Us Foods Holding Corp. ((USFD)) has held its Q1 earnings call. Read on for the main highlights of the call.
The recent earnings call for Us Foods Holding Corp. reflected a robust sentiment, underscored by strong profitability growth and consistent market share gains despite facing external challenges such as severe weather and a challenging macro environment. The announcement of a $1 billion share repurchase program, along with improvements in service levels and employee retention, further bolstered a positive outlook for the company. However, challenges such as weather impacts, chain restaurant volume declines, and difficulties in selling CHEF’STORE were also noted.
Strong Profitability Despite Challenges
The company reported a significant increase in profitability, with adjusted EBITDA growing more than 9% and adjusted diluted EPS rising by 26%, despite the challenging operating environment and severe weather-related headwinds. This demonstrates the company’s resilience and ability to navigate through adverse conditions while maintaining financial growth.
Consistent Market Share Gains
Us Foods has achieved 16 consecutive quarters of market share gains with independent restaurants and 18 consecutive quarters with healthcare. This consistent performance highlights the company’s strategic focus on expanding its footprint in these key sectors.
$1 Billion Share Repurchase Program
The Board authorized a new $1 billion share repurchase program, building upon a cumulative buyback of more than 24 million shares since late 2022. This move signals confidence in the company’s future prospects and commitment to returning value to shareholders.
Record Performance in Healthcare and Hospitality
The healthcare business grew by 6.1% and hospitality by 3.6%, with strong new business wins in both sectors. These results underscore the company’s successful efforts in capturing new opportunities and expanding its market presence.
Enhanced Service Levels
Us Foods reported that on-time delivery and service levels are at their best since 2019, with the Ops QC metric improving approximately 20% from the previous year. This improvement in operational efficiency is a testament to the company’s focus on enhancing customer satisfaction.
Innovative AI Tools
The launch of generative AI automatic order guides for sellers is set to improve efficiency in creating customer proposals and onboarding new business. This innovation reflects the company’s commitment to leveraging technology for operational excellence.
Improved Employee Retention
Employee retention has seen significant improvements, with annualized selector turnover improving by approximately 20 percentage points and driver turnover improving by low single-digits over the prior year. This indicates a positive work environment and effective employee engagement strategies.
Impact of Severe Weather
Severe weather, including wildfires in LA, impacted independent case growth, leading to a net headwind of approximately 160 basis points. This highlights the external challenges the company faces and its ongoing efforts to mitigate such impacts.
Chain Restaurant Volume Decline
The company experienced a 4.3% decline in chain restaurant volume, which aligns with the broader industry trend of a 3% decrease in foot traffic for the first quarter. This reflects the ongoing challenges in the chain restaurant sector.
Challenges in Selling CHEF’STORE
The current macro environment is not conducive to completing a transaction for CHEF’STORE at an appropriate valuation, presenting a challenge for the company in this area.
Forward-Looking Guidance
CEO Dave Flitman provided guidance for fiscal 2025, highlighting strong performance metrics and projecting independent case growth of 2% to 5% for the full year. The company aims for a 5% sales CAGR and 10% adjusted EBITDA CAGR through 2027, with a 20% adjusted EPS CAGR. This forward-looking guidance underscores the company’s strategic focus on profitable growth and resilience in the face of challenges.
In summary, the earnings call for Us Foods Holding Corp. painted a picture of a company that is not only navigating through challenges but also strategically positioning itself for future growth. With strong profitability, consistent market share gains, and a robust share repurchase program, the company is poised for continued success. Despite some challenges, the overall sentiment remains positive, reflecting confidence in the company’s strategic direction and operational capabilities.