Performance Food Group Company (NYSE:PFGC) Q2 2023 Earnings Call Transcript

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So, we do see this as a positive going forward and we’re really pleased with the progress we’ve made to date.

Operator: And we’ll take our next question from Mark Carden with UBS.

Mark Carden: So to start, it sounds like you guys have made some really nice progress on fill rates. Presumably, on the inbound side, it’s picked up a bit across the industry. Given that, have you seen any smaller competitors taking any more aggressive efforts to maybe win back some of the share that they might have given up when inbound fill rates are more challenging? Do you see that being much of a risk? Or has the new business that you’ve gained, really just proven to be pretty sticky?

George Holm: I think that nothing’s really changed from the competitive landscape. There’s probably a little bit more activity going on as far as short-term procuring of an account or picking up some business within account but — we’ve done some of that ourselves in the past and it seems to do exactly that. It works pretty good short term and doesn’t have an impact long term. So we’re just kind of continuing to do business the way we do business and price the way in which we price and we really haven’t seen any difference in the marketplace.

Mark Carden: Okay, great. And then as a follow-up, it sounds like overall, some nice progress on new business, good market share gains overall. How about from a category perspective? Are you still seeing strength really across the board and independents? Do any categories in particular stand out? Just what you’re seeing on that front?

George Holm: Yes. Casual dining, obviously, the chains, I mean, a lot of them are public in big season, numbers not doing real great. But the casual dining independent seems to be doing really well and that’s been good part of our growth. Pizza has definitely slowed down in the last year but we’re continuing to gain share and we’re very excited about that business. Hispanic seems to be doing real well, although we don’t play hugely in fine dining, fine dining seems to be doing well. And center of the plate — has been a big hit for us. I mean our margin growth has really been around our change in mix just in and mix of customers, mix within our channels but product mix has been a big contributor to that, too. Some of our highest profit per case items have been where our growth has been good.

Operator: And we’ll take our next question from Brian Harbour with Morgan Stanley.

Brian Harbour: Yes. Is there any way you’re able to quantify kind of the impact of some of the business that you said, you had exited? And then just kind of to the point you just made, was — is the softness more on the casual dining side that you’ve seen in the most recent quarter or anything else that you would call out there?

George Holm: Yes, I would say, to answer your last question, I would say casual dining is where we are seeing the most slowness. As far as exited business, we are — I think there’s different ways to look at that word. It’s extraordinarily rare for us to tell a customer we don’t want to do business with them anymore, very, very rare. But exited, we’ve gone and we’ve had to get a higher price to be able to handle that business. And in some instances, the customer isn’t willing to do that. And we’ve been in a position — I’ve mentioned this probably, this is probably the third call but maybe too much but when you have excessive overtime and you have an excessive amount of people who are temporary, you can have business that’s typically may be marginally profitable with a good return on capital that becomes unprofitable.

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