US Foods reported its Q2 2018 financial results, while also announcing its acquisition of SGA’s Food Group of Companies in a deal worth of $1.8B. For the quarter, total case volume was down 0.9 percent and restaurant case volume from independent restaurants was up 3.8 percent. Net sales were relatively flat at $6.2B,down $1M from last year’s same period. Net income increased to $126M, up $61 million from the same period last year. Year-to-date for the first two quarters, total case volume decreased 1.6 percent, but case volume for independents increased 4 percent. Net sales have increased 0.3 percent to $12B, up 34 million from the same period last year.
US Foods has indicated the total case volume decrease is attributable to a loss of chain customers during the quarter. “While our volume growth with independent restaurants was solid, it fell below our expectation, mostly due to some operational challenges,” said Chairman and CEO Pietro Satrian in a company statement. “We are working diligently to address these and we expect to see accelerating volumes in the second half of the year.”
Broadline distributors have turned to independent restaurants for growth, as chains continue to be somewhat saturated in key markets. A report by consultancy Pentallect projects sales from independents to gain 4 to 5 percent from 2017 to 2020, while chain sales will grow only 2 to 3 percent. In some ways, independent restaurants are perceived to offer a higher value proposition: Independent restaurants outrank chains in the areas of personalized service, being “special,” being community oriented, and sharing the values of customers, notes a survey by Critical Mix, in partnership with Pentallect.
US Foods reported Q2 Diluted EPS was $0.58 and Adjusted Diluted EPS of $0.57. Year-to-date for the first six fiscal months, Diluted EPS is reported as $0.89 and Adjusted EPS is $0.92. US Foods now expects case volume to “approach flat” for the year and net sales to increase 1 to 2 percent. Previously, guidance from US Foods had been volume growth of 1 percent, and a net sales increase of 3 percent, so the new outlook is a downgrade from previous expectations.
US Foods acquisition of SGA’s Food Group of Companies
US Foods also announced its acquisition of SGA’s Food Group of Companies for $1.8B,. The Scottsdale, Ariz.-based company consists of Food Services of America, Inc. (75 of net sales;); Systems Services of America, Inc. (SSA), with 21% of net sales; Amerifresh, Inc., with 2 percent of sales; Ameristar Meats, Inc., with 1 percent of net sales;, and GAMPAC Express, Inc. SGA had total revenue of $3.2B and has about 3,400 employees.
The acquisition of SGA’s Food Group is expected to help bolster US Foods’ competitive stance in the U.S. Northwest Region. “This acquisition will significantly increase US Foods’ reach across key markets in the attractive and growing Northwest region of the U.S. and adds one of the most well-regarded regional distributors to our company,” said Satriano.
Souce: Business WirePhoto credit: US Foods