The Chefs' Warehouse(US:CHEF)2019-05-05 14:48Financial Data and Key Metrics Changes - Net sales for Q1 2019 increased approximately 12.1% to $357 million from $318.6 million in Q1 2018, driven by organic growth of approximately 5.6% and acquisition contributions adding approximately 6.5% to sales growth [14][15] - Gross profit increased 13.4% to $90.2 million for Q1 2019 compared to $79.5 million for Q1 2018, with gross profit margins increasing approximately 30 basis points to 25.3% [15][20] - GAAP income was $1.1 million or $0.04 per diluted share for Q1 2019, compared to net income of $0.5 million or $0.02 per diluted share for Q1 2018 [20] Business Line Data and Key Metrics Changes - Specialty sales were up 6.6% organically over the prior year, driven by unique customer growth of approximately 6.2%, placement growth of 5.2%, and specialty case growth of 5.2% [8] - Organic pounds growth in center-of-the-plate was 3.1% [8] - Gross margins in the specialty category declined 39 basis points, while gross margins in the center-of-the-plate category increased 106 basis points year-over-year [9][15] Market Data and Key Metrics Changes - Net inflation was 1.3% in Q1 2019, consisting of 1.4% inflation in the specialty category and 1.3% in the center-of-the-plate category compared to the prior-year quarter [14] - Customer adoption of the e-commerce platform grew, with sales on e-commerce and mobile platforms representing more than 11% of total organic revenue [12] Company Strategy and Development Direction - The company executed a key acquisition of Bassian Farms, focusing on delivering high-quality natural, sustainable, local, and antibiotic-free center-of-the-plate products [10] - Continued progress on multiple systems and operational process improvements, including ERP platform conversions and facility expansions in Texas and Los Angeles [11][13] - The company is optimistic about the growth potential in Texas, viewing it as a long-term investment with significant future returns [40][41] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the continued strength in customer demand and execution by teams, despite challenging weather conditions [6][7] - The updated full-year guidance reflects improvement in expected gross profit dollar growth relative to adjusted operating expenses compared to 2018 [17][21] - Management anticipates that inflation will remain moderate, with expectations of 0% to 2% on the specialty side and flattish to 1% overall for the year [42] Other Important Information - The company ended Q1 2019 with $17.3 million in cash, and Moody's upgraded its corporate credit rating from B2 to B1 [20] - The company is focused on enhancing customer satisfaction through improved service levels and technology, which is expected to drive organic growth [55] Q&A Session Summary Question: Can you talk about the cadence of case growth in the quarter? - Management noted that the quarter was steady, with March being a strong month despite some weather-related challenges [24] Question: Can you elaborate on the gross margin changes? - Management explained that the decline in specialty margins was partly due to product mix from acquisitions and significant inflation in larger categories like cheese and baking [26][27] Question: How did fuel costs impact the company year-on-year in Q1? - Fuel costs were roughly flat year-over-year, with potential benefits expected in the second half of the year if prices stabilize [32] Question: What are the inflation expectations baked into the guidance for the year? - The guidance includes moderate inflation expectations of 0% to 2% on the specialty side and flattish to 1% overall [42] Question: How is the integration of Bassian Farms progressing? - Management reported a positive cultural fit and early synergies from combining production operations, with expectations for growth in the coming years [45][46]