CHEF Q2 2024: 10% New Customer Growth, H2 Organic Slows to 6-7%
- Robust New Customer and Case Growth: The executives highlighted approximately 10% new customer acquisition and strong case growth, which underline the company’s ability to capture market share and benefit from ongoing restaurant openings, especially in high-growth regions.
- Strategic Capacity Expansion: The planned doubling of a distribution facility—from 100,000 to 200,000 square feet—along with investments in international markets, supports future operational efficiencies and positions the company for sustained long‐term growth.
- Sales and Digital Investment for Enhanced Efficiency: Continued investments in the sales team and digital pricing tools are helping improve customer engagement and optimize product mix, suggesting an ongoing drive to improve margins and boost revenue growth.
- Organic Revenue Deceleration: Guidance and Q&A responses indicate that while the first-half organic growth was around 8%, the full-year expectations imply a slowdown to 6%-7% organic growth in the back half, suggesting potential revenue headwinds going forward.
- Margin and Cost Pressure Risks: Discussions on rising SG&A expenses, higher depreciation from facility investments, and an expanding adjusted expense ratio raise concerns that increased overhead and capital expenditures might pressure margins, especially as new investments take time to fully integrate.
- Customer Demand and Regional Uncertainties: Q&A remarks hint at mixed performance across customer segments—with possible softness in casual dining and regional variabilities—raising uncertainty about consistent demand and the sustainability of high-volume growth in all markets.
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Margin Outlook
Q: What is the margin leverage outlook?
A: Management expects a moderate deceleration in organic revenue growth in the back half, with improved operating leverage arriving mainly in Q4 as facility investments mature and competition from last year’s strong performance creates tougher comparisons. -
Case Growth
Q: What drives future case growth?
A: Management highlighted strong new customer acquisitions and double-digit placement growth as key drivers, with expectations that investment in a hybrid sales model will continue fueling case growth despite seasonal headwinds. -
Geographic Performance
Q: Are there regional sales disparities?
A: The team noted that while some regions show minor softness, overall performance remains balanced across domestic and international markets, with strong capacity investments helping offset any localized moderation. -
Facility Expansion
Q: What’s the status of CME facility expansion?
A: The CME facility is being doubled from about 100K to 200K square feet, with the project expected to complete by late Q3/Q4, promising growth benefits primarily in 2025 and beyond. -
Beef Pricing Impact
Q: How is beef pricing affecting margins?
A: Management explained that beef prices have moderated in recent months, and while customers are adjusting by opting for alternative cuts like hamburgers, pricing strategies and product mix have helped maintain stable margins. -
Expense Management
Q: What is the outlook on expense ratios?
A: Although adjusted operating expenses have risen slightly due to new facility investments, improvements are anticipated in Q4 as these costs get fully absorbed and efficiencies emerge. -
Inflation Trends
Q: What is the inflation trend this quarter?
A: Inflation averaged about 3%, staying within a normal range despite minor variations between product categories, with expectations that this trend will continue for the remainder of the year. -
Sales Team Investment
Q: How will the sales team evolve?
A: The company continues to invest in its sales force, growing the team by around 10% annually and leveraging digital tools to enhance consultative selling, which supports organic growth. -
New Restaurant Openings
Q: What is the pace of new openings?
A: There is robust activity in new restaurant openings, driven by evolving consumer habits and proactive market development, which bodes well for future sales growth.
Research analysts covering Chefs' Warehouse.