Last week the major broadline foodservice distributors reported financial results for the quarter ending Sept. 29. Sysco and Performance Food Group reported increased dollar sales while US Foods said the company experienced a drop of 0.8 percent in sales for the quarter. All three distributors said case sales to independent operators increased. All three had significant increases in profits and all three experienced increases in earnings per share.
Because of these distributors’ penetration into the foodservice market their sales indicate to some that foodservice operators are doing well, too. But others would dispute this, believing that the three giants could be growing by taking market share from smaller distributors. In any case, a more detailed look at the distributors’ financial data is shown below.
- Sysco reported a 3.9 percent increase in sales to $15.2 billion for the company’s first fiscal quarter ending Sept. 29. U.S. broadline sales were $10.4 billion, an increase of 5.6 percent. Total case volume within U.S. broadline operations grew 5.7 percent, of which 4.3 percent was organic. Net earnings rose 17.2 percent to $431 million from $367.6.
- US Foods announced a net sales decrease of 0.8 percent to $6.2 billion for the company’s fiscal quarter ending Sept. 29. Total case volume fell 0.8 percent while independent restaurant case volume rose 3.3 percent. Net income increased $18 million to $114 million. Earnings per share were $0.52 up from $0.42 in the third quarter last year.
- Performance Food Group stated its foodservice sales increased 2.2 percent to $3.6 billion in the fiscal quarter ending Sept. 29. Case sales growth to independents grew 4.8 percent. Net income grew 24.8 percent to $28.2 million. Earnings per share rose to $0.27 from $0.22.
Economic News This Week
- Initial-jobless claims totaled 214,000, a decline of 1,000 for the week ending Nov. 3. The 4-week moving average was 213,750, a decline of 250.
- The U.S. Federal Reserve reports a 3.3 percent increase in consumer borrowing in September. Revolving credit, however, declined by 0.4 percent. Non-revolving credit (car loans, student loans, etc.) increased 4.7 percent.
- The Institute for Supply Management’s Manufacturing Index showed slower expansion in October with the Index dropping to 57.7 from 59.8 in September. (Any number greater than 50 indicates increasing activity.) The New Orders Index fell 4.4 points from September to an October level of 57.4. The Production Index fell 4.0 points to a final reading of 59.9 in October. The Order Backlog Index rose 0.1 point to 55.8. The Employment Index fell 2.0 points to 568. Of the 18 manufacturing industries surveyed, 13 reported growth for the month. October marks the 114th consecutive month that manufacturing activity increased in the U.S.
- The Institute for Supply Management’s Non-Manufacturing Index showed slower growth in the service sector in October. The Index declined by 1.3 points to 60.3. (Any reading greater than 50 shows increasing activity.) The Business Activity (production) Index dropped 2.7 points to 62.5. The New Orders Index edged down by 0.1 point. The Order Backlog Index fell by 5.0 points to 53.5. The Employment Index dropped 2.7 points 59.7. October is the 105th consecutive month of growth in the U.S. non-manufacturing sector. Of the 18 non-manufacturing industries surveyed in October, 17, including Accommodations & Foodservices, reported growth.
- The University Michigan’s Index of Consumer Sentiment remains high in the preliminary November reading. The Index stands at 98.3, virtually identical with October’s 98.6. The Current Economic Conditions Index was also little changed at 113.2 compared to 113.1 in October. And the same is true of the Index of Consumer Expectations, which stands at 88.7 vs. 89.3 in October. Thus, so far this year, consumer sentiment is running at a level that hasn’t been seen since the year of 2000.
Foodservice News This Week
- Moe’s Southwest Grill will build a new prototype restaurant near the company’s Atlanta headquarters. Called “The Oasis,” the new design will also serve as test kitchen for the chain.
- Foodservice operators look to hire senior citizens to offset today’s tough job market. With a shortage of teenagers, restaurants, including McDonald’s, are turning to older workers. The U.S. Bureau of Labor Statistics estimates between 2014 and 2024 the number of workers between 16 and 24 will fall by 1.4 percent while the number of working Americans aged 65 to 74 will increase 4.5 percent. And, it appears that the seniors will not just be mopping floors and flipping burgers but moving into management positions as well.
- IHOP’s fake name change seems to have worked. While there were a number of critics of the marketing plan to introduce the chain’s Ultimate Steakburger, the company is pleased with the results. For a short time after the name change to IHOb (International House Of Burgers), burger sales quadrupled. And since June, IHOP has had positive comparable store sales every day at dinner.
- Nouria Energy Corporation will upgrade and rebrand its +100 c-stores in the next 3 years. The newly designed stores will offer a wider menu selection including fresh, healthy foods and new age beverages.
- Philadelphia-based Honeygrow closed its three Chicago locations barely a year after entering the market. The fast-casual salad and stir fry chain said Chicago sales never really took off. An industry consultant said “Simply put, it takes a lot to standout as a fast-casual concept these days.”
- Corporate Stirrings: Papa Murphy’s is “exploring financial and strategic alternatives” that would include but not be limited to the sale of the company. Papa Murphy’s has hired a financial adviser to assist in the review. PGHC Holdings Inc., parent company of Papa Gino’s Pizzeria and D’Angelo Grilled Sandwiches, reached an agreement to sell the company to Wynnchurch Capital, a private equity firm. PGHC Holdings filed for protection under Chapter 11 of the U.S. Bankruptcy Code. Wynnchurch will provide additional liquidity during the bankruptcy process. The court must approve the proposed sale. The plan is to use the funds to modernize the firm’s 140 company-owned stores. Papa Gino’s broke into the news when they abruptly closed roughly 50 of the chain’s restaurants with no explanation. The Tilted Kilt chain is being sold for $10. The purchaser is the ARC Group, owner of Dick’s Wings & Grill. ARC will also assume $1.8 million and future payment obligations of $1.5 million. Taco Bueno has announced the chain, using Chapter 11 of the U.S. Bankruptcy Code, has been sold to Sun Holdings a multi concept operator with more than 800 locations in 8 states. Casey’s General Store has purchased the Tri-Par Oil Company and will convert Tri-Par’s seven convenience stores to Casey’s.
- Growth Chains: Starbucks plans to open 100 stores a year for the next 5 years in Japan. In-N-Out Burger will open 3 locations in Houston.
- Comparable Store Sales Reports: Chuy’s Holdings up 0.5 percent, Kona Grill down 14.1 percent, Papa John’s (North America down 9.8 percent, company owned down 13.2 percent and Franchised down 8.6 percent), Papa Murphy’s Holdings (domestic down 2.1 percent, company owned down 6.9 percent and franchised down 1.8 percent), Rave Restaurant Group (Pie Five Pizza down 1.8 percent and Pizza Inn up 2.3 percent), Red Robin Gourmet Hamburgers down 3.4 percent and Wendy’s down 0.2 percent.
For details and same-store sales of other chains, please click here for the Green Sheet.