Performance Food Group Company - Earnings Call - Q3 2025
May 7, 2025
Transcript
Operator (participant)
Good day, and welcome to PFG's Fiscal Year Q3 2025 Earnings Conference call. If you would like to ask a question at the conclusion of the prepared remarks, please press the star key followed by the number one on your telephone keypad at any time. I would now like to turn the call over to Bill Marshall, Senior Vice President, Investor Relations for PFG. Please go ahead, sir.
Bill Marshall (SVP of Investor Relations)
Thank you, and good morning. We're here with George Holm, PFG CEO, Patrick Hatcher, PFG CFO, and Scott McPherson, PFG COO. We issued a press release this morning regarding our 2025 Fiscal Third Quarter results, which can be found in the Investor Relations section of our website at pfgc.com. During our call today, unless otherwise stated, we are comparing results to the results in the same period in Fiscal 2024. The results discussed on this call will include GAAP and non-GAAP results adjusted for certain items. The reconciliation of these non-GAAP measures to the corresponding GAAP measures can be found in the back of the earnings release. Our remarks on this call and in the earnings release contain forward-looking statements and projections of future results.
Please review the cautionary forward-looking statement section in today's earnings release and our SEC filings for various factors that could cause our actual results to differ materially from our forward-looking statements and projections. Now, I'd like to turn the call over to George.
George Holm (CEO)
Thanks, Bill. Good morning, everyone, and thank you for joining our call today. We have a good deal of material to cover this morning. I'm going to provide a high-level overview of the current market conditions and the strategic measures we have prioritized during the volatile time. Scott McPherson will then provide some color around our segment's performance during the third quarter, and Patrick will follow with our financial performance and guidance. The fiscal third quarter provided some challenges to our industry, mainly due to the difficult macroeconomic environment and adverse weather in January and February. We saw a decent recovery in March as the weather improved. Still, it appears that the underlying consumer performance remains muted. Interestingly, April results rebounded nicely and grew our sales and profit through the month.
The first week in May was stronger, yet producing a record sales week for foodservice, convenience, and total company. At PFG, we recognize that we cannot control the external macroeconomic environment. However, we do determine how we approach our markets, customers, associates, and suppliers. We do not know the exact path the economy will take; however, we are prepared for a range of scenarios. First, it is worth reminding you that our company has experienced several difficult periods through our history, including the 2008-2009 Great Recession and the pandemic in 2020. These experiences provide a playbook for the actions we can take in more difficult times to not only protect our business but align our operations so we will come out strong on the other side. This is exactly what we have done in the past and what we intend to do now.
Even in our soft February, our share gains were consistent with our usual performance. At our Investor Day on May 28th, you will hear our detailed strategy that looks to capture both top and bottom-line growth by being a diversified food-away-from-home distributor. We have a powerful story, and our momentum continues to build and get stronger. I'm excited for what the future holds for PFG and believe we are positioned to capture growth over the long term. Before turning it over to Scott, a few high-level comments on recent trends. As I mentioned at the beginning of my comments, the operating environment has been dynamic, to say the least. When we last reported earnings, I believe we had achieved 6% organic independent case growth for fiscal 2025.
Our run rate through January, along with easier year-over-year comparisons for the balance of the fiscal year, made that objective a reasonable target for our organization. However, the challenges we faced in February have made this target harder to reach. At the same time, as I mentioned earlier, we did see a rebound as we entered the fiscal fourth quarter with our organic independent restaurant case growth hitting 6% in April. Despite the market challenges, our broad-based structure provides stability to our bottom-line results during market challenges. We believe that gauging the health of the consumer is difficult at this time. However, I have the utmost confidence in our company's ability to execute at a high level, capture market share, and deliver revenue and profit results that drive shareholder value. With that, I'll turn it over to Scott McPherson for more details on our segment results in the quarter. Scott.
Scott McPherson (COO)
Thank you, George, and good morning, everyone. As George mentioned, it's been a dynamic year from a trend perspective. We had a strong start to fiscal Q1, and we're progressing well through November. However, in December and through much of the third quarter, we faced disruption, including calendar shifts, adverse weather conditions in both the current year and last year period comparison, and, of course, a dynamic macroeconomic and consumer backdrop. February posed challenges for our industry as we experienced significant weather disruptions and a consumer reacting to economic uncertainty. We've seen steady improvement through March, and in April, we finished the month with solid top and bottom-line results. While April's outcome is certainly encouraging and shows signs consumer trends are improving, we remain hyper-focused on what we can control. As George said, we have a broad and diverse business that has proven resilient in challenging operating environments.
For us, we remain laser-focused on our strategic priorities, starting with driving growth through our sales associates across all operating segments, continuing to leverage our proprietary brands and procurement synergies to expand gross margins, and leverage technology to drive efficiency throughout our supply chain. Now, let's take a deeper look into our three operating segments, starting with our foodservice business. Overall, foodservice growth was strong, benefiting from the addition of Cheney Brothers and Jose Santiago in the period. As George mentioned, organic independent case growth took a step back in February, growing 3.4% over the full third quarter. These results reflect steady market share gains with independent customer account growth increasing 3.9% year-over-year and lines growing at 4.3% as we continue to broaden our offerings to customers.
Performance brands sold to independent restaurants were 53% in the quarter, continuing our strong momentum and creating value for our customers with our company-owned brand portfolio. As we emphasized last quarter, these metrics show that while we cannot control the industry backdrop, we can arm our organization with the products and resources to provide our customer base a differentiated value proposition. Shifting to our chain restaurant business, we grew cases by 1.5% in the quarter, an excellent result given the current backdrop. The growth for our chain business was boosted by the onboarding of new business, which has been ongoing since the second quarter and continues into the fourth quarter. We expect these new business wins to boost fourth quarter results, providing incremental case growth and favorable profit profile versus our legacy chain business. Sales and margins were helped by pricing inflation in the quarter.
Current inflation rates in foodservice remain in a range that we consider very manageable. We are closely watching the broad commodities market and preparing for any increases driven by recent tariff considerations. We have not experienced any disruption from tariff actions to date. We continue to assess our exposure, which is currently not looked at as material. However, we are working closely with our suppliers and customers on contingency plans in the event inflation moves meaningfully higher. One inflation strategy we are focused on is positioning our high-quality company-owned brands as the best value proposition for our customers. Again, our Salesforce continues to win new accounts and gain share despite the difficult operating environment. We have steadily increased our Salesforce headcount through the year, attracting talent from across the foodservice landscape. Fiscal year to date, our foodservice Salesforce headcount increased by 250 associates, or 8% year-over-year.
This is roughly the pace of hiring we anticipate for the balance of the year, assuming we continue to see positive signs from the consumer. From a profit perspective, the foodservice segment continues to experience positive margin momentum driven by favorable mix shift, profitable chain business growth, and procurement synergies. These factors, in addition to the contributions of Cheney Brothers and Jose Santiago, drove 29% segment-adjusted EBITDA growth in the quarter, translating to 25 basis points of margin expansion. Turning to our convenience segment, the narrative for the convenience industry has remained consistent throughout the fiscal year. Despite a challenging volume backdrop, Cormor continues to win new business, take market share, and expand within existing customers through new offerings, particularly in foodservice. In the third quarter, the convenience segment volume grew by approximately 1%, well above the industry performance.
Through the full fiscal year, the convenience industry key categories, including snacks, candy, and health and beauty, have declined at a mid-single-digit rate, while most other key categories are down low single digits. Over the same time frame, Cormor has grown each of these areas by low single digits, except candy, which is flat. More recently, we remain cautiously optimistic about sales performance in April, which was notably better than recent periods. While too early to call it a trend, it is certainly a positive indicator. We are very excited about our pipeline of new business and convenience. We have found that our proposition as a consolidated convenience and foodservice distributor provides a competitive advantage and has been one of the key reasons that we continue to add new accounts at a fast pace. We will expand more on this topic at our Investor Day.
Finishing up our segment commentary with specialty, formerly known as our Vistar segment, total net sales for specialty were roughly flat in the third quarter on a low single-digit volume decline in the period. As expected, the third quarter was difficult for both theater and value channels due to a lack of content and competitive activity in the theater and consumer challenges for the value segment. On the positive side, we've seen stabilization in our vending and office coffee business, benefiting from the return-to-office trend. Our small parcel business has improved as we build upon our small but rapidly growing e-commerce business, something you will hear more about at our Investor Day. In conclusion, total PFG operating companies weathered a difficult backdrop. From a competitive positioning standpoint, we grew share across all three segments. We have continued to make progress in our mix and margins and are performing well operationally.
We feel good about our positioning to drive growth and deliver on our customer value proposition. I'll now turn the call over to Patrick, who will review our financial performance and outlook. Patrick?
Patrick Hatcher (CFO)
Thank you, Scott. This morning, I will review our financial results from our third quarter, provide some color on our financial position, and review our guidance for the balance of the year. Before jumping into our results for the quarter, we have two housekeeping items to address. First, as noted in our press release, our Vistar segment has been renamed as specialty to align our naming conventions across the three operating segments. We did not add or remove any operations from this segment in our financial reporting. It is simply a name change. As we always do, we will continue to assess our segment reporting structure to align with how we operate the business. On that front, also noted in our earnings press release, during the fiscal third quarter, we moved a few small items from corporate and all other into the foodservice segment.
These changes are immaterial to our results and are reflected in both the current and year-ago periods for comparability. As you've already heard from George and Scott, it is a dynamic time for our industry and the broad economic landscape. For this reason, we believe it is as important as ever to maintain a strong financial position. We believe that our balance sheet and cash flow not only insulate us from external shocks but also allow us to take advantage of market dislocation. As George described, supporting our associates, customers, and vendors through difficult times has allowed us to build upon the strong foundation of our business position. This was only possible because we had the financial resources to invest behind our organization.
In the first three quarters of our fiscal year, we have used our balance sheet and cash flow to finance growth initiatives, including two attractive acquisitions, Cheney Brothers and José Santiago, and over $300 million in capital projects. We believe that these initiatives put us in a strong position to thrive in a range of operating environments. Let's review our third quarter business results. PFG total net sales grew 10.5% in the quarter due to the addition of José Santiago and Cheney Brothers, as well as volume growth and net price realization. Our total independent restaurant cases grew 20% in the quarter, or 3.4% on an organic basis. Organic independent case growth was lower than we had hoped entering the quarter. However, as Scott detailed, the underlying metrics, including market share, new account growth, and lines per account, reflect strong execution.
While it is still early, our April results improved noticeably. Total company cost inflation was about 4.9% for the third quarter, an uptick from our prior period but steady year to date. Foodservice product cost inflation was 3.7% in the quarter, while specialty cost inflation was 2.8% year-over-year, and convenience increased 6.7%. We are closely watching input cost inflation, particularly with the implementation of tariffs, and have not yet seen an impact from tariffs. Importantly, we source the majority of our inventory from domestic suppliers. At the same time, we believe we are well positioned in the event of an acceleration in inflation and are maintaining close communication with customers and suppliers. We have a proven track record of managing inflation and expect to navigate the current market using a similar playbook.
Total company gross profit increased 16.2% in the fiscal third quarter, representing a gross profit per case increase of 39 cents in the quarter as compared to the prior year's period. Strong operating expense control and productivity efforts produced adjusted EBITDA growth for the foodservice, specialty, and convenience segments. In particular, our specialty segment, despite a difficult top-line environment, produced 6.9% adjusted EBITDA growth. In the third quarter of 2025, PFG reported net income of $58.3 million. Adjusted EBITDA increased 25.1% to $385.1 million. Diluted earnings per share in the fiscal third quarter was 37 cents, while adjusted diluted earnings per share was 79 cents. Our effective tax rate was 25.8% in the third quarter. We anticipate a higher tax rate in the fourth quarter, closer to our historical range.
Turning to our financial position and cash flow performance, in the first nine months of fiscal 2025, PFG generated $827.1 million of operating cash flow. After $332.7 million of capital expenditures, PFG delivered free cash flow of about $494 million. Diligent working capital management and our operating results contributed to the strong cash flow result through the fiscal year. As we described last quarter, our capital spending levels for our legacy business have remained fairly steady over the first three quarters of the fiscal year at a run rate of approximately $100 million per quarter. The increase we experienced in the third quarter was largely related to the addition of capital expense to support Cheney Brothers and Jose Santiago businesses, as expected. We anticipate an increase to our capital expenditures in the fourth quarter, which is typical for our company.
While we remain committed to capital investment in capacity and fleet to support our growth, we are closely following the external landscape and will take appropriate steps to adjust our spending if necessary. At this time, however, we feel good about the level of investment we are undertaking. During the third quarter, we began to pay down debt through reduction in the outstanding balance of our ABL facility, in line with our stated near-term objective of reducing debt. During the quarter, we also repurchased about 138,000 shares of our stock at an average cost of $76.82 per share for a total of $10.6 million. While we are prioritizing debt reduction, we also take various marketplace conditions into account when determining our capital allocation strategy. This means that we have and expect to continue to opportunistically repurchase our shares during market downturns.
This is supported by our financial position and cash flow. The M&A pipeline is robust, and we continue to evaluate strategic M&A. As always, we will apply our high standards and due diligence process in the evaluation of these acquisition opportunities. Turning to our guidance for fiscal 2025, today we are narrowing our sales and adjusted EBITDA guidance, primarily flowing through the result from the third quarter. We now expect net sales to be in a $63 billion-$63.5 billion range, adjusting the top end of the range by $500 million and leaving the bottom end unchanged. Our adjusted EBITDA guidance for the full year is now a range of $1.725 billion-$1.75 billion, narrowing the upper end by $50 million.
As we enter the final months of the fiscal year, we feel confident in these targets, and each of these ranges suggests full year 2025 results in line or above the three-year plan we set at our Investor Day in 2022. In a few weeks, we will provide more color around our successful execution of the long-term plan and discuss our vision for the next three years. To summarize, PFG successfully navigated a difficult environment in the third quarter and is prepared to maintain strong growth in a range of economic scenarios. Our financial position is strong, and we have a balanced capital allocation plan to generate long-term shareholder returns. We're excited about what the future holds and our investing capital to sustain our growth. Thank you for your time today.
We appreciate your interest in Performance Food Group, and with that, George, Scott, and I would be happy to take your questions.
Operator (participant)
Thank you. At this time, if you would like to ask a question, please press the star and one on your telephone keypad. You may remove yourself from the queue at any time by pressing star two. Once again, that is star and one to ask a question. Your first question comes from the line of Mark Carden with UBS. Please go ahead. Your line is open.
Matthew Rothway (Analyst)
Hi, this is Matthew Rothway. I'm from Mark Carden. Thanks for taking our question. Glad to hear that trends are improving a little bit of late, although it sounds like maybe still a little weak in the independent channel. I was curious if you could help us understand a little bit more what you're seeing with consumer demand and behavior. Are you seeing any trade down or trade out, any shifts in cuisine types from consumers? Any additional color would be great.
Scott McPherson (COO)
Yeah, I'll take that. This is Scott. First off, talking about just independent demand and our independent case volume, as we talked about, if you think about the quarter, we had the beginning of the quarter was pretty strong. We were mid-single digit in January. Obviously, February was the big setback for everybody in the quarter. March kind of back to that mid-single digit range. As George mentioned, we were up to 6% in April. I feel really good about how that's progressing. When I think about any trade down, we really did not see, obviously on a same-store basis, restaurants were pretty flat. We performed well from a penetration and growing account standpoint, which really is what drove our independent volume. I'd say the last piece is from a segment standpoint.
Our Mexican segment did really well, and also our convenience segment did really well from a foodservice standpoint.
George Holm (CEO)
I know we've been repeating ourselves some, but I think it's important to stress that February was the month that really changed our quarter. When we track our business, we track it closely by what our new business is and our lost business and our penetration. Virtually all of the difference in February was penetration. It wasn't just in our independent. It was in the chain business. It was in convenience. It just showed that people weren't out there. We didn't see it in our specialty business or our Vistar business. A lot of that is kind of logical. People are at work when these weather issues happened. If they were able to get to work, they didn't go out to lunch. They hit the micro-market. They hit the vending. It was actually a positive for that part of our business.
It was all about February.
Matthew Rothway (Analyst)
Great. As a follow-up question, I was curious to get your outlook on food inflation as we go through the year here. It sounds like maybe a little early for any tariff-related inflation. Would you see any opportunities for pre-buys if you do start to see inflation, particularly with your specialty and convenience segments?
Patrick Hatcher (CFO)
Yeah, Matthew, this is Patrick. I'll start with Erin, and maybe Scott wants to add a little more detail. When it comes to how we're looking at inflation, again, as we reported, very much in line for Q3, very similar to what we saw in Q2 with a little bit of an uptick in foodservice. Vistar and convenience especially staying pretty close to where they've been. As we look into Q4, we're at least modeling that that will be very similar, that foodservice will be in that mid-single digits, and Vistar will be very similar to what they were in Q3, and convenience also around 7%. It's too early to really understand what's going on with tariffs, to be honest with you. As far as the opportunity to pre-buy, we'll just have to look at that.
That's really going to be as more information becomes available.
Scott McPherson (COO)
Yeah, the only tag on to that I would have is when we think about tariffs, I would say that first off, our biggest concern with tariffs is just the macro environment and consumer share wallet. If automotive or some of those industries have big impacts, how does that affect the food away from home space? When it comes to cost of goods and our actual cost of goods, very minor impact. We import less than 10% of our goods. Especially with Mexico and Canada with the USMCA, it sounds like there is not going to be much of a tariff impact there. That really minimizes what we think the impact will be to us domestically.
Matthew Rothway (Analyst)
Great. Thank you.
Operator (participant)
Thank you. Your next question comes from the line of Edward Kelly with Wells Fargo. Please go ahead, the line is open.
Edward Kelly (Managing Director of Equity Research)
Yeah, hi. Good morning. And thanks for all the color. I wanted to follow up on organic independent case growth trends. I mean, it sounds like a pretty robust recovery in April, especially off probably what was a pretty rough February, and maybe even a better end of April, sort of like early May. Just curious, George, to the extent that you think that that's a good run rate for the business currently, are there things that we need to consider maybe around comparisons there? And then given that the Q4 guidance at the midpoint did come down by $10 million, I guess, despite the strong start. Is that just incremental conservatism on your part, or is there anything else to consider there?
George Holm (CEO)
We're going to be real cautious around the macro environment. What we are seeing now is a real positive, but there's been some calendar differences. These are two really good weeks for us all the time, the week before Cinco de Mayo and Mother's Day week. This week, so far, we are having a really strong week. Last week was our first week that we had ever done exceeded $1.3 billion in sales. Like I said, this week is better. I don't know that we can take a victory lap around it yet. We'll just have to see what comes up in the month of June. I look at what is a good run rate. If you go back and you look at this quarter, we just ended our fiscal third quarter.
If the market was down about 3%, which seems to be what people think, we would have been well above our 6% target, I guess. I do not think that the market is necessarily any stronger today than it was just a matter of a few weeks ago because we do not see it in our national accounts. We have seen a nice uptick in our independent, but the national account looks a lot like April. The other thing I would like to mention as far as total case with performance, we are very, very large in the casual dining area. We have one that is doing exceptional right now. We have another one that is doing okay. For the most part, they are really struggling. We have been able to overcome that with other business and obviously with some growth from independent.
From a top-line standpoint, we feel real good going into next fiscal year. In our convenience business, which I'll have Scott comment, we have had some real good wins there, and we are expecting to see much greater growth next fiscal year than we're seeing this fiscal year. Now, I'll turn it over to Scott for a minute.
Scott McPherson (COO)
Yeah, just to reflect a little more on the convenience piece that George mentioned. First off, as I said in the prepared remarks, the macro there has been tough. A lot of the center store categories have been down mid-single digits, and our convenience segment has outperformed that consistently quarter over quarter. We have talked a lot about pipeline opportunities and the selling cycle and convenience being a little slower, but have felt really good about our positioning. Over the last few weeks, we have had three or four big wins. Those are wins that will roll on over the course of the next, well, through the balance of the calendar year. As George said, I think convenience is really well positioned. We will see some more growth out of them into next year. Operationally, they have done a great job and margin-wise as well.
Edward Kelly (Managing Director of Equity Research)
Maybe just a follow-up as it pertains to the middle part of the P&L. Gross profit dollar growth, despite weaker case volumes, I think better than most for modeling. I mean, I don't know about you guys. It seems like SG&A was maybe a little bit higher. I'm just curious how SG&A played out relative to your expectations. Was there anything within that that came in unexpectedly higher? Is there anything there that maybe translates into Q4?
George Holm (CEO)
February was our difficult sales month. It was also a difficult expense month. We shipped a lot of product out that turned around and came back. That impacts your payroll, but it impacts your shrink. It's just really difficult to go through a period like that. That is behind us. The other thing we've continued to do, Scott mentioned that we have 8% more salespeople. We've just made the decision that we're looking at that the way we always look at it. Even though it's a slow market, for us to back off from continuing to move forward there, it's just going to hurt us in the future. We're living with the if you look at just from a percentage standpoint, when you're growing your people 8% and you're growing your cases 3.4, looking backwards, that's going to cost you some money.
We're willing to spend that money. We think we're making the right decision there.
Edward Kelly (Managing Director of Equity Research)
Makes sense. Thank you.
Operator (participant)
Thank you. Your next question comes from the line of Alex Slagel with Jefferies. Please go ahead. Your line is open.
Alex Slagle (SVP)
All right. Thanks. Morning. I think you talked about convenience trends in April, underlying trends maybe improving. Maybe you can kind of clarify that and whether that had to do with fuel costs moderating, if that's starting to be any kind of tailwind. I know it's been challenging. On convenience, I know the 4Q lap is really tough. Maybe some color on how we should think about that dynamic as we go through modeling and trying to see whether that can grow year over year.
George Holm (CEO)
Yeah, I would not say, Alex, that we have seen any improvement in the industry itself. We just have a little better penetration, and we have got some nice new business coming on. That is what gives us the confidence. We are certainly hopeful that the industry itself is going to improve. That is not something that we have seen at this point.
Patrick Hatcher (CFO)
Yeah. Alex, I'll just add on the Q4 convenience, thanks for pointing that out. I think if they didn't have that lap from prior year and have to comp, we'd be seeing close to double-digit or double-digit EBITDA growth in the fourth quarter. We're still very happy with the trends that convenience has been able to deliver on the bottom lines. That'll continue into the fourth quarter except for that comp that you brought up.
Alex Slagle (SVP)
Okay. With the restaurants, were there any changes between kind of underlying volume dynamics and the chains versus independents worth calling out? I think you touched on it. I didn't catch that.
George Holm (CEO)
We are certainly seeing once again, this is just the last few weeks, but we are seeing the independent doing better. I do not know that that reflects on the industry or reflects on our customer base. Unfortunately, we have not seen any real improvement in casual dining. We do have some QSR business that has been doing fairly well. Any comments beyond that, Scott? I think that probably covers it.
Scott McPherson (COO)
Yeah, I think that covers it.
Alex Slagle (SVP)
Yeah. Thanks for that.
Operator (participant)
Thank you. Your next question comes from the line of John Heinbockel with Guggenheim. Please go ahead. The line is open.
John Heinbockel (Managing Director)
Hey, guys. I wanted to start with cases per account or cases per line, rather. Right? So if lines were up 4% or so, and I think you said comp locations flat. Is that right that cases per line down 4%, drop size kind of flattish? Are we seeing an inflection in drop size? Right? I think you were down, but now it looks like April and go forward, you might actually be up.
George Holm (CEO)
It's another one of those. Yeah, it's another one of those, John, that it's February. In the month of February, we didn't see that much of a decline in lines, but we saw a big decline in cases per order.
John Heinbockel (Managing Director)
Okay. I mean, point being, have we seen now a sort of an inflection in drop size? Right? Because if drop size can now increase, right, because lines per account are up, whatever, three or four cases per line are flat or down slightly, are we now seeing an inflection there in drop size?
Scott McPherson (COO)
Yeah, John. As you pointed out, clearly, our lines are up per account, but our drop sizes remain relatively flat. When you think about our growth, almost 100% of our independent growth is driven by new accounts and driven by lines per order. I mean, that's really what's getting us there. It's really the new account growth so that the stops aren't getting bigger right now.
John Heinbockel (Managing Director)
One last thing for Scott, right? When you think about the opportunity on the convenience side, I am curious, what percent of your base has now adopted all of your or most of your prepared food programs? Right? Pizza, chicken, etc. And then do you think you are getting a mid to high single-digit lift on those accounts that do adopt those programs and prepared food?
Scott McPherson (COO)
Yeah, John, the way I'd answer that is I'd say we're still in the second or third inning as far as foodservice goes. The number of concepts that we place is growing significantly. Every month, every quarter, we add a lot of turnkey concepts into convenience. When you think about 50,000 stores that we have, we've got a long runway ahead of us. I think we're getting better at it. Our convenience segment's doing really well there. To your point, in foodservice, whether it be coming out of convenience or whether it be coming from PFS into convenience, we're growing in that mid-single to low double-digit range on a pretty consistent basis.
John Heinbockel (Managing Director)
Thank you.
Operator (participant)
Thank you. Your next question comes from the line of Kelly Bania with BMO Capital. Please go ahead, the line is open.
Kelly Bania (Managing Director of Equity Research)
Hi, good morning. Thanks for taking our questions. George, was just wondering how you are seeing smaller competitors and other competitors react to this environment. Obviously, February was very tough, but it feels like it could remain volatile here. Just are you seeing others react more with respect to costs and service levels? Is that creating any areas where you can lean into from a market share perspective?
George Holm (CEO)
I would say that the market is more competitive than it has been really in quite a while, probably going back to the Great Recession. I think that's normal when you have volume harder to get. I think things are going to get more competitive. As far as smaller competitors, if you consider the information that's made as far as how the restaurant part of the industry is doing versus what we see on our Circana report, I think it shows that the large distributors are continuing to get a bigger market share than the smaller ones would be getting.
Kelly Bania (Managing Director of Equity Research)
I guess on that note, just on competition, are you seeing any change in competition for the sales force in terms of the talent you're able to hire, the cost of hiring that talent, any color on that front?
George Holm (CEO)
We're not seeing any change there at all. We have a great pipeline of salespeople that are available that have experience. That is why we're part of why we're continuing to grow our sales force at the rate we're growing it.
Kelly Bania (Managing Director of Equity Research)
That's very helpful. Last one for me, I know you have the analyst day coming up in a couple of weeks here, but lots of questions on what that guidance could look like. Just curious if you wanted to give us any bit of a teaser for how to think about your plans for the next several years.
Patrick Hatcher (CFO)
Hey, Kelly, this is Patrick. I'll just jump in here. We're very excited to see all of you at Investor Day, and we'll be really happy to share the guidance at that time.
George Holm (CEO)
We do not tease.
Kelly Bania (Managing Director of Equity Research)
Thank you.
Operator (participant)
Thank you. Your next question comes from the line of Brian Harper with Morgan Stanley. Please go ahead. The line is open.
Brian Harper (Analyst)
Yeah, thanks. Good morning, guys. George, that comment about competition, I mean, is that, is it sort of like changes in price at the margin? Is that what you're referring to? Or how does that manifest itself?
George Holm (CEO)
I think that we're in an industry that's pretty rational, but we all want to grow. I think that when growth is hard to come by, people get more competitive. We're certainly looking closely at our pricing, looking closely at our cost structure all the time. I would say that the prepaying or upfront monies are certainly something that has become more commonplace in our industry. Other than that, I really don't see changes.
Brian Harper (Analyst)
Okay. Thanks. With Vistar, I guess, specialty now, did you sort of expect it to be a bit slower quarter there? I guess, and also just as I think about kind of the future growth rate, would Q4 look similar? Have you seen kind of recovery in that business too? I know the comparison's a little bit different, but could you talk about your expectations there?
Scott McPherson (COO)
Sure. I'll take that. This is Scott. We called out last quarter in our remarks that we knew we were going to have a pressured quarter for Vistar, particularly in the theater space. Q3 is traditionally not a great theater quarter. Also, we had some pressure in the value channel as well, which we expected. As we've moved into March and into April, similar to the other segments, theaters had great content. Theater looks like Q4 is going to be really strong content as well. Beyond theater, Vistar is a very diverse business. We feel really good about the pipeline we have with our e-commerce platform. Also with return to work, we're starting to see some real signs there in our office coffee and our vending. We are really optimistic about Vistar. They had a couple of tough quarters to start the year.
Obviously, had a nice EBITDA quarter this quarter. We will start to see some growth out of that segment. Really, really feel good about where they're headed.
Brian Harper (Analyst)
Thanks.
Operator (participant)
Thank you. Your next question comes from the line of Jake Bartlett with William Blair. Please go ahead, the line is open.
Jake Bartlett (Analyst)
Great. Thanks for taking the question. I'm sorry to go back to some of the near-term dynamics, but I just want to make sure I understood what's happening in April. One question is whether spring break shift along with Easter, seems like that could have had a pretty big impact. I just want to make sure that that's not what's partially driving the better April. Also, just looking back at last year, I believe you started the quarter with a fairly solid April. The question is what your compares are like in the next couple of months. I have another question.
George Holm (CEO)
That is part of why we are being cautious. As far as the change in Easter and Easter being later, we are past. Easter for both years is gone. The week after Easter is always a light week for us. Our April, although a good month, was very choppy. When we did have we were up against the end of Easter. Those were tough comparisons. I do not think the shift mattered, really. It just all washed out, and I do not think it mattered. We are in a little different time here too. I mean, Cinco de Mayo is always a great week for us, and Mother's Day is always close to Cinco de Mayo.
We had a real good week last week, and we did not expect this week to start out as big as it did, but I think a lot of people did not bring their product in for Cinco de Mayo until Monday. Those are just all the reasons I think you are bringing up is why we are cautious right now. There has been all year, really, there have been some calendar challenges. Even a small thing, having Valentine's Day on the weekend, had a big impact on our sales because you did not get that extra really good night during that week.
Jake Bartlett (Analyst)
Great. That's helpful. My next question is about your margin expectations in the fourth quarter. If I'm doing the math right, it looks like you're expecting fairly minimal EBITDA margin expansion in the fourth quarter. The question is whether that's just due to the compare, the really strong expansion you had last fourth quarter. Also, if you can talk to some of your productivity measures, how you feel like you're doing in terms of your productivity and efficiencies, and just anything we should think about in terms of what you're proactively doing to protect your margins.
Scott McPherson (COO)
Yeah. First off, the biggest call I'd have on EBITDA margins in the quarter, I think we've talked a little bit about convenience. They had a pretty sizable gain in Q4 of last year. That's one call out. When I think about margins overall, really pleased with how all three segments are operating from a margin standpoint. It really comes down to a few things. One of those is mix across all three segments. I think we've done a great job with mix in our growing independent cases. We've done a really nice job with chain margins in foodservice as well. That's really just as we've looked at that portfolio of customers, we've got some great customers that we've onboarded. Feel really good about how we're progressing margin-wise in foodservice. Convenience has done well.
A lot of that is just our growth in key categories. I think about foodservice and some of those categories that drive higher margins. Similarly, in Vistar as well, in our specialty segment, some of the segments that are growing tend to be our higher margin segments. The last thing I'll call out around margins is just procurement strategies. We talked a little bit about it last quarter. For the last year, we've been bringing our three segments together, having them work together on common vendors. We've now got Cheney Brothers and Jose Santiago. Obviously, you're able to look at the deals that they've negotiated as standalone and work through some of those opportunities. We feel like your procurement opportunity is also a way to continue to keep our margins strong.
Jake Bartlett (Analyst)
Thank you.
Operator (participant)
Thank you. Your next question comes from the line of Andrew Wolf with CL King. Please go ahead. Your line is open.
Andrew Wolf (SVP)
Thanks. Good morning. I also wanted to circle back with a follow-up on the implied Q4 guide. I understand to be conservative in this environment, but it does back into a slowing if you take out the acquisitions or actually kind of a maintenance of the Q3 organic EBITDA growth rate. There are different explanations. One is conservative. When you think about conservatism, are you thinking more in terms of can you stay at the 6% case growth organically? Or is it more, I think you alluded to George, of being very competitive now and maybe some impact in gross profit per case if it were to come in somewhere in the middle of your range instead of what I think people expect might be a little better?
George Holm (CEO)
Our guidance is a reflection of how our people in the field are looking at things. They tend to be conservative. We want them to be conservative. The competitive nature of the industry may have something to do with that. They're the ones that are on the front line dealing with that every day. I think we feel with our guidance, we would like to think that we'll be able to stay at at least the 6% independent growth. As I mentioned earlier, and Scott's mentioned too, we've got to be cautious. We really don't, at this point, know what June is going to be. Right now, we feel good.
Andrew Wolf (SVP)
Okay.
Patrick Hatcher (CFO)
Andrew, I was just going to add real quick. Obviously, we take in a variety of scenarios, both economic and consumer and backdrop, as George has said. We feel we are being prudent. Like I had made in my comments, we feel that this range is appropriate. Based on what we have seen to date, we feel good about the guidance that we have given.
Andrew Wolf (SVP)
Got it. Okay. I thought that was what you were saying. I just wanted to probe it a bit. Scott, on convenience, going back to when Cormor was public, a lot of the attributes to win customers was on fresh, consolidated delivery, making their life easier from an operational perspective. Is that still the case? Or is it now you got sort of a third thing here with better capabilities in foodservice? Could you just sort of give us, I know you'll probably touch on this quite a little more at the Investor Day, but a little bit of what's driving the new customer wins there in the convenience side?
Scott McPherson (COO)
No, it's a great question, Andy. When I think about the evolution of convenience stores, you're right. I know you used to cover the space. Fresh was the calling card 10 years ago. As Fresh evolved, Fresh really morphed into a broader offering outside of center stores. That's really food away from home. I think the consumer expectation got a lot higher. It wasn't packaged sandwiches and burritos anymore. It became high-quality, restaurant-quality food in convenience stores. I think that's the real driver behind our message to the independent and the chain. I think that it's gone a long way for us to pick up new accounts and gain share.
Andrew Wolf (SVP)
Okay. Thank you.
Operator (participant)
Thank you. Your next question comes from the line of Jeffrey Bernstein with Barclays. Please go ahead. The line is open.
Jeffrey Bernstein (Equity Research Analyst)
Great. Thank you very much. My first question is just on the next three-year outlook. I recognize that's likely to come later this month. George, just wondering conceptually, how do you get your arms around forecasting the top and bottom line in the next few years when you're battling through the current very cautious dynamic environment? Obviously, visibility is limited. You would think there's lots of opportunity for market share. Do you change your thought process in terms of how you guide for the next few years when you're in an environment like this? Are you able to see through that and kind of see what the underlying opportunity is for the business? I had one follow-up.
George Holm (CEO)
I think the current environment always affects you, right? I mean, a lot of what we do as far as our projections come from our people in the field. Like I said a few minutes ago, they're the ones that are in the heat of the battle every day. I will also tell you that they're very confident. I think February shook everybody. That's natural. You're trying to figure out how much of it is the consumer, how much of it is the weather, how much of it is just all of the change in rhetoric around tariffs and where we're headed. I think that we're looking at it the same way we did three years ago. We're trying to gauge another thing that's difficult to gauge is some of these smaller acquisitions that you can get that can help things.
We have a nice M&A pipeline right now, not the size of what we've done in the past at this point, but we have a nice group there. We're just putting all those things together. In just a few weeks, right? Just a few weeks, we'll have a real good presentation for everybody.
Scott McPherson (COO)
Yeah. And Jeffrey, I'll just add a couple of other comments. I mean, as we close out this three-year guidance, as I mentioned, we're well within our sales range, and we're exceeding the EBITDA range that we gave three years ago. What you guys are all going to hear in a few weeks is we're very consistent in our approach and our strategies. You'll hear some new things. We feel like the last three years have executed very well. And we've hit these numbers. We'll provide you some new numbers and how we're going to execute behind those. Again, we're looking very forward to seeing all of you in New York in a few weeks.
Jeffrey Bernstein (Equity Research Analyst)
No, we appreciate you coming to New York. My follow-up is just on that M&A George Lee just mentioned. Obviously, it's a difficult, choppy environment for you. You would think it's way more challenged for smaller, midsize foodservice distribution peers. So I'm just wondering if you could talk about the opportunity. I think you mentioned a robust pipeline. And I think in your prepared remarks, you mentioned taking advantage of market dislocation. I wasn't sure if that's what you were referring to. But any thoughts in terms of how the current environment helps or hurts the opportunity for you to be more aggressive with M&A versus less? Thank you.
George Holm (CEO)
Obviously, we've got some focus on paying down debt right now, even though for us, historically, the debt levels we're at today, if you take into account when we were private and when we were public, we're actually at kind of a low level of debt. We tend to be maybe a little fearless about the amount of debt we have. Paying down debt is important to us. We feel that we can do some fairly sizable acquisitions and not have the concern around the debt. If you look at since the purchase of Jose Santiago and of Cheney, had we not bought Cheney, which would have been a terrible thing, but had we not, we would have pretty much paid down the debt from Jose Santiago. We paid down debt quickly. We're going to continue to be very opportunistic.
We have acquisitions available to us today that were in good shape from a negotiation standpoint. They are not real significant, but they will help us from a growth standpoint. A couple of them we will probably have in our three-year plan, but probably only a couple. That is a long answer, but that is just kind of where we sit today.
Jeffrey Bernstein (Equity Research Analyst)
Understood. Nothing that you see of significant size. These are more good opportunities, but not significant to the business.
George Holm (CEO)
That's correct.
Jeffrey Bernstein (Equity Research Analyst)
Thank you.
Operator (participant)
Thank you. Your next question comes from the line of Peter Sala with BTIG. Please go ahead, the line is open.
Peter Sala (Analyst)
Great. Thanks for taking the question. Just two questions. I guess the first one is, are you seeing any changes in independent restaurant formation given tariffs and rising construction costs? We've heard some concern about this. Just curious what you guys are seeing out in the field.
Scott McPherson (COO)
No, I think it's a little too early to tell. I mean, the tariff activity really has just started over the last couple of months. We haven't had any customers that have hit the pause button that I'm aware of. I think the independent pipeline and the independent restaurant is still very healthy and vibrant. Obviously, if we look back over the last four months with the exception of February, it's been pretty strong growth for us. Obviously, their same-store sales are a little bit pressured right now. That's a vibrant industry. I think you'll continue to see new restaurants pop up on a regular basis.
Peter Sala (Analyst)
Great. Just curious if you guys can comment a little bit on performance or sales performance by geography. We've heard some thoughts that some of the areas more heavily related to tourism have seen a bigger decline. Have you guys seen the same? Is it more of a broad-based and more confined to that February timeframe? Thanks.
George Holm (CEO)
Yeah. I would say that the Northeast, if you take out when the bad weather times are, is surprisingly doing the best as far as increases go. Florida's been a little bit challenged. Many closures there, not just hurricane-related, but closures in general. Restaurants that just haven't been successful. I'd say most of the rest of the country is all fairly similar, but slight declines, but similar.
Operator (participant)
Thank you. There are no further questions at this time. I will now turn the program back to Bill Marshall for closing remarks.
Bill Marshall (SVP of Investor Relations)
Thank you for joining our call today. If you have any follow-up questions, please contact us at Investor Relations.
Operator (participant)
Thank you. This does conclude today's presentation. Thank you for your participation. You may disconnect at any time.