Summary
Management framed the quarter as evidence that diversification and sales execution can offset a choppy restaurant environment, with stronger growth expected in fiscal 2027.
- 6.5%6.5% independent case growth exceeded the 6% benchmark, with new accounts driving most gains and penetration improving in existing accounts.
- Florence facility ramp costs weighed on Chaney Brothers’ second- and third-quarter expenses and remain partly embedded in fourth-quarter outlook.
- Specialty revenue growth did not translate into EBITDA growth as margin comparisons and shipping and fuel costs pressured results.
Guidance
- Low- to mid-single-digit inflation for the remainder of fiscal 2026.
- 27%Full-year fiscal 2026 tax rate close to the historical range of around 27%.
- 70 bpsFiscal 2026 capex below the long-term target of 70 basis points of net revenue.
- Loves and RaceTrac business to remain an incremental convenience benefit through mid-fiscal 2027.
- Fiscal 2027 foodservice volume expected to benefit from a robust new-chain pipeline.
Notable disclosures
- 5.4%5.4% new-account growth represented the majority of independent case gains; total cases grew 6.5%, indicating improved penetration.
- Customer First has multiple deployed AI agents supporting customer and salesperson product research and order placement.
- Convenience has visibility into additional customer wins and offsetting losses, but management said none approach Loves or RaceTrac in size.
- $83.11$83.11 was the average cost per share repurchased during the quarter.
Risks raised
- Low-single-digit restaurant foot-traffic declines persisted, while foodservice inflation was 1.5% amid deflation in cheese, poultry and eggs.
- Specialty EBITDA declined year over year as prior-year inventory gains were lapped and shipping and fuel costs rose.
- Chaney Brothers incurred higher-than-anticipated second- and third-quarter expenses from infrastructure investment, with some costs continuing in Q4.
- Convenience inflation reached 7.9%, driven partly by tobacco and candy.
Tone: Positive 0.67
The tone was confident on independent and convenience growth, cash generation and fiscal 2027 momentum, tempered by specialty pressure and ongoing investment costs.
Who spoke
Company
- Bill MarshallInvestor Relations
- Scott McPhersonChief Executive Officer & President
- H. Patrick HatcherEVP & Chief Financial Officer
Full transcript
Analyst questions are marked with a bar. Timestamps are into the recording.
Prepared remarks
Good day, and welcome to PFG's Fiscal Year Q3-26 Earnings Conference Call. If you would like to ask a question at the conclusion of the prepared remarks, please press the star key, followed by the number one on your telephone keypad at any time. I would now like to turn the call over to Bill Marshall, Senior Vice President and Ambassador Relations for PFG. Please go ahead, sir.
Bill MarshallInvestor Relations
Thank you and good morning. We're here with Scott McPherson, PFG CEO and Patrick Hatcher, PFG CFO. We issued a press release this morning regarding our 2026 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 the results in the same period in fiscal 2025.
Any reference to 2025, 2026 or specific quarters refers to our fiscal calendar, unless otherwise stated. The results discussed on this call will include GAP and non-GAP results adjusted for certain items. The reconciliation of these non-GAP measures to the corresponding GAP measures can be found at 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 statement 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.
With that, I'd now like to turn the call over to Scott.
Scott McPhersonChief Executive Officer & President
Thanks, Bill. Good morning, everyone, and thank you for joining our call today. I'm excited to share our results from the third quarter, which demonstrates the strength of our strategy, solid execution in the field, and building momentum that we expect to continue through the fourth quarter and end of fiscal 2027. At our investor day last May, we laid out the long-term vision for the company.
Central to this plan is leveraging the diversification of our business across the entire food away from home market. We believe that our broad position across the U. S. is a unique strength for PFG and will result in many years of sustained growth. The most recent quarter demonstrates the benefits of this strategy. There's been much discussion about the challenges facing our industry, including softfoot traffic in the restaurants, price inflation, major weather events, and political disruption.
Despite these items, we were able to achieve the high end of our guidance outlined in February, exceeding expectations in several of the metrics that underpin our projections. All three of our operating segments displayed positive signs of resilience and a strong foundation to grow upon in future quarters. Let's discuss some of the business highlights from the quarter in each of our businesses. I'll then turn the call over to Patrick, who will review our financial performance and updated outlook for the fiscal year.
Starting with our food service segment, strong sales execution combined with discipline margin management translated into high single-digit, even dog growth in our food service business, excluding Cheney. This performance underscores the durability of our food service model and our ability to grow profitably, even in a choppy, macro environment. Our ability to gain market share and grow independent cases has been a strength of PFG's business throughout our history.
Consistent with that theme, we are incredibly proud of our sales organization and their independent performance in the third quarter. Of the period, independent cases accelerated from the second quarter growing 6.5%, exceeding our stated benchmark of 6%. Our performance was the result of consistent market share gains through the quarter and wallet share gains from existing customers. That new account growth was approximately 5.4% as account wins continue to drive the majority of our case growth.
At the same time, we were pleased to see a 100 basis point differential between new account growth and total case growth, which indicates positive trends and account penetration within existing accounts. This performance occurred within a backdrop of consistent low single-digit foot traffic declines according to black box, demonstrating the strong execution of our sales force. Our focus on recruiting, training, and incentivizing our sales force is a key factor in our multi-year outperformance within the independent restaurant space.
We continued to strengthen our talent and sales team by providing them with industry leading brands, technology that enables great customer engagement, and once again, we increased our head count by mid-single digits compared to the prior year.
Double clicking on technology, we continue to see excellent traction from our online ordering platform customer first. Since highlighting this technology at our investor day, we have deployed multiple AI agents that provide our customers and salespeople a digital partner with researching items, recipes, and products to place the optimal order. Customer first is not only a powerful tool for a restaurant business, but will become a cross-company collaboration that defines our PSG1 initiative.
Turning to our chain business, we saw case volume increase in the third quarter. This was particularly impressive given the difficult backdrop that chains have experienced and reflect our efforts to partner with growth concepts. Also encouraging is our pipeline of new chain business, which is robust, and should provide a lift to our food service volume performance in fiscal 2027.
Before turning from the food service segment, a few comments on Chaney Brothers. In the third quarter, we continue to see strong sales growth from Chaney, particularly with independence where cases grew north of 6% as did a sales head count. Their growth culture remains vibrant and their brand portfolio is growing, providing additional sales and margin opportunities ahead. Critical to continue in this growth are the investments we have made and their physical infrastructure discussed last quarter.
The headline investment is our recently opened state-of-the-art broad-line distribution facility in Florence, South Carolina, which started shipping to existing and new customers towards the end of the second quarter. This new facility will not only provide room to grow in the Carolinas, but will also free up capacity in other facilities in the southeast. We are making investments today that will pay dividends in future periods.
These activities did cause higher than anticipated expenses in the fiscal second and third quarters, and we have embedded a continuation of some cost items in our fourth quarter outlook. As we move through the fourth quarter and into fiscal 2027, we are confident Chaney will become a significant contributor to our revenue and profit growth moving forward.
Turning to our convenience segment results, I'm extremely proud of how our former associates have risen to the occasion and led our company in revenue and even our growth. For the past two quarters, we have discussed adding two meaningful pieces of business with loves and racetrack. While exciting, these types of large customer wins also bring potential execution risk.
I'm proud to say that Quomark has done a great job onboarding these customers and continues to work tirelessly to execute while building strong and lasting partnerships with these iconic convenience retailers.
The results speak for themselves. Convenience delivered 8.3% organic case growth and 8.7% total revenue growth in the quarter and an outstanding 34.1% adjusted EBITDA performance. While the top line performance is certainly impressive, Quomark's ability to deliver on volume increases of this magnitude exemplifies the commitment this organization has to its customers. As I said at the onset of the call, PFGSpires to be the leader in the food away from home space and this diversification has played a significant role in the success we are seeing with Quomark.
Quomark has leveraged the broader enterprise to develop food expertise, expanding its food and brand portfolio, providing customers with a differentiated offer. That coupled with great customer facing technology, strong supply chain execution and a focus on building lasting partnerships has resulted in significant market share wins for the segment.
Looking ahead, the addition of Loves and Race Track will continue to be an incremental benefit to our convenience performance through mid fiscal 2027. We have visibility into additional customer wins and some offsetting losses, though not nearly the size of either of these two pieces of business. We believe the outlet for a convenience segment is bright and we continue to resonate with customers looking for a partner to help them drive their business performance.
Finishing with our specialty segment, this is a unique asset within the PFT portfolio as there is no pure play competitor that has the reach of VISTAR and the candy snack and beverage market. As a result, we are able to pursue a range of business opportunities for long term growth. An example of this is the continued expansion into the e-commerce fulfillment space.
While still a relatively small channel for us, our ability to ship direct to businesses and consumers across the U. S. makes VISTAR an attractive partner for a wide array of businesses and manufacturers trying to reach their end consumer. VISTAR also continues to benefit from growth in other emerging channels, including specialty grocery and campus retail. It is currently pursuing additional avenues that we are confident will fuel future growth.
During the quarter of growth across most of specialty channels drove solid top line performance. Case growth of 1.1% produced a 5.3% revenue increase year over year. During the quarter, specialty saw difficult margin comparisons, including lapping higher prior year inventory gains. Expenses in the third quarter were also elevated due to shipping and fuel costs resulting in negative EBITDA performance in the quarter compared to the prior year period.
Despite a challenging quarter, the specialty segments attracted overall margins and prospects for continued revenue performance give us a high degree of confidence in their long-term profit opportunities. To summarize, all three of our operating segments contributed nicely to our top-line growth, allowing us to achieve sales results at the top end of the guidance we laid out in February.
Our adjusted EBITDA came in above the high end of our guidance range, even as we invested in our business to support future growth. This performance was possible because of our diversification efforts and share gains across the U. S. food away from home market. I'm excited for the final months of fiscal 2026 and expect a nice acceleration in fiscal 2027, putting us all on track to achieve our three-year targets laid out last May.
I'll now turn the call over to Patrick who will review our financial performance and outlook. Patrick?
H. Patrick HatcherEVP & Chief Financial Officer
Thank you, Scott, and good morning. Today, I will review our third quarter financial results, provide color on our financial position, or review our Titan guidance for 2026.
PFG's total net sales grew 6.4% in the third quarter with growth in all three operating segments and particular strength and convenience. Total company cases increased 4.4% during the quarter, highlighted by 6.5% organic independent restaurant case growth and an 8.3% organic case gain for our convenience segment. We are very pleased with the contribution from the addition of the loves and racetrack business which accounted for the majority of the growth in convenience.
Total company cost inflation was approximately 4.5% for the quarter in line with what we experienced in the prior quarter. Food service inflation of 1.5% was slightly below recent trends with continued deflation in the cheese, poultry, and egg categories somewhat offset by higher inflation and beef. At the same time, while cheese and poultry remained deflationary on a year-over-year basis, we did not see the dramatic declines we experienced during the fiscal second quarter and as a result, these items were less impactful to our overall financial results.
Especially segment cost inflation was up 5.1% year-over-year, about 25 basis points lower than the prior quarter, mainly the result of candy and hot-trink price inflation. Convenience cost inflation increased 7.9%, slightly higher than the prior quarter due to inflation in tobacco and candy.
The inflationary environment has been active over the past several years, but as a company, we have demonstrated our ability to handle a range of outcomes. We expect the inflation rate to remain in the low to mid-single-digit range for the remainder of fiscal 2026.
Moving down the P&L, total company gross profit increased 6.4% in the third quarter, representing a gross profit per case increase of 20 cents as compared to the prior year's period. This improvement was driven by strong mix, execution of our procurement initiatives outlined at our investor day, and continued execution of our brand strategy. We are very pleased with our gross profit results, which demonstrate our ability to execute on our priorities outlined in our three-year plan. In the third quarter of 2026, PFG reported net income of $41.7 million, a 28.5% decrease year-over-year due to an increase in operating expenses.
Adjusted EBITDA increased 6.6% to $410.6 million. Deluded earnings per share in the fiscal third quarter was 27 cents, while adjusted diluted earnings per share was 80 cents, an increase of 1.3% year-over-year. Our EPS was impacted by below-the-line items, including higher interest and depreciation expense. Our effective tax rate was 25.4% in the third quarter, a slight decrease from 25.8% last year.
We expect our full-year 2026 tax rate to be close to our historical range of around 27%. Turning to our financial position, cash flow performance. In the first nine months of 2026, PFG generated over $1 billion of operating cash flow, an increase of approximately $245 million compared to the same period last year. We invested approximately $266 million in capital expenditures during the first nine months of 2026. We have been diligent around new capital projects and expect full-year 2026 capbacks to be below our long-term target of 70 basis points of net revenue.
The organization is striking a good balance of investing in infrastructure and high-return projects to support our long-term growth while maintaining excellent free cash flow performance. In the first nine months of 2026, we generated $806 million of free cash flow, of $312 million compared to last year. We are extremely pleased with our cash flow performance. We are fully committed to investing back into our business to support our growth.
And as you can see from our nine month results, we are generating significant cash flow to find this investment. During the quarter, we repurchased a total of $1.2 million of our stock at average cost of $83.11 per share. We will continue to be opportunistic around share repurchase, where our priority remains debt reduction and investing in our growth. The M&A pipeline remains robust, and we continue to evaluate strategic M&A. PFG has a history of successful acquisitions to drive growth and shareholder value, and we expect that to continue. 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Other Performance Food Group earnings calls
- Q4 2026 earnings call
Management framed FY27 as an acceleration year, with growth across all three segments and procurement savings building through FY28.
Aug 12, 2026Confident0.72 - Q2 2026 earnings call
Management framed the quarter as resilient despite weaker traffic, while emphasizing share gains and confidence in its three-year strategy.
Feb 04, 2026Mildly positive0.35
Done reading? Open Performance Food Group with the chart, filings, and estimates next to this call.
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