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F500-2023-091-Performance Food Group

The food distributor and supplier, which delivers to restaurants, grocery stores, offices, schools, and health care facilities, among other settings, jumped a whopping 21 spots on this year’s Fortune 500. 
<ul> 
 	<li>The Richmond-based company brought in $47 billion in revenue in 2022, a 62% increase compared with the previous year.</li> 
 	<li>George Holm, PFG’s chairman and CEO, attributed the growth in part to the company’s growing base of independent, non-chain restaurant customers.</li> 
 	<li>In the company’s latest ESG report, Performance Food Group announced that it had achieved its responsible sourcing goals, including ensuring that 90% of its branded beef, pork, poultry, seafood, coffee, and tea are produced with verified environmentally sustainable and socially responsible practices.</li> 
</ul>

Aggregate sales hit $37.8 trillion last year—an increase of 19%, the highest annual growth rate in the list’s history.

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Total revenue for the world’s biggest companies fell 4.8% to $31.7 trillion this year—the first decline in half a decade.

The company provides food services and vending products to restaurant chains and other commercial entities. Performance Food Group recently announced a $2.5 billion deal to purchase Core-Mark Holding Co., one of the largest wholesale distributors to convenience stores in North America.

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F500-2021-114-Performance Food Group

This year's Fortune 500 marks the 66th running of the list.

F500-2020-168-Performance-Food-Group

Based in Richmond, Va., this food-distribution company sells some 160,000 food and food-related products and operates out of 83 distribution centers around the U.S.

This year's Fortune 500 marks the 65th running of the list.

This year's Fortune 500 marks the 64th running of the list.

This year's Fortune 500 marks the 63rd running of the list.

This year's Fortune 500 marks the 62nd running of the list.

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Founded in 1885, Performance Food Group distributes food and related products domestically. It operates through three segments: Performance Foodservice; Vistar, which focuses on snack foods and beverages; and Core-Mark, providing convenience store services. The company sells a wide range of products including frozen food, candy, cigarettes, and beauty items. PFG engages with a variety of businesses, from small independent restaurants to large institutions like hospitals.

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Performance Food Group (PFGC): Company Profile, Stock Price, News, Rankings

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Performance Food Group

performance food group

Good day, and welcome to PFG's Fiscal Year Q3 twenty twenty five Earnings Conference Call. I would now like to turn the call over to Bill Marshall, Senior Vice President, Investor Relations for PFG.

Thank you, and good morning. We're here with George Holm, PFG's CEO Patrick Hatcher, PFG's CFO and Scott McPherson, PFG's COO. We issued a press release this morning regarding our twenty twenty five fiscal third 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 results in the same period in fiscal twenty twenty four. 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 in the back of the earnings release. Our remarks on this call and in the earnings release contain forward looking statements and projections of future results. Please review the cautionary forward looking statements 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. Now I'd like to turn the call over to George.

Thanks, Bill. Good morning, everyone, and thank you for joining our call today. We have a good deal of material to cover this morning. I'm going to provide a high level overview of the current market conditions and the strategic measures we have prioritized during the volatile time. Scott McPherson will then provide some color around our segment's performance during the third quarter, and Patrick will follow with our financial performance and guidance.

The fiscal third quarter provided some challenges to our industry, mainly due to difficult macroeconomic environment and adverse weather in January and February. We saw a decent recovery in March as the weather improved. Still, it appears that the underlying consumer performance remains muted. Interestingly, April results rebounded nicely and we grew our sales and profit through the month. The first week in May was stronger yet producing a record sales week for foodservice, convenience and total company.

At PFG, we recognize that we cannot control the external macroeconomic environment. However, we do determine how we approach our markets, customers, associates and suppliers. We do not know the exact path the economy will take. However, we are prepared for a range of scenarios. First, it is worth reminding you that our company has experienced several difficult periods through our history, including the 'eight, 'nine Great Recession and the pandemic in 2020.

These experiences provide a playbook for the actions we can take in more difficult times to not only protect our business but align our operations so we will come out strong on the other side. This is exactly what we have done in the past and what we intend to do now. Even in our soft February, our share gains were consistent with our usual performance. At our Investor Day on May 28, you will hear our detailed strategy that looks to capture both top and bottom line growth by being a diversified food away from home distributor. We have a powerful story and our momentum continues to build and get stronger.

I'm excited for what the future holds for PFG and believe we are positioned to capture growth over the long term. Before turning it over to Scott, a few high level comments on recent trends. As I mentioned at the beginning of my comments, the operating environment has been dynamic to say the least. When we last reported earnings, I believe we could achieve 6% organic independent case growth for fiscal twenty twenty five. Our run rate through January along with easier year over year comparisons for the balance of the fiscal year made that objective a reasonable target for our organization.

However, the challenges we faced in February have made this target harder to reach. At the same time, as I mentioned earlier, we did see a rebound as we entered the fiscal fourth quarter with our organic independent restaurant case growth hitting 6% in April. Despite the market challenges, our broad based structure provides stability to our bottom line results during market challenges. We believe that gauging the health of the consumer is difficult at this time. However, I have the utmost confidence in our company's ability to execute at a high level, capture market share and deliver revenue and profit results that drive shareholder value.

With that, I'll turn it over to Scott McPherson for more details on our segment results in the quarter. Scott?

Thank you, George, and good morning, everyone. As George mentioned, it's been a dynamic year from a trend perspective. We had a strong start to fiscal Q1, and we're progressing well through November. However, in December and through much of the third quarter, we faced disruption, including calendar shifts, adverse weather conditions in both the current year and last year period comparison and of course a dynamic macroeconomic and consumer backdrop. February posed challenges for our industry as we experienced significant weather disruptions and a consumer reacting to economic uncertainty.

We've seen steady improvement through March. And in April, we finished the month with solid top and bottom line results. While April's outcome is certainly encouraging and shows signs consumer trends are improving, we remain hyper focused on what we can control. As George said, we have a broad and diverse business that has proven resilient in challenging operating environments. For us, we remain laser focused on our strategic priorities, starting with driving growth through our sales associates across all operating segments, continuing to leverage our proprietary brands and procurement synergies to expand gross margins and leverage technology to drive efficiency throughout our supply chain.

Now let's take a deeper look into our three operating segments, starting with our Foodservice business. Overall, Foodservice growth was strong, benefiting from the addition of Cheney Brothers and Jose Santiago in the period. As George mentioned, organic independent case growth took a step back in February growing 3.4% over the full third quarter. These results reflect steady market share gains with independent customer account growth increasing 3.9% year over year and lines growing at 4.3 as we continue to broaden our offerings to customers. Performance Brands sold to independent restaurants were 53% in the quarter, continuing our strong momentum and creating value for our customers with our company owned brand portfolio.

As we emphasized last quarter, these metrics show that while we cannot control the industry backdrop, we can arm our organization with the products and resources to provide our customer base a differentiated value proposition. Shifting to our chain restaurant business, we grew cases by 1.5% in the quarter, an excellent result given the current backdrop. The growth for our chain business was boosted by the onboarding of new business, which has been ongoing since the second quarter and continues into the fourth quarter. We expect these new business wins to boost fourth quarter results providing incremental case growth and favorable profit profile versus our legacy chain business. Sales and margins were helped by pricing inflation in the quarter.

Current inflation rates in foodservice remain in a range that we consider very manageable. We are closely watching the broad commodities market and preparing for any increases driven by recent tariff considerations. We have not experienced any disruption from tariff actions to date. We continue to assess our exposure, which is currently not looked at as material. However, we are working closely with our suppliers and customers on contingency plans in the event inflation moves meaningfully higher.

One inflation strategy we are focused on is positioning our high quality company owned brands as the best value proposition for our customers. Again, our sales force continues to win new accounts and gain share despite the difficult operating environment. We have steadily increased our sales force headcount through the year, attracting talent from across the foodservice landscape. Fiscal year to date, our foodservice sales force headcount increased by two fifty associates or 8% year over year. This is roughly the pace of hiring we anticipate for the balance of the year, assuming we continue to see positive signs from the consumer.

From a profit perspective, the Foodservice segment continues to experience positive margin momentum, driven by favorable mix shift, profitable chain business growth and procurement synergies. These factors, in addition to the contributions of Cheney Brothers and Jose Santiago, drove 29% segment adjusted EBITDA growth in the quarter, translating to 25 basis points of margin expansion. Turning to our convenience segment. The narrative for the convenience industry has remained consistent throughout the fiscal year. Despite a challenging volume backdrop, Core Mark continues to win new business, take market share and expand within existing customers through new offerings, particularly in foodservice.

In the third quarter, the convenience segment volume grew by approximately 1%, well above the industry performance. Through the full fiscal year, the convenience industry, key categories including snacks, candy and health and beauty have declined at a mid single digit rate, while most other key categories are down low single digits. Over the same timeframe, Core Mark has grown each of these areas by low single digits except candy, which is flat. More recently, we remain cautiously optimistic about sales performance in April, which was notably better than recent periods. While too early to call it a trend, it is certainly a positive indicator.

We are very excited about our pipeline of new business in convenience. We have found that our proposition as a consolidated convenience and foodservice distributor provides a competitive advantage and has been one of the key reasons that we continue to add new accounts at a fast pace. We will expand more on this topic at our Investor Day. Finishing up our segment commentary with Specialty, formerly known as our Vistar segment, total net sales for Specialty were roughly flat in the third quarter on a low single digit volume decline in the period. As expected, the third quarter was difficult for both theater and value channels due to the lack of content and competitive activity in the theater and consumer challenges for the value segment.

On the positive side, we've seen stabilization in our vending and office coffee business, benefiting from the return to office trend. Our small parcel business has improved as we build upon our small but rapidly growing e commerce business, something you'll hear more about at our Investor Day. In conclusion, total PFG operating companies weathered a difficult backdrop. From a competitive positioning standpoint, we grew share across all three segments. We have continued to make progress in our mix and margins and are performing well operationally.

We feel good about our positioning to drive growth and deliver on our customer value proposition. I'll now turn the call over to Patrick, who will review our financial performance and outlook. Patrick?

Thank you, Scott. This morning, I will review our financial results from our third quarter, provide some color on our financial position, a review of our guidance for the balance of the year. Before jumping into our results for the quarter, we have two housekeeping items to address. First, as noted in our press release, our Vistar segment has been renamed a specialty to align our naming conventions across the three operating segments. We did not add or remove any operations from this segment in our financial reporting.

It is simply a name change. As we always do, we will continue to assess our segment reporting structure to align with how we operate the business. On that front, also noted in our earnings press release, during the fiscal third quarter, we moved a few small items from corporate and all other into the Foodservice segment. These changes are immaterial to our results and are reflected in both the current and year ago periods for comparability. As you've already heard from George and Scott, it is a dynamic time for our industry and the broad economic landscape.

For this reason, we believe it is as important as ever to maintain a strong financial position. We believe that our balance sheet and cash flow not only insulate us from external shocks, but also allow us to take advantage of market dislocation. As George described, supporting our associates, customers and vendors through difficult times has allowed us to build upon the strong foundation of our business position. This was only possible because we had the financial resources to invest behind our organization. In the first three quarters of our fiscal year, we have used our balance sheet and cash flow to finance growth initiatives, including two attractive acquisitions, Cheney Brothers and Jose Santiago and over $300,000,000 in capital projects.

We believe that these initiatives put us in a strong position to thrive in a range of operating environments. Let's review our third quarter business results. PFG total net sales grew 10.5% in the quarter due to the addition of Jose Santiago and Cheney Brothers as well as volume growth and net price realization. Our total independent restaurant cases grew 20% in the quarter or 3.4% on an organic basis. Organic independent case growth was lower than we had hoped entering the quarter.

However, as Scott detailed, the underlying metrics including market share, new account growth and lines per account reflect strong execution. While it is still early, our April results improved noticeably. Total company cost inflation was about 4.9% for the third quarter, an uptick from our prior period, but steady year to date. Foodservice product cost inflation was 3.7% in the quarter, while specialty cost inflation was 2.8% year over year and convenience increased 6.7%. We are closely watching input cost inflation, particularly with the implementation of tariffs and have not yet seen an impact from tariffs.

Importantly, we source the majority of our inventory from domestic suppliers. At the same time, we believe we are well positioned in the event of an acceleration in inflation and are maintaining close communication with customers and suppliers. We have a proven track record of managing inflation and expect to navigate the current market using the similar playbook. Total company gross profit increased 16.2% in the fiscal third quarter, representing a gross profit per case increase of $0.39 in the quarter as compared to the prior year's period. Strong operating expense control and productivity efforts produced adjusted EBITDA growth for the Foodservice, Specialty and Convenience segments.

In particular, our Specialty segment, despite a difficult top line environment, produced 6.9% adjusted EBITDA growth. In the third quarter of twenty twenty five, PFG reported net income of $58,300,000 Adjusted EBITDA increased 20.1% to $385,100,000 Diluted earnings per share in the fiscal third quarter was $0.37 while adjusted diluted earnings per share was $0.79 Our effective tax rate was 25.8 in the third quarter. We anticipate a higher tax rate in the fourth quarter closer to our historical range. Turning to our financial position and cash flow performance. In the first nine months of fiscal twenty twenty five, PFG generated $827,100,000 of operating cash flow.

After $332,700,000 of capital expenditures, PFG delivered free cash flow of about $494,000,000 Diligent working capital management and our operating results contributed to the strong cash flow result through the fiscal year. As we described last quarter, our capital spending levels for our legacy business have remained fairly steady over the first three quarters of the fiscal year at a run rate of approximately $100,000,000 per quarter. The increase we experienced in the third quarter was largely related to the addition of capital expense to support Cheney and Jose Santiago businesses as expected. We anticipate an increase to our capital expenditures in the fourth quarter, which is typical for our company. While we remain committed to capital investment in capacity and fleet to support our growth, we are closely following the external landscape and will take appropriate steps to adjust our spending if necessary.

At this time, however, we feel good about the level of investment we are undertaking. During the third quarter, we began to pay down debt through reduction in the outstanding balance of our ABL facility, in line with our stated near term objective of reducing debt. During the quarter, we also repurchased about 138,000 shares of our stock at an average cost of $76.82 per share for a total of $10,600,000 While we are prioritizing debt reduction, we also take various marketplace conditions into account when determining our capital allocation strategy. This means that we have and expect to continue to opportunistically repurchase our shares during market downturns. This is supported by our financial position and cash flow.

The M and A pipeline is robust, and we continue to evaluate strategic M and A. As always, we will apply our high standards and due diligence process in the evaluation of these acquisition opportunities. Turning to our guidance for fiscal twenty twenty five. Today, are narrowing our sales and adjusted EBITDA guidance, primarily flowing through the results from the third quarter. We now expect net sales to be in a 63,000,000,000 to $63,500,000,000 range, adjusting the top end of the range by $500,000,000 and leaving the bottom end unchanged.

Our adjusted EBITDA guidance for the full year is now a range of $1,725,000,000 to $1,750,000,000 narrowing the upper end by $50,000,000 As we enter the final months of the fiscal year, we feel confident in these targets and each of these ranges suggest full year 2025 results in line or above the three year plan we set at our Investor Day in 2022. In a few weeks, we will provide more color around our successful execution of the long term plan and discuss our vision for the next three years. To summarize, PFG successfully navigated difficult environment in the third quarter and is prepared to maintain strong growth in a range of economic scenarios. Our financial position is strong, and we have a balanced capital allocation plan to generate long term shareholder returns. We're excited about what the future holds and are investing capital to sustain our growth.

Thank you for your time today. We appreciate your interest in Performance Food Group. And with that, George, Scott and I would be happy to take your questions.

Thank you. And your first question comes from the line of Mark with UBS. Please go ahead. Your line is open.

Hi. This is Matthew Rothway on for Mark Carden. Thanks for taking our question. Glad to hear that trends are improving a little bit of late, although it sounds like maybe still a little weak in the independent channel. I was curious if you could help us understand a little bit more what you're seeing with consumer demand and behavior.

Are you seeing any trade down or trade out? Any shifts in cuisine types from consumers? Any additional color would be great.

Yes. I'll take that. This is Scott. So first off, talking about just independent demand and our independent case volume, as we talked about, if you think about the quarter, we had the beginning of the quarter was pretty strong. We were mid single digit in January.

Obviously, was the big setback for everybody in the quarter. And then March, kind of back to that mid single digit range. And as George mentioned, we were up to 6% in April. So feel really good about how that's progressing. When I think about any trade down, we really didn't see obviously, on a same store basis, restaurants were pretty flat.

We performed well from a penetration and growing account standpoint, which really is what drove our independent volume. And I'd say the last piece is from a segment standpoint. Our Mexican segment did really well and also our Convenience segment did really well from a foodservice standpoint.

And I know we've been repeating ourselves some, but I think it's important to stress that February was the month that really changed our quarter. But when we track our business, we track it closely by what our new business is and our lost business and our penetration. And virtually all of the difference in February was penetration. And it wasn't just in our independent, it was in the chain business, and also it was inconvenience. And it just showed that, you know, people weren't out there.

We didn't see it in our in our specialty business or Vistar business, and a lot of that is kinda logical. People are at work, when these weather issues happened. If they were able to get to work, they didn't go out to lunch. They hit the micro market. They hit the vending, and it was actually a positive for that part of our business.

Great. And then as a follow-up question, just curious to get your outlook on food inflation as we go through the year here. It sounds like maybe a little early for any tariff related inflation. But would you see any opportunities for pre buys if you do start to see inflation, particularly with your Specialty and Convenience segment?

Yes, Matthew, this is Patrick. I'll start with that and maybe Scott wants to add a little more detail. But when it comes to how we're looking at inflation, again, as we reported, very much in line for Q3, very similar to what we saw in Q2 with a little bit of an uptick in foodservice, but Vistar and Convenience Specialties staying pretty close to where they've been. And as we look into Q4, we'll expect we're at least modeling that that will be very similar that foodservice will be in that mid single digits and Vistar will be very similar to what they were in Q3 and convenience also around 7%. It's too early to really understand what's going on with tariffs, to be honest with you.

And as far as the opportunity to pre buy, we'll just have to look at that. That's really going to be as more information becomes available.

Yeah. The only tag on to that I would have is when we think about tariffs, you know, I would say that first off, our biggest concern with tariffs is just the macro environment, you know, and and consumer share of wallet. And if, you know, if automotive or some of those industries have big impacts, how does that affect the food away from home space? When it comes to cost of goods and our actual cost of goods, very minor impact. We import less than 10% of our goods.

And especially with Mexico and Canada with USMCA, it sounds like there's not going to be much of a tariff impact there. And that really minimizes what we think the impact will be to us domestically.

Thank you. And your next question comes from the line of Edward Kelly with Wells Fargo. Please go ahead. Your line is open.

Yes. Hi. Good morning. And thanks for all the color. I wanted to follow-up on organic independent case growth trends.

I mean, sounds like a pretty robust recovery in April, especially off probably what was a pretty rough February. And maybe even a better April, sort of like early May. Just curious, George, to the extent that you think that that's a good run rate for the business currently, are there things that we need to consider maybe around comparisons there? And then given that, the Q4 guidance at the midpoint did come down by $10,000,000 I guess despite the strong start. So is that just incremental conservatism on your part?

Or is there anything else to consider there?

Well, we're gonna be real cautious around the macro environment. What we are seeing now is a real positive, but there's been some calendar differences. These are two really good weeks for us all the time, the week before Cinco de Mayo and Mother's Day week. This week, so far, we are having a really strong week. And last week was our first week that we had ever done, exceeded a billion 300,000,000 in sales.

And like I said, this this week is better. I I don't know that we can take a victory lap around it yet. We'll just have to see what comes up, in the month of June. And I I look at what is a good run rate. If if you go back and and you look at this quarter, we just ended our fiscal third quarter.

If the market was down about 3%, which seems to be what people think, you know, we would have been well above our 6% target, I guess. I don't think that the market is necessarily any stronger today than it was just a matter of a few weeks ago because we don't see it in our national accounts. We've seen a nice uptick in our independent, but the national account looks a lot like April. The other thing I I would like to mention as far as total case with performance, you know, we are very, very large in the casual dining area. You know, we have one that's doing exceptional right now.

We have another one that's doing okay. But for the most part, they are really struggling. And we've been able to overcome that with other business and and obviously with with some growth from independent. So from a top line standpoint, we feel real good going into next fiscal year. And then in our convenience business, which I'll have Scott comment, but we have had some real good wins there, and we are expecting to see much greater growth next fiscal year than we're seeing this fiscal year.

Now I'll turn it over to Scott for a minute.

Yes. Just to reflect a little more on the convenience piece that George mentioned. First off, as I said in the prepared remarks, the macro there has been tough. A lot of the center store categories have been down mid single digits and our convenience segment has outperformed that consistently quarter over quarter. And then we've talked a lot about pipeline opportunities and the selling cycle and convenience being a little slower, but have felt really good about our positioning.

And over the last few weeks, we've had three or four big wins. Those are wins that will roll on over the course of the next well, through the balance of the calendar year. But as George said, I think Convenience is really well positioned. We'll see some more growth out of them into next year. And operationally, they've done a great job margin wise as well.

Then maybe just a follow-up as it pertains to the middle part of the P and L. Gross profit dollar growth despite weaker case volumes were, I think, better than most for modeling. I mean, I don't know about you guys. And it seems like SG and A was maybe a little bit higher. But I'm just curious how SG and A played out relative to your expectations.

Was there, you know, anything, you know, within that that, came in unexpectedly higher? And is there anything there that maybe translates into q four?

Well, you know, February was our difficult sales month. It was also a difficult expense month. We shipped a lot of product out that turned around and came back. And, you know, that impacts your payroll, but it impacts your shrink. It's it's just really difficult to to go through a period like that, but that is behind us.

And the other thing we've continued to do, Scott mentioned that we have 8% more salespeople, and we've just made the decision that, we're looking at that the way we always look at it. And even though it's a slow market for us to to back off from continuing to move forward there, it's just gonna hurt us in the future. So we're living with, you know, if you if you look at just from a percentage standpoint, when you're growing your people eight percent and you're growing your cases 3.4% looking backwards, that's going to cost you some money. And we're willing to spend that money, and we think we're making the right decision there.

Thank you. And your next question comes from the line of Alex Slagle with Jefferies. Please go ahead. Your line is open.

All right. Thanks. Good morning. I think you talked about convenience trends in April, underlying trends maybe improving and maybe you can clarify that and whether that had to do with fuel costs moderating if that's starting to be any kind of tailwind. I know it's been challenging.

And then on convenience, I know the 4Q lap is is really tough. Maybe some color on how we should think about that dynamic as, you know, we we go through modeling and, you know, trying to see whether that can grow year over year.

Yeah. I wouldn't say, Alex, that we've seen any improvement in the industry itself. We just have a little better penetration, and we've got some nice new business coming on. So that's what gives us the confidence. We are certainly hopeful that the industry itself is is going to improve, but that's not, something that we've seen, you know, at this point.

Yeah. And Alex, I'll just add on on the q four convenience. Thanks for pointing that out. I think, you know, if if they didn't have that lap from prior year and have to comp, we'll be seeing, close to double digit or double digit EBITDA growth in the fourth quarter. So we're still very happy with the trends that convenience has been able to deliver on the bottom line, and that will continue into the fourth quarter except for comp that you brought up.

Okay. And then with the restaurants, were there any changes between kinda underlying volume dynamics and the chains versus independents worth calling out? I think you touched on it. I I didn't catch that.

Well, we're certainly seeing, you know, once again, this is just the last few weeks, but we're seeing the independent doing better. I don't know that that reflects on the industry or reflects on our customer base. Unfortunately, we haven't seen any real improvement in casual dining. We do have some QSR business that has been doing fairly well. Any comments beyond that, Scott?

I think that probably covers No. I think that covers it. Yeah.

Thank you. And your next question comes from the line of John Heinbockel with Guggenheim. Please go ahead. Your line is open.

Hey, guys. Wanted to start with cases per account or cases per line rather, right? So if lines were up 4% or so, and I think you said comp location is flat. So is that right that cases per line down four, drop size kind of flattish? And are we seeing an inflection in drop size?

Right? Because I think you were down, but now it looks like April and go forward, you might actually be up.

Yes. Another one of those, John, that it's February. And in the month of February, we didn't see that much of a decline in lines, but we saw a a big decline in cases per order.

Okay. But I mean, you know, point being, have we seen now a sort of an inflection in drop size, right? Because if drop size can now increase, right, because lines per lines per account are, you know, up whatever three or four cases per line or flat down slightly. Are we now seeing an inflection there in drop size?

Yes, John. As you pointed out, clearly our lines are up per account, but our drop sizes remain relatively flat. So when you think about our growth, almost 100% of our independent growth is driven by new accounts and driven by lines per order. I mean that's really what's getting us there. It's really the new account growth.

So the stops aren't getting bigger right now.

And one last thing for Scott, right? When you think about the opportunity on the convenience side, I'm curious what percent of your base has now adopted all of your prepared or most of your prepared food programs, right, pizza, chicken, etcetera? And then do you think you're getting a mid to high single digit lift on those accounts that do adopt those programs in prepared food?

Yes, John. The way I'd answer that is I'd say we're still in the second or third inning as far as foodservice goes. The number of concepts that we place is growing significantly. Every month, every quarter, we add a lot of turnkey concepts into convenience. But when you think about 50,000 stores that we have, we've got a long runway ahead of us.

I think we're getting better at it. Our convenience segment is doing really well there. And to your point, in foodservice, whether it be coming out of convenience or whether it be coming from PFS in the convenience, we're growing in that mid single to low double digit range on a pretty consistent basis.

Thank you. And your next question comes from the line of Kelly Bania with BMO Capital. Please go ahead. Your line is open.

Hi, good morning. Thanks for taking our questions. George, was just wondering how you are seeing, you know, smaller competitors and other competitors react to this environment. Obviously, February was was very tough, but it feels like it could remain volatile here. And so just is are you seeing others react more with respect to cost and service levels?

And is that creating any areas where you can lean into, from a market share perspective?

Well, I would say that the market is more competitive than it has been, really in quite a while, probably going back to to the, great recession. And I think that's normal when when you have volume harder to get. I think things are gonna get more competitive. As far as smaller competitors, if you consider the the information that's made as far as how the restaurant part of the industry is doing versus what we see on our Surcana report, I think it shows that the large distributors are continuing to get a bigger market share than than the smaller ones would be getting.

And and I guess on that note, on competition, are you seeing any change in competition for the Salesforce in terms of the the talent you're able to hire, the cost of of hiring that talent? Any color on that front?

We're not seeing any change there at all. We are we have a a great pipeline of salespeople that are available that have experience, and that's why we're part of why we're continuing to grow our Salesforce at the rate we're growing it.

That's very helpful. And and and last one for me, I know you have the the analyst day, coming up in a couple of weeks here, but, lots of questions on on, you know, what that guidance could look like. And just curious if you wanted to give us any bit of a teaser for, how to think about, your plans for for the next, several years.

Hey, Kelly. This is Patrick. I'll just jump in here. We're very excited to see all of you at Investor Day, and we'll be really happy to share the guidance at that time. Thank

Thank you. And your next question comes from the line of Brian Harbour with Morgan Stanley. Please go ahead. Your line is open.

Yes. Thanks. Good morning, guys. George, that comment about competition, I mean, is that is it sort of like changes in price at margin? Is that what you're referring to?

Well, you know, I think that we're an industry that's pretty rational, but we all wanna grow. And I think that when growth is hard to come by, I think people get more competitive. We're certainly looking closely at our pricing, looking closely at our cost structure all the time. And then I would say that the prepaying or, you know, upfront monies are certainly something that, has become more commonplace in our industry. Other than that, I really don't see changes.

Okay. Thanks. With Vistar, or I guess, Specialty now, did you sort of expect it to be a bit slower quarter there? I guess, and also just as I think about kind of the future growth rate, would 4Q look similar? Have you seen kind of recovery in that business too?

Performance Food Group (PFGC) Q3 2025 Earnings Call Transcript

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