US Foods(US:USFD)2024-05-09 18:08Financial Data and Key Metrics Changes - First quarter net sales increased by 4.8% to $8.9 billion, driven by total case volume growth of 4.2% and food cost inflation of 1.5% [9] - Adjusted EBITDA grew by 5.6% from the prior year to $356 million, slightly above the high end of guidance, despite a $20 million negative impact from labor disruptions and weather-related issues [149][128] - Adjusted gross profit grew nearly 7% to $1.5 billion, with adjusted EBITDA margin remaining largely unchanged at 4% [125][128] Business Line Data and Key Metrics Changes - Independent restaurant volume increased by 4.6% overall and 2.9% organically, while health care and hospitality grew by 6.4% and 0.9%, respectively [9] - The company achieved a record in cases per mile in February and March, with a 4% improvement in cases per mile compared to Q1 2023 [6] - Private label penetration increased by 90 basis points year-over-year to over 52% [26] Market Data and Key Metrics Changes - Despite a slight year-over-year decrease in restaurant foot traffic, broadliners increased their volume within the overall food service distribution channel, indicating industry resilience [23] - The company expects hospitality to accelerate through Q2 and the second half of the year as new customers are onboarded [9][47] Company Strategy and Development Direction - The company is focused on accelerating profitable growth and gaining market share, aiming for 1.5x market growth for restaurants in 2024 [119] - Continued investments in operational rigor and technology modernization are expected to enhance service levels and delivery efficiency [24][117] - The Pronto small truck delivery service is positioned as a competitive differentiator, with expectations of approximately $600 million in annualized sales [152] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges in the macro environment but expressed confidence in the company's ability to control outcomes and gain profitable market share [33][30] - The company remains focused on executing its strategy and maintaining disciplined capital deployment to drive long-term shareholder value [131] - Management expects adjusted EBITDA for fiscal year 2024 to be in the range of $1.69 billion to $1.74 billion, reaffirming guidance despite a softer macro environment [130] Other Important Information - The company repurchased $13 million of shares during the first quarter, with plans to increase share repurchases through the remainder of the year [11][23] - The company is set to host an Investor Day on June 5, where it will share long-range plan targets [3][31] Q&A Session Summary Question: Impact of softer traffic environment on internal targets - Management noted that while there have been challenges, the company has opportunities to focus on controllable factors like gaining profitable market share [33] Question: Growth expectations in health care and hospitality - Management expects hospitality to accelerate in Q2 and the second half of the year, driven by onboarding new customers [47] Question: Size of sales force and impact on share gains - Management believes that a low to mid-single-digit addition to the sales force is appropriate and will not hinder growth [41] Question: Performance of CHEF STORE in the current macro backdrop - CHEF STORE has returned to case growth, and the company plans to continue adding stores [60] Question: Increase in private label penetration - The increase is attributed to a combination of factors, including improved sales force confidence and compensation changes [65] Question: M&A outlook and impact on guidance - Management indicated that while IWC will contribute to growth, they do not need to pursue additional M&A aggressively at this time [145]