Food Supplier Rally
We are short SYY, CHEF, and USFD. We will be hosting an updated Restaurant Thems Black book on 5/20 @ 12:30 to discuss these and other names.
The food supplier sector had a strong day on Tuesday after Sysco beat estimates on the revenue, EPS, and adjusted EBITDA lines. Also, in a bow to activists, USFD announced Pietro Satriano is stepping down as CEO and will not stand for re-election as director; Robert M. Dutkowsky has been appointed Executive Chair, and Andrew Iacobucci has been appointed Interim CEO.
SYY FY3Q22 Non-GAAP EPS of $0.71 beats by $0.16, and Revenue of $16.99B (+43.7% Y/Y) beats by $1B. A robust #Quad3 quarter with strong customer away-from-home demand in late February and March! Helping to manage earnings this quarter, the company also reduced its "snap-back investments" by more than 50% vs. the prior quarter. Snap-back operating costs dropped from $73mm in FY2Q22 to $35mm in FY3Q22. The upbeat tone led to the company raising our adjusted EPS guidance for FY22 from $3.00-$3.10 to $3.16-$3.26. The pricing relationship between food-at-home and food-away-from-home is favorable to Sysco. Other results:
- 3Q22 sales were $16.9B, an increase of 42.9% from FY2021 and a 15.3% increase from FY2019.
- In the USA, U.S. Foodservice was up by 43.6% vs. FY2021 and up 18.8% vs. FY2019.
- Local case volume within the U.S. Broadline operations increased 14.1%, while total case volume within U.S. Broadline operations increased 18.8% compared to last year.
- SYGMA sales were up 13.5% vs. FY2021 and up 16.8% vs. FY2019
- International sales were up 64.5% vs. FY2021 and up approximately 3% vs. FY2019
- Sales trends accelerated internationally with lower Omicron cases and as government-related restrictions eased
- Foreign exchange rates had a negative impact of 0.7% on Sysco sales results
SYY commented that "while our customers are feeling the high cost of fuels, we have not experienced a reduction of consumer demand." We are also getting the same commentary from USFD this AM: "Our independent restaurant business kept its strong momentum, growing organic case volume by double digits even as we begin to lap a better operating environment in the year-ago period. The integration of Core-Mark continues to meet or exceed our expectations, and new business wins support our long-term vision for accelerating sales and profit growth in the convenience business. Vistar is experiencing solid profit performance, and we are increasingly confident in recovery as the theater, and office coffee channels show signs of improvement...As a result, we are increasing our full-year financial guidance and believe we now have a path to $1B of Adjusted EBITDA in the current fiscal year."
Demand destruction is what happens in #quad4
Driving Organic growth
Krispy Kreme is a LONG
DNUT 1Q22 Non-GAAP EPS of $0.08 beats by $0.01; Revenue of $372.5M (+15.8% Y/Y) beats by $3.82M and 2022 re-affirms its previous guidance for the full year 2022:
- 1Q22 revenue $372.5M vs FactSet $368.8M and Organic revenue +15.0%
- Adjusted EBITDA $48.9M vs FactSet $50.7M
Reaffirms FY Guidance (Dec 2022):
- EPS $0.38-0.41 ex-items vs FactSet $0.39 [8 est, $0.37-0.41]
- Revenue $1.53B-1.56B vs FactSet $1.55B [8 est, $1.53-1.59B]
- Organic revenue +10%-12%
Delivery Fee Dispute
Yum China today reported that it had invoked the dispute resolution process with Yum! Brands (YUM), according to the Master License Agreement dated October 31, 2016, to resolve a disagreement over royalties charged on delivery and aggregator platform fees. The Company believes, according to the Master License Agreement, delivery and aggregator platform fees should not be subject to royalties. The Company has informed YUM that the Company will stop paying royalties on such fees. The royalty fee amount in dispute for the first quarter ended March 31, 2022, is approximately $2 million. The Company may also seek to recoup additional royalty fee payments from November 1, 2016, to December 31, 2021, concerning such delivery-related fees. The Company does not expect the dispute resolution process to have a material impact on its operations, financial results, and long-term partnership with YUM.
