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PF

Performance Food Group Co (PFGC)·Q4 2022 Earnings Summary

Executive Summary

  • Q4 2022 delivered strong top-line and margin expansion: net sales $14.6B (+56.8% YoY), gross profit $1.5B (+40% YoY), net income $76.0M (+142% YoY), Adjusted EBITDA $357.1M (+69% YoY), Diluted EPS $0.49 (+113% YoY), and Adjusted Diluted EPS $1.07 (+91% YoY) .
  • Sequentially, results benefitted from improving labor dynamics and supply-chain fill rates, with gross profit per case up ~$1.03 and temporary contract labor costs down $21M YoY .
  • FY2023 guidance initiated: net sales $56–$58B and Adjusted EBITDA $1.15–$1.25B; Q1 FY23 AEBITDA $280–$300M; Q2 FY23 AEBITDA $245–$265M. Quarterly cadence reflects timing of inventory gains (tobacco/candy) and modestly decelerating inflation .
  • Catalyst: management highlighted strongest inbound fill rates in over a year, labor improving, continued mix shift to independents and Performance Brands, plus visibility on inventory gains in Q1 FY23—supporting near-term margin confidence and estimate revisions .

What Went Well and What Went Wrong

What Went Well

  • Independent restaurant momentum and share gains across all 15 largest categories; organic independent cases +16% vs Q4 2019, and sequential share gains improved each month in Q4 .
  • Mix and margin: gross profit per case +$1.03 YoY; contract labor tailwind with temporary/contract costs down $21M YoY as staffing improved; higher inbound fill rates at Performance Foodservice reached the best level in over a year .
  • Vistar & Convenience strength: theaters rebounded; vending/micro-markets and value stores resilient; convenience food/foodservice and related products +17.6% while nicotine -3.5%, driving positive mix shift .

Management quotes:

  • “We posted net sales at the top end of our guidance range and higher than anticipated margins…fill rates…reach[ed] the highest level in over a year.”
  • “Gross profit per case was up about $1.03…temporary contract labor costs decreased $21 million…reflects improvement in the external labor market.”
  • “Our theater business saw [a] strong fourth quarter as box office numbers rebounded significantly.”

What Went Wrong

  • Chain restaurant softness and inflation headwinds: high-teens foodservice inflation; some casual dining weakness versus lower-ticket formats; consumer fuel costs pressured convenience traffic (though tickets were higher) .
  • Supply chain still uneven outside foodservice: inbound fill rates remain challenged in packaged goods-heavy Vistar/Convenience due to multi-ingredient constraints .
  • Q4 organic independent cases were modest (+4.7% ex-53rd week), reflecting tough comps with prior year stimulus and reopening surge; management flagged easier comparisons later in FY23 .

Financial Results

MetricQ4 2021Q3 2022Q4 2022YoY % (Q4 2022 vs Q4 2021)
Net Sales ($USD Billions)—$13.1 $14.6 +56.8%
Gross Profit ($USD Billions)——$1.5 +40%
Net Income ($USD Millions)—$23.4 $76.0 +142%
Adjusted EBITDA ($USD Millions)—$237.9 $357.1 +69%
Diluted EPS ($USD)—$0.15 $0.49 +113%
Adjusted Diluted EPS ($USD)—$0.51 $1.07 +91%

Notes:

  • Sequential change (Q4 vs Q3): Net sales +11.5%; Adj. EBITDA +50%; Diluted EPS +$0.34; Adjusted EPS +$0.56 (calculated from cited values).
  • Case volume: total +17% YoY; organic independent +4.7% YoY excluding 53rd week impact .

Segment highlights and KPIs:

Segment/KPIQ2 2022Q3 2022Q4 2022
Weighted cost inflation (Total Co.)~12.5% 13.6% ~in line with Q3
Foodservice cost inflationDouble-digit incl. seafood/meat/poultry/eggs ~20% High-teens
Gross profit per case change+$0.66 +~$1.00 +$1.03
Temporary/contract labor YoY+$34M (increase) +$16M (increase) −$21M (decrease)
Convenience: food/foodservice sales YoY—+21.5% (Q3) +17.6% (Q4)
Convenience: nicotine sales YoY—−1.9% (Q3) −3.5% (Q4)
Vistar: theater channelRecovering; stronger late CY2021 Solid progress; margins ~pre-COVID Strong Q4 box office rebound
Core-Mark contributionGP $245.2M (Q2) GP $243M (Q3) GP ~$270M (Q4)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales ($USD Billions)Q1 FY2023—$14.2–$14.5 Initiated
Adjusted EBITDA ($USD Millions)Q1 FY2023—$280–$300 Initiated
Net Sales ($USD Billions)Q2 FY2023—$13.5–$13.8 Initiated
Adjusted EBITDA ($USD Millions)Q2 FY2023—$245–$265 Initiated
Net Sales ($USD Billions)FY2023—$56–$58 Initiated
Adjusted EBITDA ($USD Billions)FY2023—$1.15–$1.25 Initiated

Management noted the quarterly cadence is driven primarily by inventory gains timing (tobacco/candy) and slightly lower inflation benefit in Q2 vs Q1 .

Earnings Call Themes & Trends

TopicQ2 2022 (Prior Two)Q3 2022 (Prior One)Q4 2022 (Current)Trend
Labor and OpExStructural vs transitory wage pressures; temp labor costs elevated; turnover improving Temp labor costs still up YoY but improving; aiming near “steady-state” by end of Q4 Temp/contract cost down $21M YoY; biggest monthly headcount gain in June; continued improvement expected Improving labor cost profile and productivity
Supply chain/fill ratesFoodservice inbound >90%; CPG fill rates lagging with multi-ingredient constraints Foodservice fill rates ~95% inbound; Vistar/Convenience still challenged Foodservice inbound fill rates highest in >1 year; Vistar/Convenience still slower Foodservice improving; CPG gradual
InflationWeighted ~12.5%; Foodservice double-digit Weighted 13.6%; Foodservice ~20%; manageable pass-through High teens Foodservice; inflation moderating in some proteins; expect continued but easing High but slowly subsiding
Mix shift to independents/performance brandsIndependents driving growth; Reinhart private label penetration increasing Record performance brand penetration; 4,500 new independent accounts Share gains in all 15 categories; Performance Brands +8.4% in Q4 Sustained mix tailwind
Convenience format shiftFood/foodservice up; nicotine down; early wins; integration on track Food/foodservice +21.5%; nicotine −1.9% Food/foodservice +17.6%; nicotine −3.5% Ongoing positive mix shift
Theaters & VistarSequential improvement; retail automation facilities at mid–high single-digit EBITDA margins Vistar margins ~pre-COVID; strong recovery Theater business strong with box office rebound Recovery intact

Management Commentary

  • “We believe our company is uniquely constructed to do well… our recent strategic activity, including the Core‑Mark acquisition, have only increased our ability to weather various challenges.” – George Holm (CEO)
  • “Gross profit per case was up about $1.03…temporary contract labor costs decreased $21 million…reflects…improvement in the external labor market…we expect another strong year…in fiscal 2023.” – Jim Hope (CFO)
  • “Performance Brands often provide a win‑win…in the quarter, Performance Brands grew 8.4%.” – George Holm (CEO)
  • “We posted net sales at the top end of our guidance range and higher than anticipated margins…Sales results in July and early August continued to keep pace with our June run‑rate.” – George Holm (CEO)

Q&A Highlights

  • Labor productivity/OpEx per case: management expects OpEx tailwinds as temp labor normalizes and productivity improves; structural wage inflation manageable within guidance .
  • Free cash flow: working capital build to support growth is moderating; FCF pressure to subside in FY2023 .
  • Inventory gains cadence: heavier in Q1 FY23 than Q2; clear rationale for two‑quarter guidance to calibrate Street expectations .
  • Demand trends: casual dining softness, trade‑down to lower‑ticket formats; convenience traffic down on high fuel, but higher tickets offset .
  • Fill rates and new customer growth: improving inbound (Foodservice) should aid wins; CPG fill rates slower due to multi‑ingredient constraints .

Estimates Context

  • S&P Global consensus EPS and revenue estimates for Q4 2022 were unavailable at time of analysis due to SPGI daily request limits; therefore, a formal comparison to Wall Street consensus could not be provided (Values intended to be retrieved from S&P Global).

Key Takeaways for Investors

  • Q4 2022 was a clean beat operationally with broad-based strength; sequential margin expansion supported by mix, lower temp labor, and improved fill rates. Near-term upside visibility from identified inventory gains in Q1 FY23 .
  • Mix shift toward independents and Performance Brands is structural and continues to drive per-case gross profit expansion and earnings quality; share gains across 15 major categories underscore competitive momentum .
  • Convenience strategy is working: food/foodservice growth offsets nicotine declines, creating a durable mix tailwind; integration synergies tracking, with Core‑Mark contributing ~$270M gross profit in Q4 .
  • Inflation likely to remain elevated but gradually easing; PFG has demonstrated effective pass-through and procurement scale advantages, limiting demand destruction while expanding margins .
  • Labor normalization is a multi-quarter tailwind; expect continued productivity gains and OpEx per case improvement as churn abates and full-time staffing ramps .
  • FY2023 guide implies continued top- and bottom-line growth with explicit quarterly cadence; potential for estimate revisions as investors refine inventory gains timing and inflation assumptions .
  • Strategic positioning (independents, pizza/center‑of‑plate, micro‑markets, theater) and cross-sell between Foodservice and Convenience supports medium-term thesis of sustained margin expansion and deleveraging .

Additional Sources Read

  • Q4 2022 earnings call transcript (full) –.
  • Q3 2022 earnings call transcript (full) –.
  • Q2 2022 earnings call transcript (full) –.
  • Q4 2022 earnings press release (full highlights and guidance) .
  • CFO retirement/leadership change press release (context) .