The three largest foodservice distributors in the U.S. reported their financial results for the quarter and all three did well. A synopsis follows:
- Sysco Foodservice reported that in their last fiscal quarter sales for the U.S. operation increased 4.1 percent to $10.1 billion over the same period last year. Local case volume for the U.S. broadline operation increased 3.1 percent, of which 2.2 percent was organic. Total case volume within the U.S. broadline operation was up 2.1 percent, of which 1.3 percent was organic. (Organic sales exclude sales from recent acquisitions.) Gross profits for the corporation in the quarter increased 2.9 percent to $2.8 billion and earnings per share increased $0.22 to $0.85.
- US Foods reported that in their last fiscal quarter sales rose 3.6 percent to $6.0 billion. Total case volume increased 1.4 percent and independent restaurant case volume increased 5.5 percent. Gross profit increased 6.0 percent to $1,052 million. Earnings per share rose 3.2 percent to $0.32.
- The Performance Food Group Company reported that for its most recent fiscal quarter, sales increased 7.8 percent to $4.7 billion. Total case volume grew 5.3 percent. Gross profit rose 8.2 percent to $604.7 million. Earnings per share fell 3.1 percent to $0.31.
Healthy distributors are an indication of a healthy industry and since most foodservice operators deal with distributors, sales and particularly case sales, are sort of an index of operator sales as well. And all three distributors had increased case volume.
Now there is a caveat with this analysis. An argument could be made that the big three are gaining sales at the expense of smaller distributors. It is somewhat unlikely this could happen with all three of the big distributors quarter after quarter. It would seem more likely that there is some real growth in the business.
Economic News This Week
- Business productivity rose 3.6 percent in the first quarter this year according to the Bureau of Labor Statistics. This is the best improvement in worker efficiency since 2010. The report also noted that from a year earlier, productivity increased 2.4 percent. Economists and other experts believe that rising productivity is one of the key factors in an improving economy. Rising productivity allows management to increase workers’ pay without increasing prices. Thus, the economy can grow without driving inflation.
- Initial jobless claims fell by 2,000 to 228,000 for the week ending May 4. The 4-week moving average rose by 7,750 claims to 220,250. The job keeps chugging right along.
- The Federal Reserve reported U.S. consumers increased their borrowing by 4.25 percent during the first quarter this year on a seasonally adjusted annual basis. Revolving Credit, which is mostly credit card borrowing, increased at an annual rate of 1.5 percent. Non-revolving credit – auto loans, boat loans, student loans, etc. – rose 5.25 percent. In March, consumer credit increased 3.0 percent.
- The April Producer Price Index for final demand increased 0.2 percent. Without the volatile food and energy prices, the index rose 0.4 percent. The index for final demand goods was up 0.3 percent. Excluding food and energy prices, the index for final demand goods was flat for the month. The index for final demand services was up 1.0 percent in April. In the last 12 months the producer price index for final demand is up 2.2 percent.
- The Consumer Price Index increased 0.3 percent in April. Without food and energy prices, the index was up 0.1 percent. In the 12 months ending in April the CPI is up 2.0percent. (For consumer food prices in April, please see the Foodservice News This Week section below.)
Foodservice News This Week
- The Consumer Price Index for April reported food prices fell 0.1. Prices for food at home had a big decline of 0.5 percent but prices for food away from home jumped 0.3 percent. There remains a striking difference between food prices at home and away from home. In the 12 months ending in April prices for food at home are up 0.7 percent while prices for food away from home are up 3.1 percent. Some in foodservice believe operators are raising menu prices in an attempt to cover rapidly increasing labor costs.
- John JJohn Schnatter, founder and former chairman of Papa John’s Pizza, may be considering the sale of all or part of his Papa John’s stock according to an SEC document as reported by CNBC. After several controversial statements that impacted sales and the stock price, Schnatter left the company and he no longer has any position with the chain. Papa John’s stock price is up 34 percent this year. Schnatter reportedly owns 31 percent of the company’s outstanding shares.
- Steak N Shake closed dozens of restaurants nationwide. The chain announced a refranchising program with the stated goal of selling off most company-owned locations. The company is offering very generous terms, including just $10,000 up-front money and a guaranteed 50 percent of the profits. A chain spokesperson said the restaurants are being closed to prepare them for sale to franchisees, including the installation of new equipment.
- The Time Out Market food hall opened in Miami Beach. The operation offers 18 eateries, a demonstration kitchen and 3 bars. Time Out Markets originated in Portugal and the Miami Brach operation features some of the top culinary talent in southern Florida. Time Out Markets are planed for Boston, Chicago, New York and Montreal.
- Famous Dave’s introduces a fast-casual concept. Called Famous Dave’s BBQ Shack, the new design is just 3,000 square feet. Famous Dave’s CEO said the smaller, more flexible size may appeal to existing chain franchisees who do not have a BBQ brand.
- McDonald’s bought out one of their partners in India. The Indian company owned 169 units and had fought with McDonald’s for over a year in what The Wall Street Journal termed a “rogue Licensee.”
- Corporate Stirrings: Whataburger is exploring options. A report from Reuters says the 7th largest burger chain in the U.S. has hired Morgan Stanley to manage the process that includes possibly selling a minority stake in the company. Ruth’s Chris Steak House bought development rights in “prized territory” through its franchisees in the areas of Philadelphia, parts of New Jersey and parts of Long Island, N.Y. The corporation paid $19 million for the acquisition.
- Growth Chains: Captain D’s has signed a franchise agreement for 15 locations in Arkansas and the Carolinas. Dunkin’ plans to add 200 to 250 stores a year in the U.S. for the next 3 years, focusing on Kentucky, Michigan, Minnesota, Missouri, Nevada, North Carolina, Texas and Wisconsin. Ruth’s Chris Steak House plans on opening company-owned locations in Columbus; Oklahoma City; Sommerville, Mass., and Washington, D.C. Mojo Coffee is opening 2 stores in Chicago.
- Comparable Store Sales Reports: Bad Daddy Hamburgers up 1.3 percent, Del Frisco (total up 1.3 percent, Double Eagle down 0.4 percent, Barcelona up 3.7 percent, Bartaco up 6.7 percent and Del Frisco’s Grille up 0.2 percent), Del Taco (system down 0.1 percent, company operated down 0.7 percent and franchise up 0.4 percent), Fiesta Restaurant Group (Pollo Tropical down 2.6 percent and Taco Cabana down 0.5 percent), Good Times Burgers down 5.9 percent, Noodles & Company (system up 3.0 percent, company owned up 3.0 percent and franchised up 2.8 percent), One Group Hospitality up 8.6 percent, Papa John’s Pizza (North America down 6.9 percent, company owned down 9.0 percent and franchised down 6.1 percent), Potbelly Sandwich Shop down 4.7 percent, Rave Restaurant Group (Pie Five Pizza down 4.4 percent and Pizza Inn up 4.3 percent), Texas Roadhouse (company owned up 5.2 percent and franchised up 4.3 percent) and Wendy’s up 1.3 percent.
For details and same store sales of other chains, please click here for the most recent Green Sheet.