlying health of that market. I think we're hearing some concerns around, you know, travel tourism, particularly international tourism, around theme parks and whatnot, being down pretty materially. And then just as snowbird season has gotten underway, any risk that Canadians are avoiding the market this year?
Karen Holthouse: Hi, thanks for taking the question. I wanted to dig into, you know, Florida a little bit and just kind of excluding Cheney Brothers or noise from that, your sense of just the underlying health of that market. I think we're hearing some concerns around, you know, travel tourism, particularly international tourism, around theme parks and whatnot, being down pretty materially. And then just as snowbird season has gotten underway, any risk that Canadians are avoiding the market this year?
Speaker #14: And then one bigger weather events that we saw the last week or so, anything to comment in terms of geographic performance in the quarter to
Speaker #3: work. Okay.
Speaker #15: Great, thank you. And you mentioned margin in your answer, and earlier you also talked about the discovery that you really had during the process of a potential merger with US Foods on the procurement side.
Speaker #14: date? Oh, it's a really good
Speaker #4: question. We had called out on prior earnings calls that we saw some slowness in the Midwest and we'd also called out areas where we had fringe travel from Canada.
Speaker #15: So, I'm wondering, over what time frame do you expect performance to potentially start to close some of the margin gap versus peers, absent, obviously, the mix impact that is going to be favoring you over time?
Speaker #4: But as I think back to last quarter, the start of this quarter, particularly the start of this quarter, January which January isn't the bellwether month because it's a smaller month.
Scott McPherson: No, I think it's a, it's a great question. And certainly we have our finger on that pulse pretty closely. You know, the one thing that I would say that I've been very pleased about with Cheney is their independent share gain. You know, they continue to grow independent share at a rate consistent with the rest of our business. And definitely, you know, we've been following very closely the travel patterns, and I saw the recent theme park attendance. So I do think there's been a little bit of a slowdown with international travel and the Canadian travel in the marketplace. But I'll tell you, we have a ton of confidence in Florida overall. I mean, that's been a state that's been growing consistently for a number of years.
Scott E. McPherson: No, I think it's a, it's a great question. And certainly we have our finger on that pulse pretty closely. You know, the one thing that I would say that I've been very pleased about with Cheney is their independent share gain. You know, they continue to grow independent share at a rate consistent with the rest of our business. And definitely, you know, we've been following very closely the travel patterns, and I saw the recent theme park attendance. So I do think there's been a little bit of a slowdown with international travel and the Canadian travel in the marketplace. But I'll tell you, we have a ton of confidence in Florida overall. I mean, that's been a state that's been growing consistently for a number of years.
Speaker #15: And what are some of the low-hanging fruits that you think you could capture without impacting the case growth?
Speaker #4: But really saw pretty consistent performance across any material lulls or
Speaker #3: Now, another great question. I would say that the work we did in the clean room was just validation. We felt like when we sat down and put together our strategy for investor day, this is a company, as I called out in my prior remarks, that's grown dramatically over the last 10 years.
Speaker #4: surges. Great.
Speaker #14: Thank you.
Speaker #1: And once again, ladies and gentlemen, that is star one if you would like to signal for a question. We'll turn next to Danielle with Gargiulo, with Bernstein.
Speaker #1: Please go ahead.
Speaker #3: And so we felt like, as we sit down with our vendors and partner with our vendors, that there's an opportunity to create cost of goods benefits, to create logistics benefits, just through our size and scale and creating efficiency with our vendor partners.
Speaker #15: Great. Scott, once again, congratulations on your new role. And I want to ask you a more strategic question to begin with. So as you're embarking on this new role, how would you like your era to be remembered for?
Scott McPherson: And, you know, feel like that, you know, they're poised for a big rebound in that state. But, you know, we're performing really pretty well in the state, all things considered.
Speaker #15: In other words, where do you see incremental opportunities for performance going forward?
Scott E. McPherson: And, you know, feel like that, you know, they're poised for a big rebound in that state. But, you know, we're performing really pretty well in the state, all things considered.
Speaker #3: So, I think the clean room exercise was just a further validation that that opportunity exists, and that we have a clear line of sight to go capture it.
Speaker #4: Really appreciate the question. I think it's a great question. One of the reasons that I'm at performance food group, it's one of the reasons that as I was running COREMARK that we decided to merge with them is culturally, I truly foundationally believed in what George and performance food group were doing as a company.
Bill Marshall: ... And then one quick follow-up, that just prior to the bigger weather events that we saw the last week or so, anything to comment in terms of geographic performance in the quarter to date?
Bill Marshall: And then one quick follow-up, that just prior to the bigger weather events that we saw the last week or so, anything to comment in terms of geographic performance in the quarter to date?
Speaker #3: And the second—I'm sorry, the second part of your question?
Speaker #15: What is the right time frame for the closure of the margin gap?
Speaker #3: Yeah. I think I've called that out a little bit. We really incorporated that procurement synergy into our three-year guide. And as I look at the cadence of that, I would say that we're in the early innings.
Scott McPherson: Oh, it's a really good question. You know, we had called out on prior earnings calls that we saw some slowness in the Midwest, and we'd also called out areas where we had, you know, friends travel from Canada. But as I think back to, you know, last quarter, the start of this quarter, you know, particularly the start of this quarter, you know, January, which, you know, January isn't the bellwether month because it's a smaller month, but really saw pretty consistent performance across the map. Didn't see any markets that had any material, you know, lulls or surges.
Scott E. McPherson: Oh, it's a really good question. You know, we had called out on prior earnings calls that we saw some slowness in the Midwest, and we'd also called out areas where we had, you know, friends travel from Canada. But as I think back to, you know, last quarter, the start of this quarter, you know, particularly the start of this quarter, you know, January, which, you know, January isn't the bellwether month because it's a smaller month, but really saw pretty consistent performance across the map. Didn't see any markets that had any material, you know, lulls or surges.
Speaker #4: So as I've worked with George over the last four years, I would say that we very much align and how we look at the business, I think believers in driving fundamentally we're both through M&A.
Speaker #3: We're in the first couple of quarters of that. But we felt like, and still feel like, that's going to flow fairly consistently year to year.
Speaker #4: I think growth. Both organically and we both pay particular attention to margin and how mix can help and drive margin. Culture is very important.
Speaker #3: So, I think that my thinking there is unchanged.
Speaker #15: Thank you. Okay.
Speaker #4: To me, and then I'd say if there's anything that maybe is a little different is I probably have a little slant towards how are we going to leverage technology?
Speaker #1: Is there no further questions in queue at this time? I would like to turn the call back over to Bill Marshall for any additional or closing comments.
Bill Marshall: Great. Thank you.
Bill Marshall: Great. Thank you.
Speaker #16: Thank you for joining our call today. If you have any follow-up questions, please reach out to investor
Operator: And once again, ladies and gentlemen, that is star one, if you would like to signal for a question. We'll turn next to Danilo Gargiulo with Bernstein. Please go ahead.
Operator: And once again, ladies and gentlemen, that is star one, if you would like to signal for a question. We'll turn next to Danilo Gargiulo with Bernstein. Please go ahead.
Speaker #16: relations. Thank you.
Speaker #4: How are we going to leverage that to be more efficient as a company? But outside of that, I'd say George and I are approaching the business as very consistent.
Danilo Gargiulo: Great. Scott, once again, congratulations on your new role, and I want to ask you a more strategic question to begin with. So as you embark in this new role, how would you like your era to be remembered for? In other words, where do you see incremental opportunities, for Performance going forward?
Danilo Gargiulo: Great. Scott, once again, congratulations on your new role, and I want to ask you a more strategic question to begin with. So as you embark in this new role, how would you like your era to be remembered for? In other words, where do you see incremental opportunities, for Performance going forward?
Speaker #4: And my priority for this company is to continue to drive that top-line growth, but make sure that everything that we do allows it to flow to the bottom line.
Speaker #4: And that we do it with a great culture and make sure there's a great place for people to work.
Scott McPherson: No, I really appreciate the question. I think it's a great question. You know, one of the reasons that I'm at Performance Food Group, it's one of the reasons that, you know, as I was running Core-Mark, that we decided to merge with them is culturally, I truly foundationally believed in what George and Performance Food Group were doing as a company. So, you know, as I've worked with George over the last four years, I would say that, you know, we very much align in how we look at the business. I think fundamentally, we're both believers in driving growth, you know, both organically and through M&A. I think we both pay particular attention to margin and, you know, how mix can help and drive margin. Culture is very important, you know, to me.
Scott E. McPherson: No, I really appreciate the question. I think it's a great question. You know, one of the reasons that I'm at Performance Food Group, it's one of the reasons that, you know, as I was running Core-Mark, that we decided to merge with them is culturally, I truly foundationally believed in what George and Performance Food Group were doing as a company. So, you know, as I've worked with George over the last four years, I would say that, you know, we very much align in how we look at the business. I think fundamentally, we're both believers in driving growth, you know, both organically and through M&A. I think we both pay particular attention to margin and, you know, how mix can help and drive margin. Culture is very important, you know, to me.
Speaker #15: Okay, great. Thank you. And you mentioned margin. In your answer, and earlier you also talked about the discovery that you really the during the process of a potential merger with US Food on the procurement side.
Speaker #15: So I'm wondering, over what time frame do you expect performance to potentially starting to close some of the margin gap versus peers absent, obviously, the mix impact that it's going to be favoring you over time?
Speaker #15: And what are some of the low-hanging fruits that you think you could capture without impacting the case
Speaker #15: growth? Now,
Speaker #4: another great question. I would say that the work we did in the clean room was just validation. We felt like when we sat down and put together our strategy for investor day, this is a company, as I called out in my prior remarks, that's grown dramatically over the last 10 years.
Scott McPherson: And then I'd say if there's any, you know, anything that maybe is a little different is I probably have a little slant towards, you know, how are we gonna leverage technology? How are we gonna leverage that to be more efficient as a company? You know, but outside of that, I'd say, you know, George and I, our approach to the business is very consistent. And my priority for this company is to continue to drive, you know, that top line growth, but make sure that, you know, everything that we do allows it to flow to the bottom line, and that we do, you know, with a great culture and make sure this is a great place for people to work.
Scott E. McPherson: And then I'd say if there's any, you know, anything that maybe is a little different is I probably have a little slant towards, you know, how are we gonna leverage technology? How are we gonna leverage that to be more efficient as a company? You know, but outside of that, I'd say, you know, George and I, our approach to the business is very consistent. And my priority for this company is to continue to drive, you know, that top line growth, but make sure that, you know, everything that we do allows it to flow to the bottom line, and that we do, you know, with a great culture and make sure this is a great place for people to work.
Speaker #4: And so we felt like, as we sit down with our vendors and partner with our vendors, that there's an opportunity to create cost of goods benefits, to create logistics benefits, just through our size and scale and creating efficiency with our vendor partners.
Speaker #4: So I think the clean room exercise was just a further validation that that opportunity exists and that we have a clear line of sight to go capture it.
Speaker #4: And the second, I'm sorry, the second part of your
Speaker #4: question? What is the
Danilo Gargiulo: Okay, great. Thank you. And you mentioned margin in your answer. And earlier, you also talked about the discovery that you really had with the you know, during the process of a potential merger with US Foods on the procurement side. So I'm wondering, over what time frame do you expect Performance to potentially starting to close some of the margin gap versus peers, you know, absent, obviously, the mix impact that is gonna be favoring you over time? And what are some of the low-hanging fruits that you think you could capture without impacting the case growth?
Danilo Gargiulo: Okay, great. Thank you. And you mentioned margin in your answer. And earlier, you also talked about the discovery that you really had with the you know, during the process of a potential merger with US Foods on the procurement side. So I'm wondering, over what time frame do you expect Performance to potentially starting to close some of the margin gap versus peers, you know, absent, obviously, the mix impact that is gonna be favoring you over time? And what are some of the low-hanging fruits that you think you could capture without impacting the case growth?
Speaker #15: right time frame margin gap?
Speaker #4: Yeah, I think I've called that out a little bit. We really incorporated that procurement synergy into our three-year guide. And as I look at the cadence of that, I would say that we're in the early innings.
Speaker #4: We're in the first couple of quarters of that. But we felt like and still feel like that's going to flow fairly consistently year to year.
Speaker #4: So I think my thinking there is
Speaker #15: Okay, thank unchanged. you.
Scott McPherson: No, another great question. I would say that the work we did in the Clean Room was just validation. We felt like when we, you know, sat down and put together our strategy for Investor Day, you know, this is a company, as I called out in my prior remarks, that's grown dramatically over the last 10 years. So we felt like as we sit down with our vendors and partner with our vendors, that there's an opportunity to create cost of goods benefits, to create logistics benefits, you know, just through our size and scale and creating efficiency with our vendor partners. So, you know, I think the Clean Room exercise was just a further validation that that opportunity exists and that, you know, we have a clear line of sight to go capture it.
Scott E. McPherson: No, another great question. I would say that the work we did in the Clean Room was just validation. We felt like when we, you know, sat down and put together our strategy for Investor Day, you know, this is a company, as I called out in my prior remarks, that's grown dramatically over the last 10 years. So we felt like as we sit down with our vendors and partner with our vendors, that there's an opportunity to create cost of goods benefits, to create logistics benefits, you know, just through our size and scale and creating efficiency with our vendor partners. So, you know, I think the Clean Room exercise was just a further validation that that opportunity exists and that, you know, we have a clear line of sight to go capture it.
Speaker #1: Is there no further questions in queue at this time? I would like to turn the call back over to Bill Marshall for any additional or closing comments.
Speaker #16: Thank you for joining our call today. If you have any follow-up questions, please reach out to investor
Speaker #16: relations. Thank
Scott McPherson: And the second... I'm sorry, the second part of your question?
Scott E. McPherson: And the second... I'm sorry, the second part of your question?
Danilo Gargiulo: What is the right time frame for the closure of the margin gap?
Danilo Gargiulo: What is the right time frame for the closure of the margin gap?
Scott McPherson: Yeah, I think I, I've called that out a little bit. You know, we really incorporated that, that procurement synergy into our three-year guide. And as I look at, you know, the cadence of that, I would say that, you know, we're in the early innings. We're, you know, in the first couple quarters of that, but we felt like and still feel like that's gonna flow, you know, fairly consistently year to year. So, you know, I think that my, my thinking there is unchanged.
Scott E. McPherson: Yeah, I think I, I've called that out a little bit. You know, we really incorporated that, that procurement synergy into our three-year guide. And as I look at, you know, the cadence of that, I would say that, you know, we're in the early innings. We're, you know, in the first couple quarters of that, but we felt like and still feel like that's gonna flow, you know, fairly consistently year to year. So, you know, I think that my, my thinking there is unchanged.
Danilo Gargiulo: Okay, thank you so much.
Danilo Gargiulo: Okay, thank you so much.
Operator: As there are no further questions in queue at this time, I would like to turn the call back over to Bill Marshall for any additional or closing comments.
Operator: As there are no further questions in queue at this time, I would like to turn the call back over to Bill Marshall for any additional or closing comments.
Bill Marshall: Thank you for joining our call today. If you have any follow-up questions, please reach out to Investor Relations.
Bill Marshall: Thank you for joining our call today. If you have any follow-up questions, please reach out to Investor Relations.
Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may disconnect.
Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may disconnect.
