ROSEMONT, Ill. – A disappointing second quarter earnings report from US Foods Holdings Corp. overshadowed the company’s announcement of a major acquisition and weighed heavily on shares of US Foods.
Net sales for the second quarter ended June 30, 2018, were flat at $6.2 billion compared to the year-ago quarter. The company attributed the result to inflation in the grocery and dairy categories which was offset by deflation in pork and poultry combined with a decline in case volume. Sales from acquisitions completed during the last four fiscal quarters raised net sales by roughly 0.7 percent, the company added.
Net income increased to $126 million, or $0.58 per diluted share, up from $65 million, or $0.29 per diluted share, in the year prior. Diluted earnings per share for the period were and adjusted diluted EPS was $0.57.
Total case volume eased 0.9 percent from the second quarter of 2017, with organic case volume declining 1.5 percent. Independent restaurant case volume climbed 3.8 percent, of which 2.7 percent was organic growth, US Foods reported. Select chain customers leaving US Foods was the primary driver behind the decline in case volume.
“Our focus on improving profitability across our customer base is continuing to deliver positive results, with gross profit per case expanding $0.16 from the prior year,” said Chairman and CEO Pietro Satriano. “Adjusted EBITDA grew a solid 4.9 percent for the quarter. While our volume growth with independent restaurants was solid, it fell below our expectation, mostly due to some operational challenges. We are working diligently to address these, and we expect to see accelerating volumes in the second half of the year.”
Operating expenses declined 2.0 percent in the quarter to $908 million. Higher wage and benefit costs raised adjusted operating expenses 1.0 percent to $806 million.
For the six months ended June 30, 2018 net income increased $101 million to $193 million. Diluted earnings per share for the first six months was $0.89. Adjusted diluted EPS of for the second quarter was $0.92
Net sales increased 0.3 percent to $12.0 billion.
US Foods is forecasting total case volume growth to approach flat compared with previous guidance of 1 percent growth. The company’s outlook for net sales growth is for 1-2 percent, adjusted gross profit dollar growth of approximately 3 percent, adjusted EBITDA growth of 5-7 percent and depreciation and amortization of $330-$340 million.
All other fiscal year 2018 guidance numbers announced in February remain unchanged including adjusted diluted earnings per share of $2.00-$2.10.