Performance Food Group (NYSE:PFGC) reported higher fiscal first-quarter earnings and reiterated its full-year outlook, as growth across its three businesses and wider gross margins helped offset higher fuel costs and a challenging restaurant market.
Net sales rose 5.5% from a year earlier, while net income increased 38.4% to $129.5 million. Adjusted EBITDA climbed 10% to $528 million, at the upper end of the company’s guidance range. Diluted earnings per share were $0.82, and adjusted diluted earnings per share rose 11.9% to $1.32.
CEO Scott McPherson described the consumer environment as challenging but stable. Restaurant traffic was down approximately 2%, according to Black Box data cited by McPherson, while gasoline prices averaged more than $4 a gallon during the quarter.
“Despite the softer industry backdrop, we continue to see opportunities to gain share and outpace industry growth trends,” McPherson said.
Independent restaurant growth supports margins
Foodservice organic case volume for independent restaurants rose 5.5%, while total independent case growth was 7.8%. McPherson said net new accounts accounted for most of the organic increase, with higher sales to existing customers also contributing.
The company recorded a third consecutive quarter of positive penetration into existing accounts, measured by an increase in lines per delivery. McPherson said its sales force and CustomerFirst digital tools helped drive that improvement. Performance Brands represented nearly 51% of cases sold to independent restaurants during the quarter.
Organic chain restaurant case volume was slightly negative. McPherson expects a similar result in the second quarter, followed by acceleration as Performance Food Group begins onboarding Jersey Mike’s in February. The company will serve three of the chain’s four geographic regions, with margins in line with its overall chain business, he said.
Companywide gross profit increased 8.5%, and gross margin improved by 33 basis points. CFO Patrick Hatcher attributed the improvement to a favorable business mix, procurement initiatives and growth in Performance Brands. He said the company expects those factors to continue supporting gross margin expansion through the rest of the year.
Convenience and Specialty face fuel pressure
Convenience sales rose 5.4%, supported by 4.1% case growth and a low-single-digit contribution from price and mix. Case volume in the segment’s branded foodservice programs increased 11%, with sales from those programs up nearly 15%.
McPherson said higher fuel prices weighed on store traffic and purchasing, while the absence of prior-year candy inventory holding gains and alternative nicotine promotional activity held back segment EBITDA growth. After the company laps large customer wins including Love’s and RaceTrac, he expects Convenience revenue growth to return to a low-single-digit pace in the second half, with adjusted EBITDA growth in the high single digits to low double digits.
Specialty posted double-digit revenue growth, helped by vending and office coffee, entertainment and grocery retail. Its margins faced pressure from prior-year candy inventory gains that did not recur, competition and higher fuel costs. McPherson expects similar pressure in the second quarter, followed by stronger profit results in the second half as comparisons ease.
Hatcher said the net impact of higher diesel expenses was approximately $16 million in the first quarter after surcharges and hedges. He expects a similar impact in the second quarter at current prices, before year-over-year fuel comparisons begin to ease in March.
Guidance maintained
For fiscal 2027, Performance Food Group reiterated its forecast for net sales of $72.5 billion to $73 billion and adjusted EBITDA of $2.125 billion to $2.225 billion. The outlook includes a 53rd week in the fourth quarter, which management expects to benefit results by approximately 2%.
For the second quarter, the company forecast net sales of $17 billion to $17.2 billion and adjusted EBITDA of $490 million to $510 million. Hatcher said the slower sales growth reflects comparisons with the prior-year Convenience customer additions.
The company also expects procurement savings to build through fiscal 2027 and reach approximately $125 million by the end of fiscal 2028, at the upper end of its previously provided range. Hatcher said the savings are expected to be spread roughly evenly across the two fiscal years.
Performance Food Group used $89.3 million in operating cash flow during the first quarter, compared with $145.2 million a year earlier. Hatcher said first-quarter cash use is typical as the company builds inventory, and management expects strong operating and free cash flow for the full year. Net debt was at the top end of the company’s 2.5-to-3.5-times leverage target range, with debt reduction a priority during fiscal 2027.
About Performance Food Group (NYSE:PFGC)
Performance Food Group Company is a foodservice and convenience-store distributor headquartered in Richmond, Virginia. Through its distribution network, the company supplies food and related products to restaurants, schools, healthcare facilities, businesses, and other institutions, as well as convenience retailers.
Its offerings include fresh and frozen foods, dry groceries, beverages, snacks, and disposables and other operating supplies. The company operates through businesses including Performance Foodservice, Vistar, and Core-Mark, which serve different customer segments and provide distribution and related services.
Performance Food Group traces its roots to 1885 and serves customers across the United States and Canada.
