Performance Food Group (PFGC) Q4 2026 earnings call transcript

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 fourth 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 or 2026 or specific quarters refers to our fiscal calendar year, unless otherwise stated. The results discussed on this call will include GAAT and non-GAAT results adjusted for certain items. The reconciliation of these non-GAAT measures to the corresponding GAAT 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 FCC filings for various factors that could cause our actual results different materially from our forward-looking statements and projections.

With that, I'd now like to turn the call over to Scott.

Thanks, Bill. Good morning, everyone. And thank you for joining our call today. This morning, Patrick, and I will review our results for 2026, discuss industry trends, and walk you through our expectations for 2027 beyond. As we close out the fiscal year, I'm proud of the passion, dedication, and resilience shown by our 44,000-plus associates. The year certainly brought a share of challenges as consumers continue to navigate higher prices. Distributors faced operating cost pressures and external factors weighed on the broader food away from home industry.

Despite these headwinds, our team rose to the occasion and posted excellent results. We are excited about what 2027 has in store for performance food group. Our company is well positioned to build upon recent trends and accelerate our financial performance. For the upcoming fiscal year, we have visibility into revenue, margin, and profit opportunities, positioning us favorably to achieve our three-year outlook.

Headlining our performance in 2027 is anticipated growth across all three of our business segments. The foundation of that growth is our continued investment in our sales organization, sales technology, and most importantly, our customer relationships. In food service, ongoing market share gains with independent restaurants, recently awarded national account business, and a strong pipeline of opportunities positioned the segment well for another year of solid growth.

In convenience, we look to benefit from the momentum generated by our 2026 market share wins, supported by a healthy sales pipeline and continued out performance relative to industry trends. Our differentiated value proposition, scale, and customer service capabilities continue to resonate in the marketplace and create opportunities for profitable growth. Specialty enters 2027 with strong sales momentum, expanding opportunities across new verticals, and significant long-term potential in e-commerce.

Together, these growth drivers reinforce our confidence that all three segments are well positioned to contribute meaningfully to PFG's performance in the year ahead. From a margin perspective, we continue to benefit from our scale, growth profile, and vendor relationships as we work to achieve the $120 to $125 million procurement synergy target we outlined at our investor day. I'm confident we will meet or exceed the high end of that target by the end of fiscal 2028.

Additionally, we launched over 580 brand SKUs in 2026, bringing our total number of branded SKUs to approximately 25,000 across more than 85 brand families. Our customers and sales organization find tremendous value in our high-quality brands, and we see this as a competitive advantage in the market.

Lastly, let's touch briefly on our commitment to drive operational efficiency and safety results. In transportation and warehouse, we continue to make significant investments in infrastructure, technology, and staff, building a foundation to efficiently onboard future growth. On the safety front, I can only thank our people and the work they have put in the PFG's safety culture as 2026 reductions in accidents and injuries, benefiting insurance costs.

Taking a step back, let's now discuss some of the highlights from the quarter across our three business segments. Our food service results can be summarized in one word, consistency. Through the ups and downs of the external market, our organization has delivered independent case growth, market share gains, and margin improvement. We closed the fourth quarter with 5.8% organic independent case growth, putting our full year improvement at 5.9%. In the context of the external environment, these numbers are powerful in a testament to our sales organization's connection with their customer base.

According to black box, foot traffic trends in the restaurant space were consistently negative every month of fiscal 2026. However, by adding new independent accounts at a pace of roughly 5% in the fourth quarter, gaining wallet share with existing accounts, we have continued our pace of market share gains. A key driver to our continued independent performance is our unwavering focus on our selling organization.

Investments in high-performing sales associates, customer-facing technology, and continuous expansion of our brand portfolio will continue to be foundational in our success.

Our PFG brand portfolio grew faster than our overall business and represented approximately 54% of cases sold to independent restaurants during the fourth quarter, excluding Chaney Brothers, or just over 50%, including Chaney. We see our brands as a competitive advantage with a long runway of profitable growth ahead. In our chain restaurant portfolio, we saw case volume decline slightly in the quarter, though still outperforming the foot traffic results reported by black box. We are now lapping new account onboarding from last year and anticipate fairly similar results over the next two quarters.

We have visibility to new business in the second half of the fiscal year as we expand our relationship with Jersey Mikes. This additional business will help our chain volume as we progress through the fiscal year.

Looking across the entirety of 26, I'm incredibly proud of our food service segment performance. Despite several headwinds, our food service organization posted nearly 6% independent case growth and nearly 9% revenue growth. As we look ahead to 2027, we believe we can build on our momentum and layer in efficiencies in both gross profit and operating expense to deliver profit growth for the organization.

Shifting gears, our convenience segment continues to be the engine of our profit performance. As new business brands, market share gains, and solid execution converted to mid single digit revenue growth into double digit segment level adjusted eva dot performance. The performance is even more impressive in the context of the industry backdrop, which continues to deal with the impact of high gasoline prices and inflation led pricing across in store product categories. Over the course of the fiscal year, or mark grew sales across all customer account types, national, regional, and independent.

The biggest contributor to this success was our national accounts portfolio led by the addition of loves and racetrack. Overall, national store count grew 16% in 2026, producing 6.9% case growth. Market share growth underpin the success of our convenience segment. In fiscal 2026, core mark grew cases in each of the key non nicotine categories of food service, candy, snacks, and health and beauty.

Taken together, these categories increased mid single digits in the fourth quarter compared to an industry decline of nearly 6%. The result was a sizable pickup and market share. These top line wins are flowing down the income statement, resulting in double digit segment profit growth. Total segment eva dot increased 10.4% in the fourth quarter, driven by gross margin improvement and discipline operating expense controls.

Looking ahead, the addition of loves and racetrack will continue to be an incremental benefit to our convenience performance through mid fiscal 2027. As we discussed last quarter, we have visibility into both additional customer wins and some offsetting losses across the fiscal year. We believe that our ability to service the convenience market with a full portfolio of both traditional center store, consumer packaged goods, and food service items is a key component in our ability to win new business.

Our customer discussions often include representatives from our poor mark segment as well as from performance food service and VISTAR, setting PFT apart from the competition and resulting in higher conversion of our customer pipeline opportunities. Overall, our convenience organization is well positioned to have another strong year in fiscal 2027 and build upon its momentum in the coming years. I will close with our specialty segment, which rounds out our portfolio across the food away from home market.

Specialty certainly wrestled with its own challenges in 26 as persistent candy and snack inflation, a choppy consumer environment and elevated operating costs impacted results for the year. At the same time, there were a number of highlights and reasons for optimism as we moved through 2027. Top line performance for specialty accelerated in each of the final three quarters of the year, finishing with solid 6.6% growth in the fourth quarter.

Case and sales growth was the result of new account wins and positive performance in the vending campus travel and hospitality channels. As we move into 2027, we expect operating cost pressures to persist in the first half of the year eclipsed by continued sales momentum, providing a strong top and bottom line close to the year. Specialty is also in the new markets, which are providing pathways for growth in 27.

By collaborating with our food service organization, VISTA identified opportunities in the specialty grocery channel and began shipping products to various customers in late fiscal 2026. We believe that the unique position VISTA holds with direct to business and consumer opportunities, fresh and frozen shipping and a delivery platform tailored to smaller venues will continue to pave the way for sustainable growth in the diverse food away from home market.

To summarize, we finished 2026 with solid revenue growth from all three of our operating segments, our strategy of competing across the entire food away from home market is paying off and producing consistent market share gains. We believe we were well positioned for an excellent 2027, keeping us on track to achieve our three-year targets. I'll now turn it over to Patrick who will review our financial performance and outlook. Patrick.

Thank you, Scott, and good morning. Today, I will review our fourth quarter results, provide color on our financial position, and review our newly issued guidance for 2027.

PFT's total net sales grew 6.4% in the fourth quarter with growth in all three operating segments and particular strength in food service. Total company cases increased 3.5% during the quarter highlighted by a 5.8% organic independent restaurant case growth. Total company cost inflation was approximately 4.7% for the quarter in line with what we experienced in the prior quarter. Food service inflation of 2.7% accelerated sequentially as we had expected. We experienced continued deflation in the cheese, poultry, and egg categories and inflation in beef.

We did see a deceleration in food service product inflation in July to just below 1%. Especially segment cost inflation was up 5.3% year over year and just slightly higher than the prior quarter, mainly the result of candy and beverage inflation. Convenience cost inflation was 7.1% year over year and was 64 basis points lower than the prior quarter.

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 that overall inflation rates remain in the low to mid single digit range for fiscal 2027. Moving down the P&L, total company gross profit increased 8.3% in the fourth quarter, representing a gross profit per case increased of 34 cents as compared to the prior year period.

This improvement was driven by strong mix, execution of our procurement initiatives outlined in our investor day, and continued growth of our brands. We're very pleased with our gross profit results, which demonstrate our ability to execute on our priorities outlined in our three-year plan. In the fourth quarter of 2026, PFG reported net income of $162.3 million, a 23.4% increase year over year.

Adjusted EBITDA increased 7.4% to $587.5 million, which was at the upper end of our guidance range implied by the full year outlook we provided in May.

Deluded earnings per share in the fiscal fourth quarter was $1.03, while adjusted to eluded earnings per share was $1.59, an increase of 2.6% year over year. Our effective tax rate was 26.8% in the fourth quarter, an increase from 25.6% last year. We expect our full year 2027 tax rate to be close to our historical range of around 26% to 27%.

A note on our exposure to diesel, during fiscal 2026, our team worked to manage the increase in diesel prices through our surcharge program. In the fourth quarter, the net impact from higher diesel expense was approximately $16 million, a sizable increase, but roughly in line with the projection we provided back in May.

Due to the volatility and fuel prices, we have examined our approach to fuel expense. While our strategy has done a nice job of mitigating fuel volatility, we are looking at additional ways to help manage our exposure in the future. In early July, we entered into a diesel fuel swap contract on a portion of the fuel exposure that is not covered by surcharges.

This contract runs for a 12-month period. We are evaluating hedge accounting treatment for our fuel swap under the updated accounting standards, which could allow us to directly offset movement and fuel expense in the operating expense line. Our strategy is to provide additional visibility into our cash flow, reduce volatility, and increase our ability to forecast financial performance.

Turning to our financial position in cash flow performance, over the full fiscal year 2026, GFG generated over $1.4 billion of operating cash flow, an increase of approximately $200 million compared to last year. We invested $384.1 million in capital expenditures during 2026. We have been diligent around new capital projects and expect full-year 2027 CAPX to remain 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 2026, we generated more than $1 billion of free cash flow up approximately $326 million compared to last year. We are extremely pleased with our cash flow, and we are fully committed to investing back into our business to support our growth.

We closed the fiscal year with net debt just below the top end of our two and a half to three and a half times leverage target range, benefiting from disciplined working capital management and strong cash flow. As a reminder, the first quarter is typically a period of investment, and as a result, we anticipate our leverage to remain towards the top end of our range.

The M&A pipeline remains robust, and we continue to evaluate strategic M&A. We will continue to apply our typical high standards and robust due diligence to evaluate high quality acquisition opportunities.

Turning to our guidance, today we share guidance for fiscal 2027. For the first fiscal quarter of 2027, we expect net sales to be in a range of $17.9 to $18.1 billion, and adjusted EBITDA to be in a range of $510 to $530 million. We expect our quarterly EBITDA growth to accelerate as we move through the fiscal year. In addition to new business wins in all three segments, which will help our top line, we have a number of initiatives that are expected to boost our profit results, including an acceleration of our procurement efficiency efforts, comparing against elevated objects related to the opening of the Florence, South Carolina building, and continued progress on cost energy targets related to M&A activities.

For the full fiscal year, our sales targets are a range of $72.5 billion to $73 billion. We expect full year adjusted EBITDA in a range of $2.125 to $2.225 billion. Our full year guidance range includes the benefit of a 53rd week, which will occur in the fiscal fourth quarter and helps results by approximately 2%. The midpoint of these ranges represents year over year growth of 7.2% for sales and 12.7% for adjusted EBITDA.

This keeps us on track to achieve the three year projections we announced at investor day with sales in a range of $73 to $75 billion and just at EBITDA between $2.3 and $2.5 billion in fiscal 28.

To summarize, we are very pleased with our progress. We are in a solid financial position which supports our growth investments and capital return to our shareholders and our execution sets the stage for a strong fiscal 2027.

Thank you for your time today. We appreciate your interest and performance food group. And with that, Scott and I would be happy to take your questions.

Hi, Kelly. This was Scott. Thanks for the question. A lot to unpack there. So let me just start with growth. I think that was really the headline of the question. You know, so when we think about food service, you know, always, you know, internally, we are focused on independent account growth and independent case growth. And so certainly, internally, we're always shooting for that 6%.

And so that will certainly be a driver when we talked about our case volume for national. You know, we were a little bit negative this year. That was largely based on the macro. But we did talk about Jersey mics that will come in on the back half of the year. So that would be a really nice boost in our national accounts. So really a good pipeline beyond that with national accounts. So from a food service standpoint, feel really good about the growth algorithm that we'll see in 27.

Convenience, you know, we obviously have the benefit of loves and racetrack continued strong pipeline there. And their continued out performance. And then, you know, specialty has been a really nice story for the last three quarters. They've accelerated and really have great line of sight to continue growth and specialty. We talked about a couple of new verticals we're working on that are starting to pay dividends. So if we're really, really good about the growth perspective for 27. And I'll just touch on margins and I'll let Patrick talk about the expenses. And from a margin standpoint, again, the mix that I just talked about will really help drive margins.

Then we've talked a lot about our procurement synergies and we have great line of sight as we move through 27. That's going to be a building story, but you know, really have a great visibility into quarter by quarter where we'll see gains in procurement synergy. So Phil, you know, top half of the income statement, we feel great about how we're set up for 27. Patrick, you want to touch on the expense side?

Yeah, Kelly, just a couple more things on OPEX. Obviously, talking about the full year guidance, we're going to see in Q3 and Q4 specifically, we'll start to see easier comps related to the Cheney OPEX that we've talked about for the last couple of cores moving into the new Florence building. As well as, you know, we're obviously had some fuel pressures and at the end of Q3 and Q4 that we'll start to see those E's in the balance of half of this year.

And then finally, is your question on corporate? Again, that's really a segment thing. It's related to safety. We've saw great progress in our trends with our segments. And so that did improve and we saw that benefit flow into corporate and Q4. You know, the trends are in a positive momentum, so we should see some improvement. Lots of different dynamics go into those numbers, but that's all incorporated in the Q1 and the full year guidance.

Okay, and maybe just to follow up, you talked about some good visibility into the procurement savings and the initiative there. Maybe you can just expand on, you know, which segment that will flow through or maybe all of them. And just what you're learning through that process as you have those discussions with vendors.

Yeah, Kelly. It's a great question. And as far as the flow through, most of that flows through food service. That's been the real focus of that initiative. You know, as we move into the back half of the year, we'll also add Cheney's volume to that. So that will certainly help with their procurement synergies as well. And then, you know, as far as the interaction that we've had that gives us great visibility, we've really sat down with our entire vendor community and really walked through, you know, our growth over the last five years and the prospects that that creates for them around efficiency, you know, how we approach the supply chain. So really it's been a, it's really been a win-win for both sides.

And we've had great dialogue and, you know, we've had great negotiations. And through that, you know, it's given us, like I said, great visibility kind of quarter to quarter of win. We'll start to see those benefits flow through the income statement.

Thank you.

Yeah, John, I'll start and then turn it over to Scott on the second question. So on inflation, we did, we did exit the quarter in that range that exactly as we had projected. You know, I think we said sub three and we ended up 2-7. Did call out that July dropped to sub one in food service. Largely, you know, we obviously always are managing a large basket of commodities and we do an excellent job of managing those. What we saw in July is that actually beef is starting to lap this mid-teen inflation from prior year, and now is running kind of a high single digit. So maybe it's early signs of beef normalizing.

And then the other commodities that we continue to see deflation in our cheese, chicken, and eggs. But those have been relatively stable from a month to month standpoint, and I'll turn it over to. And then, oh, I'm sorry, and as far as to how we modeled the year. Food service, we did model in that low single digit around 2% for the year. And the other segments, very similar to how we exited Q4 with the start and mid-single digits and convenience just slightly higher than that.

Hi, John, on the question around independent cases. So you, as you pointed out, really nice quarter as far as penetration.

Most of that was lines per drop. So continuing to benefit from our salespeople and their connection to our customers. You know, I think another big part of that is just the technology that we are now putting in front of our salespeople and our customers. It's really helping with recommendations, you know, new item selection. So that I think that's really been a nice benefit to penetration. So that's been back to back quarters where we've seen nearly 100 basis points of penetration. And again, that's really driven by lines for drop. You know, at the end of the day, though, the real, you know, driver of market share win has been net new accounts. You know, we came in again right around 5%.

You know, so that's four consecutive quarters in that range. And that's going to continue to be the driver. It's really nice to see the penetration. You know, hopefully that continues, love to see that grow. But, you know, again, we're really focused on that net new account number as well. And quick follow-up for Scott.

You guys don't talk as much about labor productivity, but I'm curious, you know, from a margin standpoint, right? Cases per hour per labor hour and cases per mile of ribbon. When you look at going after that and the ability to move the dial, where are we on that?

Yeah, John, I think it's a big opportunity. It's one of the places where, you know, when we talk about technology, I think there's been a lot of conversation in our industry about AI. You know, I'll start with fleet. You know, we have, we've done a lot of work on evaluating fleet utilization as well as our routing technologies. And we deploy, you know, standard software plus, you know, AI enablement that helps that. And so certainly I think there's runway there. We have always been focused on our routing and routing efficiency, but definitely I think there will continue to be runway.

And then the other place is in our warehouse. And I think there's really two things there that I focus in on. One of them is really technology enabled, which is really how we layout our warehouses. So how you slot your facilities to optimize, you know, that pick path. The other thing that we're doing technology-wise is around inventory management. So we have, we have been running a test now and have expanded that, you know, fairly rapidly around inventory accounts using drone technology.

So again, you know, leveraging technology to be more efficient in our facilities. And when I think about metrics, you know, I really look at, you know, we'll call it cases per route. You know, that's a key metric for us. We're constantly focused on improving our cases per route. And then, you know, to your point, it's really, it's either cost per case or, you know, from a selection standpoint. You know, it's how many units of select or selects in an hour. So, you know, it's our productivity metrics that we really hone in on.

Thank you.

Let me, let me start. Scott wants to add some comments. I'm certainly going to do that too as well. I mean, I think, you know, one of the key points is we provide a key one guidance to really show the cadence. At the year, I just want to make sure that we're showing that, you know, Q1, we're exiting Q4 with some strong momentum. But we do have some of those headwinds like fuel still impacting us. And we actually expect the headwind and fuel of Q1 to be very similar to what it was in Q4, maybe just slightly better. And then we'll see our acceleration on the top line, obviously, from the customer stuff that Scott ran through.

But, you know, the things that you're bringing up, we think that as we get into the second half of year specifically, that's when you start to see the benefit of us lapping that off-back from Cheney. And, you know, I think we sized that up in Q3 and Q4 as well. It's probably not as big as you highlighted there. But we do see some benefits there, obviously. And then the fuel becomes neutral to possibly a tailwind as we go throughout the year. But we did plan for fuel to be a higher expense this year based on how we exit a Q4.

And then, you know, we've talked about catchway. And, yeah, so we really think that those are the key factors that are going to help us achieve that guidance. And we're really happy with, you know, where we are. And, obviously, Scott mentioned the procurement savings. Those will ramp throughout all of 27 and all the way through 28. So, again, it's really a year of acceleration.

Yeah, let me just add a couple more things. You know, we're a couple months into the year. I think when we think about guidance, you know, there's obviously a range for a reason. You know, we think about, you know, the current state of the macro and how we're performing. And, you know, certainly if we deliver that, we think about that getting us to the middle end of that range.

If we get some tailwinds, you know, certainly, you know, focus on getting to the upper end. And, you know, then, you know, don't want to talk about it. But if there's headwinds, you know, certainly that could push you to the lower end of the range. And so that's, you know, I think how we think about framing up the range. I do want to just touch on a couple other things.

You know, you brought up Cheney. And, you know, Cheney has certainly been an expense headwind over the last couple of quarters. We'll see that persist a little bit into Q1, but really we've turned the corner there. That's facility and Florence has fully rolled out. That actually is the fastest growing as far as case volume facility in the southeast for us.

So they've really kind of hit the ground running. And the other comment I'd make about just the Cheney infrastructure, we talked a little bit about Jersey Mike's in the back half of the year. And that's, you know, that's volume that we probably wouldn't have been able to bid on or bid on effectively without the infrastructure of Cheney. So, you know, that investment is really going to pay off as we get to the back half of the year and be able to fit in that volume into great facilities, great infrastructure. And, you know, that should really help us deliver, you know, from a bottom line standpoint. So I think Patrick touched on the highlights for me.

It's growth across all three segments. It's procurement synergies. It's lapping some key costs. And then, you know, certainly with Cheney, we'll grow in momentum throughout the year.

Great. In fact, I just asked you on the, you know, the cost savings side. I think I've heard you talk about, you know, sort of like a, you know, greater focus on sort of the middle of the P&L, you know, moving forward and certainly looking at the margins of the company. It seems like they're, you know, from 30,000 feet anyway. It seems like there could be some real opportunity.

Can you maybe just update us on sort of like what you think, you know, you guys can do there over time and the size of the opportunity in terms of a generally more efficient organization?

Yeah. And I'd say from a gross profit standpoint, you know, I was really happy with how we exited the year. I mean, we had one of the best performances in Q4 in GP across the organization that we've had, you know, in the last handful of years. That said, certainly feel really strong in about the procurement opportunity. And I framed that up in my script, you know, as far as the 120 to 125 million, you know, and a good portion of that falls into 27 and 28. And that will build through 27 and continue on in the 28.

When I talked, when you talk more about, you know, efficiency, you know, call that the bottom half of the income statement, I certainly think there are opportunities. I think we've kind of framed that up in our three-year guide, you know, when you talk about, you know, 50 to 60 basis points of margin enhancement. But, you know, the things I talked about earlier on the question from John really about, you know, what we're doing with fleet utilization, where we're leveraging technology in the supply chain, you know, I think that's going to really help us. And so that's, you know, when we trim up that three-year, I think that's how I think about the opportunity is being able to really add, you know, that 50 or 60-bits to even DOM margins.

Thanks, guys. Thank you.

Yeah, great question. You know, one of the things I just wanted to take a step back and, you know, maybe a shout out to our sales organization, you know, to finish the year at 5.9 and change. You know, I've talked earlier on this call about, you know, targeting internally 6%. And we almost got there. I wish we had a six-handle on it, but it was a great year from an independent, you know, case growth standpoint.

In Q4, we were at 5.8, which we were really proud of considering that on a two-year stack, that's right at 12%. So really solid performance there. When I think about the cadence of Q4, we were, I think in April, I think it was right around just under 6%. I think May was right at 6%. And then our exit in June was just sub 6%, just a couple of ticks below. So, and then we entered July kind of in that same range, just a couple ticks below 6%. So, you know, still really focused, you know, for the quarter on the year as a company on being right around that 6% range and feel like we've got the pieces in place to get that done.

Great. And then any noticeable lift from the World Cup or sporting events like that? Thank you. You know, it's a good question. We spent a fair amount of time kind of dissecting the bigger markets. You know, you think about Boston and Kansas City and Dallas and places where we have facilities and quite a bit of presence. I wouldn't say that we saw anything that was earth shattering.

You know, we saw some short-term lift around event days, but really nothing that I would say, you know, volume differential because of the World Cup in our space.

Thank you.

Yeah, and a great question. And as you mentioned, I mean, this year was, I wouldn't call this a normal year from a growth standpoint. I mean, we had an exceptional year, too big, you know, iconic retailers. So certainly drilled case growth and sales growth in the higher single digit range. You know, I would say historically, convenience is, you know, low single digit range revenues.

And, you know, really strong, you know, high single digit, low double digit EBITDA performance. That's how I think about a normal convenience algo for that segment. As I think about 27 and how that's going to frame up, I mean, certainly we'll see some nice benefit in the first couple of quarters from loves and racetrack. In the back half, we certainly have some really nice pipeline opportunities that will help us in the back half. We have had a couple of competitive losses that I would say were just priced at a level where we weren't going to stay there.

But feel, you know, like that segment, you know, I go back five years, that segment is continued to gain share quarter over quarter, year after year. And so I think the back half of the year setup is really strong. You're going to see nice growth, continued market share gains, and I see the dot performance for them. You know, even as we laugh loves and racetracks. So I think it's, you know, they're set up for a really solid year.

Great. And then I wanted to follow up on like operating leverage. So 26 driven by growth profit. We've talked about some of those dynamics. How are you thinking about growth margin versus objects in fiscal 27? And I just want to clarify the Cheney piece. Are you saying you expect Cheney to remain a slight drag in Q1? Or is it just not a headwind in Q1 and starts to become a tailwind in Q2? Just trying to understand that. Thank you.

Yeah, maybe I'll take the first part. And yeah, so Lawrence, we go in at 27. We actually, you know, one is we highlight or Scott highlighted, our growth profit margin was really strong for the total company in Q4. And for food service, you know, 15% was very strong. Probably the best it's been. And we continue to see really nice growth profit accretion due to our mix, due to the procurement initiatives.

And so we should see some really nice leverage again. And Scott's highlighted all the activities that we're doing around below the bottom half of the P&L on OPEX. So we do believe that we will see nice accretion. And again, it's an acceleration as we go throughout the year. So again, as I mentioned, we're going to see more fuel pressure this quarter, but we do expect that all to dissipate as we get into the comps in the back half of the year.

Yeah, Lauren, I'll take the second half around Cheney. So one of the things to remember about them is seasonality wise. They're kind of contour the rest of the country. So this is really a soft quarter for them, our Q1. They build in Q2 and Q3. That's really their season. So, you know, I would say they're, you know, minimal headwind to neutral in the first quarter, but they're more minimal really build as we move throughout the year. And the reason we have so much confidence in that is, you know, I mentioned earlier, the Florence facility is fully operational, operating really well and growing faster than any Opco that we have in the Southeast right now. So that's, you know, I guess one headline.

The other piece would be the Jersey Mike's I mentioned and being able to flow that into not just the Cheney facilities in the Southeast. We are, you know, that will flow into some of our legacy facilities as well, but without Cheney, that would have been a real challenge. So that really makes it, you know, a great opportunity for us. And then we've talked about structurally as we get into the two year lap of that acquisition, which is in October.

There is some structural costs to come out in October. They start coming out for next year. And then we are starting to, with our brands, with our procurement initiative to incorporate, you know, Cheney into all of those activities. And so we, we have, you know, a great line of sight to building synergies with them as we move through 27 and into 28.

Great. Thank you very much.

Yeah, Alex, thanks for the question. So as we look, you know, what we saw in Q for. And we go forward into, you know, 27 guidance below the line items. You know, I think the street did a really nice job of modeling some of those below line items. Interest expense specifically should stay relatively flat for the balance of 27.

We'll see some improvement towards the end of 27. But I think if you would model it very similar, how we exit a Q for that will be a good direction.

Time then on head count growth in the service business in the fourth quarter. I know you're laughing some really. Strong growth last year. Of course, it's 9%. I get some color on that and what to expect for 27 as you go for that. It's percent. Case growth target.

Yeah, no, absolutely. And as you pointed out, we had a, you know, really strong year last year in head count growth. I mean, we were 8% plus for most of the year. And I think some of that, that was, you know, I think heightened a little bit by some of the activities that were going on with competition and changes they were making in their model. So it was really nice opportunity for us to pick up really quality head count. You know, through this whole year, I'd say it's been very consistent. We've been right there in the mid signal digit range finding great talent available in the market. And, you know, I've said many times I don't have a, a target or a mandate on our opcos.

You know, I really rely on the opcos and our opco presidents to determine, you know, their correct level of staffing. And as I look, opco to opco, we may have opcos that are hiring, you know, double digits right now because they see great growth opportunity and they know that they need to get people in place to satisfy that. And we have other opcos that feel like they've got the right head count and they may be hiring low single digits. So I'd say, you know, like I said, really up to them. I think as a company, we feel really comfortable in that mid single digit range. And, you know, I think that, you know, I would be surprised if that's what we saw continue through 27.

Thanks a lot. Thank you.

Yeah, so a good question. Obviously, when we think about how we look at our capital allocation, you know, we are continuing to look at how we reduce our leverage paid on debt. And then we're also, and we're really happy that we got within the two and a half to three and a half times leverage range. That's our target. We also are still investing in capacity. I mean, we're a growth company and we continue to invest in growth projects for primarily food service, but across all three segments.

And we're obviously still looking at M&A. The share repurchase program is something we look at all the time. It's not the top three priorities, but it becomes a bigger priority as we get further within our leverage range.

That's helpful. And then maybe just on technology, just kind of curious where you are within the PFG one journey on this. You know, are you beginning to harvest the data procurement and operating benefits of the technology? Or would you say you're kind of still in an investment and implementation phase with most of the benefits of technology still ahead?

Yeah, that's a great question. You know, technology is for us is, you know, obviously, I think for everybody, it's been a journey. I'd say that, you know, the one thing that our exploration around AI has really helped us with is, you know, data assimilation. And so we have a number of initiatives going on around technology and AI.

You know, everything from, you know, just organic users that are using large language models to our customer facing technologies that has a lot of AI enablement to get to the specific of your question. You know, one of the things that we are working on today with a couple of external partners is, you know, I'll call it master data management.

And that is really being able to assimilate data across all three of our business segments. And, you know, what that does for us is allow us to, you know, work with customers interchangeably, also allows us to start to look at procurement and supply chain and logistics opportunities. So certainly we are in the, I'd say, still the early innings of that exploration, but we are doing a lot of work to, you know, to figure out how we leverage that.

And then outside of technology, you brought up PSU one, you know, that's one of the things that I'm really proud of our segment leaders. You know, we have three leaders, a leader for each segment. And they work together day in and day out and then the amount of cross cell that we do today, you know, where we have, you know, food service off codes that are supporting, you know, convenience stores across the country. You know, and collaboration, we mentioned it in our script where we have, we have our e-commerce platform through specialty doing small wares distribution for restaurants today.

So there are numerous examples of where our segments are working together under that PSU one umbrella. And technology is just, you know, another leg to that stool, but feel really good about how our segments are working together to create, you know, synergy and momentum. And it really helping us drive growth.

Thank you very much. Thank you.

So the acquisition impact here, are you talking specifically about Chaney? No, cash way that you did. Okay. Yeah, yeah, for sure. So cash way, you know, we haven't called out revenue specifically. It's, it's south of a billion dollars in total revenue. The one thing that's, that's unique about cash way, it's kind of a reflection of, of PFG overall. So they are, you know, very much in broad line food service.

A good mix of independent and chain and regional volume. But the other thing that's unique about cash way is they are also very much in the convenience store space. So they sell a full line of convenience store products and have a number of convenience store customers. That's a big part of their portfolio. So when you look at them, you know, from a revenue standpoint, I kind of gave you that. When you look at them from a margin profile, you know, I think of them as something, a hybrid between convenience and food service. You know, they fall somewhere in between from a margin standpoint.

But really excited to have them on board. You know, there'll be a, a great addition to us. They fill in great geography for us and, and a really great group of people that run that company. And like I said, we're glad to have them as part of the PFG family.

Okay, sounds good. When I look at OpEx in the food service segment, you know, in the quarter, I think it was up about 10%. I guess, you know, just to help us kind of think about that going forward, you know, how much of that was sort of fuel impact. How much of that was sort of just, you know, personnel versus any other kind of discrete buckets you'd call out that were driving them?

Yeah, this is Patrick. So in terms of fuel, you know, we gave you the 16 million for the quarter. The bulk of that is in food service.

So that, that pretty much goes to food service. And then really the other OpEx challenge that we had in the fourth quarter was related to the Chaney move.

In terms of personnel and those type of expenses, those were all in line. And, and, you know, again, we were able to achieve the upper end of our guidance. So we felt really good about the performance. And we know, you know, we have clear line of sight on, on the fuel expenses going forward. And as Scott already mentioned, we, you know, have pretty good line of sight on how Chaney expenses are dissipating.

Yeah, I would just add one thing to that. And those are by far the two biggest buckets. But, you know, we certainly have an opportunity across food service convenience and specialty to be more operationally efficient. And certainly something that we'll continue to focus on.

Thank you.

Yeah, so Jersey Mike's obviously is we're really excited to be partnered with them. Obviously a great performing, you know, concept that, you know, it's somewhere I like to eat myself. They do an incredible job. As far as, you know, the timing, it's middle of the year, just past middle of the year that they'll start to flow into the network.

You know, they're a public company, so I don't want to get too much into store counts and numbers. But there was, you know, basically four regions that were in that RFP and we have been awarded three of those regions. So certainly it'd be a nice opportunity for us in the back half of the year.

Great. And then are you guys seeing any sort of discernible consumer behavior change with respect to GLP ones? Anything you guys can call out would be helpful. Thanks.

We certainly spend a fair amount of time with, you know, with folks looking at data around GLP one. You know, it's honestly one of the reasons I think the independent restaurant is held up pretty well is, you know, they have that real time flexibility to change menu, to change portions.

And what we're really seeing is, you know, a movement towards more proteins, a movement towards more fresh food. And then, you know, I'd say in the convenience store space, you know, I mean, they're still indulging. So there's still a lot of, you know, snack and candy being consumed, but protein is really the word of the day. And so, you know, you see out there, protein cereals, protein bars are on fire.

So there is, you know, there is a lot of focus on protein. And we're seeing, you know, a lot of shift in behavior of manufacturers around bringing, you know, brands out and new items out that satisfy that need. But certainly we're seeing a shift in behavior as that progresses.

Thank you very much. Thank you.

Well, I think it's a great question. I think, you know, loves and racetrack, you know, like I said, those are two iconic retailers that I think put us at the forefront of the industry as a partner that, you know, really is focused on food service growth, is a partner that's flexible. And certainly they have great reputations and what they share about us in the industry goes a long way. And so certainly we have been able to, you know, engage in new conversations because of that and, you know, continue to build on our reputation.

And, you know, I think we have a great reputation as being really a customer forward supplier that is really focused on food service, focused on sales growth, and feel like our pipeline over the next, you know, two to three years is really strong. Whether it be independence, regionals, or, you know, some of the bigger players in the space.

So to your point, we definitely don't have them all. There's a lot of marketer opportunity out there. And I feel like that team of any team is one that's, you know, aggressive on going out there and building those partnerships.

Thank you. And then part of the question regarding guidance and specifically on the labor side. I mean, we've seen some tightening in terms of availability of labor for truck drivers specifically. So can you show your expectations on that, you know, turn over rate that you might be seeing internally and also what kind of labor cost inflation during betting in your guidance. And thank you.

Yeah, I'll take the part on drivers and I'll let Patrick hit on the what's embedded in the guidance. So I would just say, you know, drivers in warehouse overall, I look at kind of three key metrics around that. I look at, you know, overtime, I look at turnover, and I look at temp labor. And, you know, really all three of those metrics have been consistent over the last couple of years. We haven't seen any material shifts in any of the three of them. We have very little, almost no temp labor in the system.

We have, for the most part, manageable overtime across the network and turnovers been basically flat over the last couple of years. That being said, and to your point, you know, there are a couple of hotspots in the, you know, across the country, probably more specifically for drivers. And I wouldn't say that that's materially different this year than it was last year.

But certainly something that, you know, we as a growth company are constantly focused on is making sure that we have driver availability to be able to manage the growth that we have coming to the network. So, continual focus, don't see it as a big headwind at this point, but something we're always very sensitive to.

Yeah, and just building on what Scott said, obviously, because we are really not seeing too much in terms of market dynamics in this space, our guidance is very consistent. Now, obviously, we are experiencing the fuel, higher fuel costs. So, we did model that into our guidance for, as I mentioned, for the whole year at higher cost. And again, we expect Q1 to be very similar to what we saw in Q4, but we do expect that to slowly take down throughout the year once we start comping over those fuel costs. And then, you know, we're onboarding some new customers. Sometimes that can cause some offback spikes. But other than that, we're expecting a very consistent rate for the year and expect to get leverage.

Great. Thank you.

Well, I think you touched on really the three things that I would, I would answer with one of those is, you know, we had talked about a couple of competitive losses. So that did have a little bit of an impact in the quarter, and we'll see a little bit of an impact over the first couple quarters of the year. So that was part of it. To your point, higher fuel prices certainly does have an impact. And we've seen a bit of a slowdown and just, you know, per store case volume.

So those two things, you know, certainly are impactful. But, you know, I feel really good, as I said, for the full year that they've got a really nice pipeline and they're going to finish the year with a really strong case growth number and strong bottom line number.

Great. Thank you.

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