Performance Food Group Company 2026 Q4 Earnings Call

Please go ahead, sir. Thank you, and good morning.

We're here with Scott McPherson, PFG's CEO, and Patrick Hatcher, PFG's CFO. We issued a press release this morning regarding our 2026 fiscal fourth 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 2025. Any reference to 2025 or 2026 or specific quarters refers to our fiscal calendar year, unless otherwise stated. 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 at the back of the earnings release.

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. With that, I'd now like to turn the call over to Scott.

Thanks, Bill. Good morning, everyone, and thank you for joining our call today. This morning, Patrick and I will review our results for 2026, discuss industry trends, and walk you through our expectations for 2027 and beyond. As we close out the fiscal year, I'm proud of the passion, dedication, and resilience shown by our 44,000-plus associates. The year certainly brought its share of challenges as consumers continued to navigate higher prices, distributors faced operating cost pressures, and external factors weighed on the broader food away from home industry. Despite these headwinds, our team rose to the occasion and posted excellent results. We are excited about what 2027 has in store for Performance Food Group. Our company is well-positioned to build upon recent trends and accelerate our financial performance.

For the upcoming fiscal year, we have visibility into revenue, margin, and profit opportunities, positioning us favorably to achieve our three-year outlook. Headlining our performance in 2027 is anticipated growth across all three of our business segments. The foundation of that growth is our continued investment in our sales organization, sales technology, and most importantly, our customer relationships. In Performance Foodservice, ongoing market share gains with independent restaurants, recently awarded national account business, and a strong pipeline of opportunities position the segment well for another year of solid growth. In convenience, we look to benefit from the momentum generated by our 2026 market share wins, supported by a healthy sales pipeline and continued outperformance relative to industry trends. Our differentiated value proposition, scale, and customer service capabilities continue to resonate in the marketplace and create opportunities for profitable growth.

Specialty enters 2027 with strong sales momentum, expanding opportunities across new verticals, and significant long-term potential in e-commerce. Together, these growth drivers reinforce our confidence that all three segments are well-positioned to contribute meaningfully to PFG's performance in the year ahead. From a margin perspective, we continue to benefit from our scale, growth profile, and vendor relationships as we work to achieve the $120 million to $125 million procurement synergy target we outlined at our Investor Day. I am confident we will meet or exceed the high end of that target by the end of fiscal 2028. Additionally, we launched over 580 brand SKUs in 2026, bringing our total number of branded SKUs to approximately 25,000 across more than 85 brand families. Our customers and sales organization find tremendous value in our high-quality brands, and we see this as a competitive advantage in the market.

Lastly, let's touch briefly on our commitment to drive operational efficiency and safety results. In transportation and warehouse, we continue to make significant investments in infrastructure, technology, and staff, building a foundation to efficiently onboard future growth. On the safety front, I can only thank our people and the work they have put into PFG's safety culture as 2026 saw reductions in accidents and injuries, benefiting insurance costs. Taking a step back, let's now discuss some of the highlights from the quarter across our three business segments. Our Performance Foodservice results can be summarized in one word: consistency. Through the ups and downs of the external market, our organization has delivered independent case growth, market share gains, and margin improvement. We closed the fourth quarter with 5.8% organic independent case growth, putting our full-year improvement at 5.9%.

In the context of the external environment, these numbers are powerful and a testament to our sales organization's connection with their customer base. According to Black Box Intelligence, foot traffic trends in the restaurant space were consistently negative every month of fiscal 2026. However, by adding new independent accounts at a pace of roughly 5% in the fourth quarter and gaining wallet share with existing accounts, we have continued our pace of market share gains. A key driver to our continued independent performance is our unwavering focus on our selling organization. Investments in high-performing sales associates, customer-facing technology, and continuous expansion of our brand portfolio will continue to be foundational in our success. Our PFG brand portfolio grew faster than our overall business and represented approximately 54% of cases sold to independent restaurants during the fourth quarter, excluding Cheney Brothers, or just over 50% including Cheney.

We see our brands as a competitive advantage with a long runway of profitable growth ahead. In our chain restaurant portfolio, we saw case volume decline slightly in the quarter, though still outperforming the foot traffic results reported by Black Box Intelligence. We are now lapping new account onboarding from last year and anticipate fairly similar results over the next two quarters. We have visibility to new business in the second half of the fiscal year as we expand our relationship with Jersey Mike's. This additional business will help our chain volume as we progress through the fiscal year. Looking across the entirety of 2026, I am incredibly proud of our Performance Foodservice segment performance. Despite several headwinds, our Performance Foodservice organization posted nearly 6% independent case growth and nearly 9% revenue growth.

As we look ahead to 2027, we believe we can build on our momentum and layer in efficiencies in both gross profit and operating expense to deliver profit growth for the organization. Shifting gears, our convenience segment continues to be the engine of our profit performance as new business wins, market share gains, and solid execution converted mid-single-digit revenue growth into double-digit segment level adjusted EBITDA performance. The performance is even more impressive in the context of the industry backdrop, which continues to deal with the impact of high gasoline prices and inflation-led pricing across in-store product categories. Over the course of the fiscal year, Core-Mark grew sales across all customer account types, national, regional, and independent. The biggest contributor to this success was our national accounts portfolio, led by the addition of Love's Travel Stops & Country Stores and RaceTrac. Overall, national store count grew 16% in 2026, producing 6.9% case growth.

Market share growth underpinned the success of our convenience segment. In fiscal 2026, Core-Mark grew cases in each of the key non-nicotine categories of foodservice, candy, snacks, and health and beauty. Taken together, these categories increased mid-single digits in the fourth quarter compared to an industry decline of nearly 6%. The result was a sizable pickup in market share. These top-line wins are flowing down the income statement, resulting in double-digit segment profit growth. Total segment EBITDA increased 10.4% in the fourth quarter, driven by gross margin improvement and disciplined operating expense controls. Looking ahead, the addition of Love's Travel Stops & Country Stores and RaceTrac will continue to be an incremental benefit to our convenience performance through mid-fiscal 2027. As we discussed last quarter, we have visibility into both additional customer wins and some offsetting losses across the fiscal year.

We believe that our ability to service the convenience market with a full portfolio of both traditional center store, consumer packaged goods, and foodservice items is a key component in our ability to win new business. Our customer discussions often include representatives from our Core-Mark segment as well as from Performance Foodservice and Vistar, setting PFG apart from the competition and resulting in higher conversion of our customer pipeline opportunities. Overall, our convenience organization is well positioned to have another strong year in fiscal 2027 and build upon its momentum in the coming years. I will close with our specialty segment, which rounds out our portfolio across the food away from home market. Specialty certainly wrestled with its own challenges in 2026 as persistent candy and snack inflation, a choppy consumer environment, and elevated operating costs impacted results for the year.

At the same time, there were a number of highlights and reasons for optimism as we move through 2027. Top-line performance for specialty accelerated in each of the final three quarters of the year, finishing with solid 6.6% growth in the fourth quarter. Case and sales growth was the result of new account wins and positive performance in the vending, campus, travel, and hospitality channels. As we move into 2027, we expect operating cost pressures to persist in the first half of the year, eclipsed by continued sales momentum, providing a strong top and bottom line close to the year. Specialty has also entered new markets, which are providing pathways for growth in 2027. By collaborating with our foodservice organization, Vistar identified opportunities in the specialty grocery channel and began shipping products to various customers in late fiscal 2026.