Performance Food pany(US:PFGC)2020-05-10 03:45Financial Data and Key Metrics Changes - Net income for Q1 2020 increased to $4.3 million compared to $1.3 million last year, with a 56% increase to $10 million when excluding LIFO expense [26] - Total sales in Q1 2020 increased by 4.9% to $3.94 billion, driven by a 1.5% increase in cigarette sales and nearly 6% growth in non-cigarette sales through February [27][28] - EBITDA grew by 19%, supported by strong cigarette sales and growth in non-cigarette categories [12] Business Line Data and Key Metrics Changes - Cigarette sales were up over 6% in the first three weeks of March but saw a slowdown later in the month, with overall cigarette sales up about 3% for the quarter [28] - Non-cigarette sales were impacted by approximately $19 million in customer returns of flavored e-cigarette merchandise due to regulation [29] - Gross profit margins finished slightly below the prior year, with cigarette margins consistent with expectations and non-cigarette margins slightly above the prior year but below growth expectations [13][30] Market Data and Key Metrics Changes - Cigarette and non-cigarette sales for April were down approximately 3% and 20% year-over-year, respectively, with total margins declining by about 40 basis points [17] - The company has a diverse customer base, with about two-thirds being traditional convenience stores and the remaining third comprising various retail formats, including Walmart and Rite Aid [65] Company Strategy and Development Direction - The company is focused on maintaining liquidity through cost reduction efforts, disciplined inventory management, and reduced capital expenditures [19][44] - Core-Mark is pursuing independent retailers and sizable chain opportunities, maintaining dialogues for future growth once the business environment stabilizes [22] - The company is leveraging technology for operational metrics and customer data analytics to enhance business continuity during the crisis [20] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by COVID-19 but expressed confidence in the steps taken to preserve the health of the company and position it for future growth [24][46] - The leadership team remains focused on moving the business forward despite the complexities of operating during the crisis [20] - Management noted that while it is difficult to forecast future cash and liquidity conditions, they believe they currently have sufficient liquidity [44] Other Important Information - The company has suspended its share repurchase program but remains committed to continuing its cash dividend at a rate of $0.12 per share [43] - A headcount reduction of approximately 1,000 employees was implemented in response to volume declines due to COVID-19 [18] Q&A Session Summary Question: How are independent stores faring versus larger chains during COVID-19? - Management indicated that larger chains have generally outperformed due to their volume, while independents have held on reasonably well, with geographic variations [51][52] Question: Is there potential for market share gains from smaller distributors facing financial duress? - Management acknowledged that independent wholesalers may face pressure, particularly in regions heavily impacted by COVID-19 [53] Question: What are the expectations for warehouse and distribution expenses this year? - Management noted significant headcount reductions and efforts to control nonessential spending, with productivity rebounding to previous levels [56] Question: Can you provide insights on April trends and performance in non-cigarette sales? - Management confirmed that non-cigarette sales were consistently down in the 20% range throughout April, but there were signs of improvement in early May [62] Question: What is the geographic exposure of the company? - Management explained that the business is divided into Eastern, Western, and Northern regions, with the coasts experiencing the most significant impacts [71][72] Question: What percentage of costs are fixed versus variable? - Management indicated that about 70% of expenses are salaries, with a variable portion of 10% to 20% for SG&A and 60% to 70% for warehouse and delivery [74] Question: What is the outlook for e-cigarette trends? - Management noted disruptions in e-cigarette sales due to returns of flavored products but expects the category to remain flat for the year [84][86]