Labor Cost Inflation Constrains No-Moat Performance Foods' Profits and Shows Little Sign of Abating
Performance Foods' shares retreated to the tune of a mid-single-digit percent following third-quarter results that included 3% organic case growth and a 10-basis-point erosion in adjusted operating margins to 1.4%. We attribute the market reaction to the profit pressure eating into its already modest margins and management’s cautionary tone surrounding the added costs to attract and retain labor (particularly within its delivery and warehouse operations). However, with just one quarter remaining...Performance Food Group is a holding company. Through its subsidiaries, the company markets and distributes food and food-related products. The company's products include frozen foods, such as meats, appetizers and entrees, fruits, vegetables, and desserts; canned and dry foods; fresh meats; dairy products; beverage products; imported specialties; fresh produce; and candy, snack, and other products. The company also supplies non-food items including paper products such as pizza boxes, disposable napkins, plates and cups; tableware such as china and silverware; cookware such as pots, pans, and utensils; restaurant and kitchen equipment and supplies; cigarettes and other tobacco products; and cleaning supplies.
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