Analyst Note
| Rebecca Scheuneman, CFA |We think no-moat Performance Food Group (PFG) is performing well in the current environment. Excluding the Core-Mark acquisition, third-quarter sales advanced 24% driven by 8.3% case volumes and 13.6% inflation, essentially in line with our forecast. In the food-service segment (51% of period sales) PFG continues to expand its market share per management, despite narrow-moat Sysco’s push into Italian eateries, where PFG has a stronghold. It appears that consumers are experiencing pizza fatigue after heavy consumption during the pandemic as growth in this market slowed in the quarter. We suspect the slowdown could also be attributed to inflation, given the steep rises in wheat and dairy prices. But the overall food-service market remained strong during the quarter. Per Census Bureau data, while a spike in COVID-19 cases caused some softness in January, food-service sales have been strong since February, with no sign of consumers reverting to at-home dining in the face of accelerating inflation. This applies to PFG’s convenience store segment as well (43% of sales), a channel where sales have historically been hindered by higher gas prices. While sales have remained resilient to date, the trend bears watching.