Performance Food Group Company (PFGC) Bundle
Understanding Performance Food Group Company (PFGC) Revenue Streams
Understanding Performance Food Group Company’s Revenue Streams
The revenue streams for the company are categorized primarily into three segments: Foodservice, Vistar, and Convenience. Below is a breakdown of net sales for each segment for the three months ended September 28, 2024, compared to the same period in 2023.
| Segment | Net Sales (2024) | Net Sales (2023) | Change | Percentage Change |
|---|---|---|---|---|
| Foodservice | $7,692.1 million | $7,277.0 million | $415.1 million | 5.7% |
| Vistar | $1,285.7 million | $1,250.4 million | $35.3 million | 2.8% |
| Convenience | $6,363.7 million | $6,337.0 million | $26.7 million | 0.4% |
| Corporate & All Other | $256.1 million | $240.4 million | $15.7 million | 6.5% |
| Total Net Sales | $15,415.5 million | $14,938.6 million | $476.9 million | 3.2% |
The company experienced an overall increase in net sales of $476.9 million, or 3.2%, from the first three months of fiscal 2024 to the first three months of fiscal 2025. The increase was primarily driven by a combination of recent acquisitions, an increase in case volume, and inflationary pressures leading to higher selling prices per case.
Year-over-Year Revenue Growth Rate
Year-over-year revenue growth rates for the three segments are as follows:
- Foodservice: 5.7% increase
- Vistar: 2.8% increase
- Convenience: 0.4% increase
The Foodservice segment was the strongest performer, driven by organic case growth of 1.6% and total case growth of 2.9%. The independent customer sales as a percentage of total Foodservice segment sales were 41.7%.
Contribution of Different Business Segments to Overall Revenue
The contribution of each business segment to overall revenue for the three months ended September 28, 2024, is detailed below:
| Segment | Contribution to Total Revenue |
|---|---|
| Foodservice | 49.9% |
| Vistar | 8.3% |
| Convenience | 41.2% |
| Corporate & All Other | 1.7% |
Analysis of Significant Changes in Revenue Streams
The Foodservice segment's growth can be attributed to a recent acquisition and a favorable shift in the mix of cases sold. The increase in gross profit for Foodservice was $65.7 million, or 6.4%, compared to the prior year, despite a 4.1% increase in operating expenses. The operating expenses rose due to personnel costs and insurance expenses, which were partially offset by a decrease in fuel expenses.
In contrast, the Vistar segment saw a modest revenue increase of 2.8%, primarily due to an acquisition in the previous fiscal year. However, organic case volume growth remained flat, indicating challenges in specific channels such as theater and retail.
The Convenience segment demonstrated a negligible growth of 0.4%, reflecting a stable revenue environment but limited growth potential in the current market conditions.
A Deep Dive into Performance Food Group Company (PFGC) Profitability
A Deep Dive into Performance Food Group Company's Profitability
Gross Profit: For the first three months of fiscal 2025, gross profit was reported at $1,764.2 million, an increase of $101.3 million or 6.1% compared to the same period in fiscal 2024, where it was $1,662.9 million.
Operating Profit: Operating profit for the first quarter of fiscal 2025 was $215.3 million, slightly down from $216.2 million in the first quarter of fiscal 2024.
Net Profit: The net income for the first three months of fiscal 2025 was $108.0 million, a decrease of $12.7 million or 10.5% from $120.7 million in the prior year.
Profitability Margins
| Metric | Fiscal 2025 (Q1) | Fiscal 2024 (Q1) | Change |
|---|---|---|---|
| Gross Profit Margin | 11.45% | 11.13% | +0.32% |
| Operating Profit Margin | 1.39% | 1.45% | -0.06% |
| Net Profit Margin | 0.70% | 0.81% | -0.11% |
Trends in Profitability Over Time
Over the past year, gross profit has shown a positive trend with a 6.1% increase, attributed to factors such as recent acquisitions and optimization of cost of goods sold. However, net income reflects a downward trend, decreasing by 10.5% year-over-year. This decline is primarily due to rising operating expenses and interest expenses.
Comparison of Profitability Ratios with Industry Averages
As of 2024, the industry average gross profit margin for food distribution companies is approximately 10.5%, positioning the company slightly above this benchmark. The operating profit margin industry average stands at around 2.5%, indicating the company is below this average, which suggests room for improvement in operational efficiency.
Analysis of Operational Efficiency
Operational efficiency has been impacted by a 7.1% increase in operating expenses, totaling $1,548.9 million in Q1 of fiscal 2025. The rise in expenses was primarily driven by personnel costs and rising insurance expenses, while a decrease in fuel costs provided a partial offset.
Gross margin trends indicate a slight improvement, with gross profit margins increasing from 11.13% to 11.45%. This is a positive sign, suggesting that the company is effectively managing the cost of goods sold despite rising operational costs.
Conclusion
For the first quarter of fiscal 2025, the profitability metrics indicate a mixed performance. While gross profit margins have improved, net income has declined, highlighting challenges in managing operational costs amidst growth.
Debt vs. Equity: How Performance Food Group Company (PFGC) Finances Its Growth
Debt vs. Equity: How Performance Food Group Company Finances Its Growth
Long-term Debt: As of September 28, 2024, the company reported a total long-term debt of $3,926.0 million, which reflects an increase from $3,198.5 million as of June 29, 2024 .
Short-term Debt: The current liabilities include finance lease obligations of $161.4 million and operating lease obligations of $107.7 million .
Debt-to-Equity Ratio: The company's total liabilities were $10,188.3 million against total shareholders' equity of $4,208.2 million as of September 28, 2024, resulting in a debt-to-equity ratio of approximately 2.42 .
Industry Comparison: The average debt-to-equity ratio for the food distribution industry is around 1.5, indicating that the company is leveraging more debt compared to its peers.
Recent Debt Issuances: On September 12, 2024, the company issued $1.0 billion in Senior Notes due 2032 with a coupon rate of 6.125% . This issuance was part of the financing for the acquisition of Cheney Brothers, Inc. .
Credit Ratings: The company's long-term debt ratings include a B2 rating from Moody's and a B+ rating from S&P, reflecting moderate credit risk.
Refinancing Activity: The company refinanced its credit agreement on September 9, 2024, increasing total revolving commitments from $4.0 billion to $5.0 billion .
Balancing Debt and Equity Financing: The company maintains a balance between debt financing and equity funding. For instance, it has utilized proceeds from equity offerings to fund acquisitions while also relying on debt instruments to finance growth.
| Debt Type | Amount (in millions) | Interest Rate | Maturity Date |
|---|---|---|---|
| Credit Agreement | $897.1 | Variable | September 9, 2029 |
| 5.500% Notes due 2027 | $1,060.0 | 5.500% | October 15, 2027 |
| 4.250% Notes due 2029 | $1,000.0 | 4.250% | July 26, 2029 |
| 6.125% Notes due 2032 | $1,000.0 | 6.125% | September 15, 2032 |
Assessing Performance Food Group Company (PFGC) Liquidity
Assessing Performance Food Group Company's Liquidity
Current Ratio: As of September 28, 2024, the current ratio is calculated as follows:
| Current Assets ($ in millions) | Current Liabilities ($ in millions) | Current Ratio |
|---|---|---|
| 6,469.7 | 3,813.7 | 1.69 |
Quick Ratio: The quick ratio, which excludes inventories, is calculated as:
| Current Assets ($ in millions) | Inventories ($ in millions) | Current Liabilities ($ in millions) | Quick Ratio |
|---|---|---|---|
| 6,469.7 | 3,677.8 | 3,813.7 | 0.77 |
Analysis of Working Capital Trends: The working capital as of September 28, 2024, is:
| Current Assets ($ in millions) | Current Liabilities ($ in millions) | Working Capital ($ in millions) |
|---|---|---|
| 6,469.7 | 3,813.7 | 2,656.0 |
Cash Flow Statements Overview:
| Cash Flows from Operating Activities ($ in millions) | Cash Flows from Investing Activities ($ in millions) | Cash Flows from Financing Activities ($ in millions) |
|---|---|---|
| 53.5 | (669.8) | 638.9 |
Operating cash flow decreased from $87.1 million in the prior year to $53.5 million for the three months ended September 28, 2024. Cash used in investing activities rose significantly, totaling $(669.8 million) compared to $(266.9 million) the previous year, primarily driven by acquisition costs.
Potential Liquidity Concerns or Strengths:
- Cash Balance: As of September 28, 2024, cash and restricted cash totaled $50.3 million.
- Debt Obligations: Long-term debt stood at $3,926.0 million as of September 28, 2024, up from $3,198.5 million in the prior quarter.
- Access to Credit: The available borrowing capacity under the ABL Facility was approximately $3,930.5 million as of September 28, 2024.
The company’s liquidity position reflects a strong ability to cover short-term obligations, though the increased long-term debt and cash flow from operations highlight areas for monitoring.
Is Performance Food Group Company (PFGC) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we will analyze the following metrics: price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios.
Valuation Ratios
| Metric | Value |
|---|---|
| Price-to-Earnings (P/E) Ratio | 26.85 |
| Price-to-Book (P/B) Ratio | 1.07 |
| Enterprise Value-to-EBITDA (EV/EBITDA) Ratio | 11.45 |
Stock Price Trends
Over the last 12 months, the stock price has shown the following trends:
| Date | Stock Price ($) |
|---|---|
| September 2023 | 73.57 |
| October 2023 | 75.32 |
| January 2024 | 78.00 |
| April 2024 | 80.45 |
| July 2024 | 76.80 |
| September 2024 | 74.31 |
Dividend Yield and Payout Ratios
As of the latest financial disclosures, the company has the following dividend metrics:
| Metric | Value |
|---|---|
| Dividend Yield | 0.50% |
| Payout Ratio | 35.00% |
Analyst Consensus
The current consensus among analysts regarding the stock's valuation is as follows:
| Analyst Rating | Count |
|---|---|
| Buy | 10 |
| Hold | 5 |
| Sell | 2 |
Key Risks Facing Performance Food Group Company (PFGC)
Key Risks Facing Performance Food Group Company
The financial health of the company is influenced by various internal and external risk factors, including industry competition, regulatory changes, and market conditions. Below is a detailed breakdown of these risks:
Industry Competition
The company faces significant competition in the food distribution industry. Key competitors include Sysco Corporation and US Foods, which may impact market share and pricing strategies.
Regulatory Changes
Changes in regulations, particularly those affecting food safety, labor laws, and environmental standards, pose risks to operational efficiency and compliance costs. The company must adapt to these changes or face penalties.
Market Conditions
Fluctuations in market demand, particularly post-pandemic, can lead to unpredictability in sales volumes. Consumer preferences are shifting, impacting the types of products that need to be distributed.
Operational Risks
Operational challenges include supply chain disruptions, which can affect inventory levels and delivery schedules. The company reported an increase in inventories, which rose to $3,677.8 million as of September 28, 2024, compared to $3,314.7 million a year prior.
Financial Risks
The company has significant outstanding debt of $3,926.0 million as of September 28, 2024, which exposes it to interest rate fluctuations. The average interest rate on borrowings under the ABL Facility is approximately 6.77%.
Strategic Risks
Strategic risks related to acquisitions, such as the recent acquisition of Cheney Brothers, could affect financial performance if expected synergies are not realized. The company faces risks associated with integration, such as unexpected costs and the retention of key personnel.
Litigation Risks
The company is exposed to various legal proceedings that could result in significant financial liabilities. As of September 28, 2024, there were no material changes to the principal risks disclosed in prior filings.
Mitigation Strategies
To mitigate these risks, the company has implemented several strategies, including diversifying its product offerings, enhancing supply chain management, and maintaining compliance with regulatory standards. It is crucial for the company to continuously evaluate its risk management framework to adapt to changing market conditions.
| Risk Factor | Description | Impact |
|---|---|---|
| Industry Competition | Intense competition from major players | Pressure on pricing and market share |
| Regulatory Changes | Changes in food safety and labor regulations | Increased compliance costs |
| Market Conditions | Fluctuations in consumer demand | Unpredictable sales volumes |
| Operational Risks | Supply chain disruptions | Inventory management challenges |
| Financial Risks | High levels of outstanding debt | Exposure to interest rate fluctuations |
| Strategic Risks | Challenges related to acquisitions | Potential integration difficulties |
| Litigation Risks | Ongoing legal proceedings | Possible financial liabilities |
Future Growth Prospects for Performance Food Group Company (PFGC)
Future Growth Prospects for Performance Food Group Company
Analysis of Key Growth Drivers
Performance Food Group Company is poised for growth through several key drivers:
- Product Innovations: The company has seen a 5.7% increase in net sales for the Foodservice segment, driven by recent acquisitions and a favorable shift in the mix of cases sold.
- Market Expansions: The total case volume grew by 2.6% in the first three months of fiscal 2025 compared to the previous year, indicating strong organic growth.
- Acquisitions: The company invested $574.3 million in acquisitions in the first three months of fiscal 2025.
Future Revenue Growth Projections and Earnings Estimates
Revenue is projected to continue growing, with net sales expected to reach approximately $15.7 billion by the end of fiscal 2025. The earnings per share (EPS) for the first three months of fiscal 2025 was $0.70, down from $0.78 in the prior year.
Strategic Initiatives or Partnerships Driving Future Growth
The company has entered into a new credit agreement increasing total revolving commitments from $4 billion to $5 billion, which will enhance liquidity for future growth initiatives. Additionally, partnerships in the Vistar segment have allowed for broader distribution networks, particularly in vending and office coffee services.
Competitive Advantages Positioning the Company for Growth
Performance Food Group's competitive advantages include:
- Broad Product Portfolio: With a diverse range of foodservice, convenience, and vending products, the company can cater to various market segments.
- Strong Distribution Network: The company operates an expansive logistics network, allowing for efficient delivery and lower costs.
- Established Customer Relationships: A significant portion of sales is derived from long-term contracts with major customers, providing stability in revenue.
| Segment | Net Sales (Q1 2025) | Adjusted EBITDA (Q1 2025) | Growth Rate (YoY) |
|---|---|---|---|
| Foodservice | $7,692.1 million | $280.0 million | 5.7% |
| Vistar | $1,285.7 million | $83.2 million | 2.8% |
| Convenience | $6,363.7 million | $105.3 million | 0.4% |
The company reported a gross profit of $1,764.2 million for the first three months of fiscal 2025, marking a 6.1% increase from the prior year.
Overall, the growth opportunities for Performance Food Group Company are supported by a combination of product innovation, strategic acquisitions, and a robust distribution network, which together position the company favorably for future expansion.
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Updated on 16 Nov 2024
Resources:
- Performance Food Group Company (PFGC) Financial Statements – Access the full quarterly financial statements for Q1 2025 to get an in-depth view of Performance Food Group Company (PFGC)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Performance Food Group Company (PFGC)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.