Financial reports from the three largest foodservice distributors highlight the complexities of today’s foodservice operation. The tight labor market continues. Western businesses may want to cease their Russian operations but doing so can be complicated. People returning to their offices roughly two years after the pandemic began to face higher menu prices for lunch. These stories and a whole lot more This Week in Foodservice.

The latest financial results from three of the largest broadline distributors highlight the complex nature of today’s foodservice operating environment. Sysco, The Performance Food Group and US Foods all took hits to their bottom lines due to increased costs such as fuel prices. But top-line results, namely dollar sales and case volume, all showed significant increases indicating operator’s sales are rising.

• Sysco reported domestic foodservice operations sales increased 45.1% for a total of $11.5 billion for its second fiscal quarter of 2022. Total case volume within the U.S. broadline operations rose 22.5%. Gross profit increased 37.2% to $2.1 billion.
• The Performance Food Group reported net sales increased 87.6% for a total of $12.8 billion while total case volume grew 40% for its second fiscal quarter of 2022. Gross profit improved 57.7% for a total of $1.3 billion.
• US Foodservice reported net sales increased by 24.5% for a total of $7.6 billion for the fourth quarter of its 2021 fiscal year. Total case volume increased 6.5% and independent case volume increased 13.0%. Gross profit increased 23.2% to $1.2 billion.

Economic News This Week

• Initial jobless claims totaled 187,000, a decline of 28,000 for the week ending March 19, per the U.S. Department of Labor. This is the lowest number of weekly initial jobless claims since the week of September 6, 1969. The 4-week moving average fell by 11,500 for a total of 211,750 claims.
• Anyone concerned by the tight labor market will find little comfort in the U.S. Bureau of Labor Statistics’ most recent JOLTS Report. The study shows there are nearly 5 million more job openings than unemployed people. The report confirms that the “Great Resignation” continues as the number of people quitting their jobs has remained greater than 4 million for 8 straight months. Moreover, it does not appear that the situation will improve anytime soon.
• New orders for manufactured durable goods declined 2.2% in February from January, per the U.S. Census Bureau. February shipments of manufactured durable goods were virtually unchanged from January.
• New residential construction fell in February. Privately-owned housing starts increased 6.8% from January and 22.3% over February of 2021. Building permits issued for privately owned housing dropped 1.9% from January but were up 7.7% from February 2021.
• Sales of new single-family homes slipped in February. Sales declined 2.0% from January and 6.2% from February 2021, per the U.S. Census Bureau. Sales declined 6.2% from February last year.
• The University of Michigan Index of Consumer Sentiment continued to decline in March. And this came after the study hit a historic low in February. The final March reading for the index dropped to 59.4 from 62.8 in February. The Current Conditions Index declined to 67.2 in March from 68.2 in February. The Index of Consumer Expectations fell to 54.3 in March from 59.4 in February. A university spokesperson said the main factor driving consumers’ loss of confidence is rising inflation.

Foodservice News This Week

• Rising gas prices will likely take a bite out of consumers' food budgets, including how they use restaurants. Chicago-based research firm Technomic polled consumers about how they might adjust their spending habits due to higher gas prices and restaurants topped the list. In fact, 49% of consumers say rising gas prices will affect their ability to use limited-service restaurants and 48% say it will impact their ability to use full-service restaurants.
• An unpleasant surprise awaits a lot of people returning to their offices after working from home since the start of the pandemic more than two years ago. The Wall Street Journal reports that some returnees insist the price of their lunches has doubled, leading them to experience sticker shock. Some operators admit to what they term as modest menu price increases. Potbelly Sandwich Shops, for example, says it has increased prices by 5.4%. Sweetgreen said the company raised prices by 6.0%. Operators have had to deal with sharp rises in both food and labor costs. But perception is reality and basic economic theory indicates that higher prices may cut volume.
• Multiconcept operator Darden reported a 41% sales increase for the company’s third fiscal quarter, which ended February 27. Unfortunately, this was less than stock analysts’ estimates. Moreover, Darden has reduced its sales and profit forecasts due to high costs and inflation. These results are indicative of the many challenges operators continue to face.
• Papa John’s Pizza has joined what is estimated at more than 400 Western-based companies withdrawing from Russia. The pizza chain will stop providing corporate direction and support. Like many other foreign-owned chains, Papa John’s Russian franchisees own their stores, which makes the situation all the more complicated. In fact, many franchise-based restaurant chains are facing difficulties shutting down Russian-based operations.
• Steakhouses were sizzling the past year. Many steakhouses did not simply survive. Instead, they chalked up considerable growth. For example, in 2021 Texas Roadhouse reported increased customer visits for 51 of 52 weeks. Capital Grille and Firebirds also reported increased traffic levels at various times, too.
• Panera Bread Company has entered the chicken sandwich fray. Working on the theory of better late than never, the fast-casual chain’s two new chicken sandwiches use a 4.25-ounce white meat chicken breast served with aioli on a brioche roll. The signature sandwich features parmesan crisps and emerald greens while the spicy sandwich has pickle chips and spicy buffalo sauce. The fast-casual chain pan sears and sous-vide cooks these new menu items. This approach is necessary in light of the fact that the chain does not have any fryers in its kitchens.
• Growth Chains: Freshii has signed franchise agreements for 42 restaurants since November. Sbarro plans to open more than 100 new company and franchise locations in 2022.
• Comparable Store Sales Reports: Darden Restaurant Group (consolidated up 38.1%, Longhorn Steakhouse up 31.6%, Olive Garden up 29.9%, Fine Dining up 85.8% and other businesses up 55.2%), FAT Brands up 5.6%, Fiesta Restaurant Group up 9.0% and Freshii. up 9.4%.

For comparable store sales of other chains, please click here for the latest Green Sheet.