ewsba.se
Chief Executive Officer — Scott E. McPherson
Chief Financial Officer — H. Patrick Hatcher
Scott E. McPherson: Excited to share our results from the third quarter, which demonstrate the strength of our strategy, solid execution in the field, and building momentum that we expect to continue through the fourth quarter and into 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 Performance Food Group Company and will result in many years of sustained growth. The most recent quarter demonstrates the benefits of this strategy.
There has been much discussion about the challenges facing our industry, including soft foot traffic into 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 underpinned our projections. All three of our operating segments displayed positive signs of resilience and a strong foundation to grow upon in future quarters. Let us discuss some of the business highlights from the quarter in each of our businesses. I will then turn the call over to Patrick, who will review our financial performance and updated outlook for the fiscal year.
Starting with our Foodservice segment, strong sales execution combined with disciplined margin management translated into high single-digit EBITDA growth in our foodservice business excluding Cheney. This performance underscores the durability of our foodservice 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 Performance Food Group Company'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. For 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. Net 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 in 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 salesforce. Our focus on recruiting, training, and incentivizing our salesforce is a key factor in our multiyear outperformance within the independent restaurant space.
We continued to strengthen our talented sales team by providing them with industry-leading brands and technology that enables great customer engagement. And once again, we increased our headcount 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 when researching items, recipes, and products to place the optimal order. Customer First is not only a powerful tool for our restaurant business; it will become our digital solution for all three operating segments, demonstrating the cross-company collaboration that defines our PFG One 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 reflects 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 foodservice volume performance in fiscal 2027. Before turning from the foodservice segment, a few comments on Cheney Brothers. In the third quarter, we continued to see strong sales growth at Cheney, particularly with independents where cases grew north of 6% as did the sales headcount. Their growth culture remains vibrant, and their brand portfolio is growing, providing additional sales and margin opportunities ahead.
Critical to continuing this growth are the investments we have made in their physical infrastructure discussed last quarter. The headline investment is our recently opened state-of-the-art broadline 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 Cheney will become a significant contributor to our revenue and profit growth moving forward. Turning to our Convenience segment results, I am extremely proud of how our Core Mark associates have risen to the occasion and led our company in revenue and EBITDA growth. For the past two quarters, we have discussed adding two meaningful pieces of business with Love’s and RaceTrac. While exciting, these types of large customer wins also bring potential execution risk.
I am proud to say that Core Mark 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, Core Mark’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, Performance Food Group Company aspires 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 Core Mark. Core Mark 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 Love’s and RaceTrac 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 outlook for our 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 Performance Food Group Company portfolio as there is no pure-play competitor that has the reach of Vistar in 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, and is currently pursuing additional avenues that we are confident will fuel future growth. During the quarter, growth across most of Specialty’s 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 dynamics 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 segment’s attractive 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 am excited for the final months of fiscal 2026 and expect a nice acceleration in fiscal 2027, putting us well on track to achieve our three-year targets laid out last May. I will now turn the call over to Patrick, who will review our financial performance and outlook. Patrick?
H. Patrick Hatcher: Thank you, Scott, and good morning. Today, I will review our third quarter financial results, provide color on our financial position, and review our tightened guidance for 2026. Performance Food Group Company’s total net sales grew 6.4% in the third quarter, with growth in all three operating segments and particular strength in Convenience. Total company cases increased 4.4% during the quarter, highlighted by a 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 Love’s and RaceTrac 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. Foodservice inflation of 1.5% was slightly below recent trends, with continued deflation in the cheese, poultry, and egg categories, somewhat offset by higher inflation in 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. Specialty 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 drink 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 $0.20 as compared to the prior year 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 2026, Performance Food Group Company 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. Diluted earnings per share in the fiscal third quarter was $0.27 while adjusted diluted earnings per share was $0.80, 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 and cash flow performance, in the first nine months of 2026, Performance Food Group Company 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 CapEx 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 $[inaudible] of free cash flow, up $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 fund this investment. During the quarter, we repurchased a total of $1.2 million of our stock at an average cost of $83.11 per share.
We will continue to be opportunistic around share repurchase, but our priority remains debt reduction and investing in our growth. The M&A pipeline remains robust, and we continue to evaluate strategic M&A. Performance Food Group Company has a history of successful acquisitions to drive growth and shareholder value. We expect that to continue. At the same time, we will apply our typical high standards and robust due diligence to evaluate high-quality acquisition opportunities. Turning to our guidance, today we tightened the guidance range for fiscal 2026. For the full fiscal year, our sales target is now a range of $67.7 billion to $68 billion compared to the previously stated $67.25 billion to $68.25 billion range.
We now expect full year adjusted EBITDA in a range of $1.9 billion to $1.93 billion compared to the previously stated $1.875 billion to $1.975 billion in 2026. Our results keep us on track to achieve the three-year projection we announced at Investor Day with sales in the range of $73 billion to $75 billion and adjusted EBITDA between $2.3 billion and $2.5 billion in fiscal 2028. To summarize, we are very pleased with our progress despite a challenging business environment in the third quarter. We are in a solid financial position, which supports our growth investments and capital return to our shareholders, and expect strong execution to finish the year, setting the stage for a strong fiscal 2027.
Thank you for your time today. We appreciate your interest in Performance Food Group Company. With that, Scott and I would be happy to take your questions.
Operator: Thank you. If you would like to ask a question, press 1 on your keypad. To leave the queue at any time, press 2. Once again, that is 1 to ask a question, and we will pause for just a moment. Thank you. Our first question comes from Edward Joseph Kelly with Wells Fargo. Please go ahead. Your line is now open.
Edward Joseph Kelly: Morning, everyone, and nice quarter. It is good to see such strong top-line momentum in the business. What I wanted to ask about is that you did trim the Q4 guidance at the midpoint. I think you had an acquisition that came into the quarter, so presumably maybe there is some help there. But can you just talk about the offsets that you are seeing in Q4 to drive a slightly more conservative view?
H. Patrick Hatcher: Yeah, Ed, this is Patrick. I will take that, and maybe Scott will add something on the acquisition if he wants to. But really, we gave the full year guidance. You are talking about the implied Q4 and how we are looking at it as we exit Q3 with a really strong top-line momentum and a nice EBITDA increase of 6.6%, the top end of our guidance. So we are feeling really confident about the things that we have line of sight to and controllables. As we mentioned in our comments, really strong momentum. We are seeing positive improvement at Cheney, although there will be some pressure there during the quarter. And we are obviously looking for improvement in Specialty.
Outside of our control are things like the macro environment. Obviously, there is some pressure from fuel that we experienced a little in Q3. We expect some of that pressure in Q4 as well. So really very confident about Q4. There are some pressures on the numbers, as I mentioned. And then we are looking really towards 2027. We see a really nice setup, and we will obviously give you much more color on that in August.
Scott E. McPherson: Hi, Ed. This is Scott. Just real quick on the acquisition. We did have an acquisition that came in late in the third quarter, something that we have been really excited about. Cash-Wa is a broadline foodservice distributor in Kearney, Nebraska. Three facilities that really cover Nebraska and the Dakotas, giving us a little more presence facing West. Great family company, great culture. I think they are really excited to be a part of Performance Food Group Company, and we are excited to have them in the fold.
Edward Joseph Kelly: Great. And then maybe just a follow-up, and Patrick, you kind of hinted at this a little bit, but Cheney had drags as we think about fiscal 2026. I was hoping maybe you could talk about what that drag was again in Q3, and then I do not know if you can sort of summarize what the drag has been for the year. I mean, I think the math would say it could be $30 million, something like that. Do you get all of that back next year? Because I think you have talked about you expect Cheney to be a pretty strong contributor in 2027.
Scott E. McPherson: Really good question, Ed. From a Cheney standpoint, the first thing I would say that we are really happy about is, as we mentioned, their top line. Cheney has done a great job continuing to grow independent cases, continuing to grow share across Florida and the Carolinas. I think their sales culture is fantastic. They are set up for the balance of this year and 2027 from that perspective. Over the last couple of quarters with the opening of the new facility, we certainly saw some expense drag, and we mentioned that will carry on into the fourth quarter. But we have great line of sight to get those things under control.
The rollout of that facility has gone very well. We have transitioned three of our four phases of customers into there. We feel like their setup for 2027 is great, and we are really looking forward to their contributions both top and bottom line going forward.
Operator: Thank you. We will move next to Lauren Danielle Silberman with Deutsche Bank. Please go ahead. Your line is now open.
Lauren Danielle Silberman: Thanks a lot and congrats on the quarter. A couple of follow-ups and then one question. On Q4, are you able to quantify the net impact of fuel costs that you are embedding for the quarter? I know there are some offsets of surcharges, but not fully. I am just trying to figure out if it basically accounts for the $20 million to $30 million tick down in the implied Q4. And then on the cleaning expense drag, what exactly is driving these higher expenses? I guess I am just trying to understand whether these expenses roll forward into fiscal 2027 just within the base or if some of them come off.
And then on the independent case growth side, there is obviously a lot of different dynamics and noise throughout the quarter. Any color you could provide on the cadence you saw as you moved through the quarter, and any you can share on what you have seen into April, thoughts on the fourth quarter? Thank you.
H. Patrick Hatcher: Lauren, good question. As we exited Q3, we saw the impact of fuel come in. You are going to get much more detail in the 10-Q on this, but the gross impact for Q3 for that month was $7.3 million, and that is not just because of higher fuel prices; that is also because of new customers and miles driven. Because of the timing of surcharges, we were not able to adjust the surcharge in March, but that was adjusted in April and again in May. So we do have some headwind in Q4, but it is not material. It is something we are working through.
We called it out as a headwind because it is one, but it is one of a few things that we embedded into our guidance, and that is why we gave the range we did.
Scott E. McPherson: On the Cheney expense drag, there are a couple of things I would outline. The primary one is the new facility in Florence. Right now, we have customers that we are shifting from other buildings into that facility. We had to hire and staff that facility for all of that inbound volume, and at the same time, before we transition those customers, we are still servicing them in our existing facilities. It is kind of double headcount to service that volume, and that has continued over the course of four or five periods, which has been impactful from an expense standpoint. The other thing that drops off is expense as we move past certain integration milestones.
We have talked about our synergy flow. At the end of Q3 of this year, or really at the end of the second year anniversary of Cheney, we have a nice pickup in synergy that will continue on through year three and beyond. So we definitely have a couple of things that will be good momentum from the Cheney expense standpoint. On independent case growth cadence, January was a great month. Towards the end of January into February, you saw pretty material weather impact. If I look at the average of January and February, that is kind of what we saw in March, and we saw that continue into April. We have been pretty consistent over the last couple months.
If you took the January–February average, that equals what we saw in March and April.
Operator: Thank you. We will now move next to Kelly Ann Bania with BMO Capital. Please go ahead.
Kelly Ann Bania: Thanks. Scott, just wanted to clarify one point on the Cheney expenses. Did your view of the impact of those to the fourth quarter change since you reported last quarter, or is that just coming in line as you expected it to still be an impact into the fourth quarter? And then, Scott, you made the comment about 2027 and looking for an acceleration in sales and profit growth there. You mentioned cycling some of these expense headwinds and also the synergies, but you also mentioned some new chain business at Foodservice. Could you help bucket some dollars or how we should think about what that might look like in the coming quarters?
And then also the procurement savings target should maybe start to build. Is that a factor we should think about being impactful in fiscal 2027 as well?
Scott E. McPherson: Thanks for the question, Kelly. There was a little more spillover into the fourth quarter than we probably anticipated a few months ago. We had four waves of customer transition shifting business from existing buildings into that new facility. We have completed three of those waves, and that fourth wave will take place here in the next couple of weeks. We thought we were going to have all four of those waves completed in the third quarter, but we had a little weather impact when we started that building that pushed it back a couple weeks, and we have taken our time to make sure we do a great job servicing those we shift over.
We have seen sales growth in that new building on a same-store basis since day one. All those customers that we shifted in there have continued to grow, so really positive results from the transition. On 2027 acceleration, you touched on the key drivers. In Foodservice, we see continued momentum in independent case growth. We have a really nice chain pipeline that we think will help keep chain growth positive for next year. Convenience obviously had a great year from a market share gain standpoint and has some carryover into next year. Specialty has improved its growth three quarters in a row and has a nice pipeline as well.
On margins, we feel good about mix and about procurement synergies; that really helps the margin profile. We will also have some spring-back on Cheney expenses and overall efficiency from adding volume. The setup is really nice for next year.
Operator: Thank you. We will move next to Mark David Carden with UBS. Please go ahead. Your line is open.
Mark David Carden: Good morning. Thanks so much for taking the questions. To start, I know it is pretty much impossible to predict the duration of the Middle East conflict, but if we see higher oil prices continue at their current level for an extended period of time, how much of an impact would you expect it to have on your product inflation outlook over, call it, the next few quarters? And then a follow-up on Cash-Wa. How does its mix of business compare to the base Foodservice business? Does it lean any more or less heavily towards independents? And then more broadly, how is your traction going on building out some of your independent business organically out West in select markets?
Scott E. McPherson: I will take a stab at this and let Patrick fill in the blanks. We have talked about how we handle fuel surcharges and fuel inflation, and we have a really good plan around that. Our fuel surcharges mitigate a lot of that impact, though there is a little headwind in Q4. We cannot anticipate whether fuel prices go up significantly or down over that period and beyond, but we think we have a good setup around fuel surcharges. As far as other product inflation, we have not seen any material impacts to date other than a little noise around petroleum-based products—some products we sell are petroleum-based, and there is packaging and containers as well.
The longer the duration, at some point you could see inflation tick up. Across the third quarter, we saw inflation tick up a little period by period, and we have seen it tick up a little as we started this quarter, but we feel well positioned to navigate that. On Cash-Wa, their Foodservice business is very much in line with what we see across broadline. They have a really nice independent mix. They also have some broadline national customers, and they have a segment of their business that does have some Convenience sales—snacks, candy, a little cigarette and tobacco as well. So a very diversified mix that fits well into our overall portfolio.
Out West, we have continued to add capacity in California, Oregon, Arizona, and Colorado. The West is our fastest growing region by a fair amount. The team is doing exceptionally well in the West, and we are proud of their ability to gain share.
H. Patrick Hatcher: Just a little more color on inflation. We manage a very large basket of commodities. As Scott mentioned, maybe some of the petroleum-based might see a little bit of impact. It is hard to predict. Over time, we have managed through a variety of markets well. Specifically in Foodservice inflation, we started January very low, below 1%, and we finished in March at 2%. That is still well within low single digits, an area we manage very well.
Operator: Thank you. We will move next to John Edward Heinbockel with Guggenheim. Please go ahead. Your line is open.
John Edward Heinbockel: Hey, Scott. Two quick questions on local independent case growth. One, is there still an opportunity to reduce the account loss rate from where it is today? And then if you look at the pickup in lines per account, where is that concentrated? Are you gaining some traction with center of the plate versus where you might have been? And on Cheney, now that they have South Carolina open, where are they in terms of capacity—meaning I do not think they will need to open another facility for a while. And if you took synergy out and just looked at Cheney apples to apples, does it outgrow the rest of Foodservice because of the economic growth in its markets?
Scott E. McPherson: On loss rate, we have been fairly consistent over a number of quarters. Is there an opportunity to improve? Absolutely. We are always focused on improving that and spend a lot of time on it. Turning customers is obviously not the goal. Overall, it has been fairly balanced; we have not seen a big shift. On lines per drop and cases per drop, that was the headliner of our penetration in the quarter—really nice increases. It continues to be driven by our brands. If you asked our sales reps their biggest lever, brands would be one of the top one or two.
We have had really nice performance in center of the plate—our protein strategy and seafood are working to drive that. But brands are where the focus and real growth have been. On Cheney capacity, we are taking volume out of a facility that was about 90% full and now will be more like 50%–60%. We are going to have three facilities that have 40%–50% available capacity—maybe one is not quite that high—but three facilities with a lot of capacity, creating a whole network with capacity across the network. Really well positioned to continue to grow. Absent synergies, Cheney is certainly in one of the fastest growing markets in the country.
As a broadliner with a great reputation and presence in that market, with capacity available, I think they have a really nice growth future ahead of them.
Operator: Thank you. We will move next to Alexander Russell Slagle with Jefferies. Please go ahead. Your line is now open.
Alexander Russell Slagle: Thanks. Good morning. A follow-up on Cheney. I know the synergies are not really expected until year two or three, but as you have had more time to evaluate the business and see how it pairs up against Performance Food Group Company, do you see any incremental opportunities there? And also curious on the private label at Cheney and your latest thoughts. Also, I wanted to ask on inbound logistics opportunities and potential offsets for some of the higher freight and inbound costs that you have had.
Scott E. McPherson: The biggest opportunity is around brands. Cheney has established some of their own really solid brands. Their brand percentage of sales is a lot less than what we see across the rest of broadline, but they do have strong brands, and one of those brands we have taken into the rest of broadline. The procurement piece around brands is going to be a really nice part of the synergy. We have also found some other core competencies that Cheney has that we think will help the broader business, which is why we take our time in that first year and try not to jump in and make big changes.
Maybe we do not generate as much EBITDA in the first year, but in the long run it positions us really well. We feel like the future of Cheney and the setup for 2027 and beyond is really strong. On inbound logistics and redistribution, we talked at Investor Day about redistribution and that we continue to grow our redistribution network. That network has performed really well this year. I would highlight the West—we have opened up a facility in the West to help us get our brands to all of those centers. Seeing how those distribution centers aided by redistribution are growing makes me very bullish on what we can do around redistribution.
On the broader inbound landscape, we certainly think that is an opportunity—being more efficient in getting goods to our buildings. It is something that helps us today and has more opportunity ahead.
Operator: Thank you. We will move next to Jeffrey Andrew Bernstein with Barclays. Please go ahead. Your line is now open.
Jeffrey Andrew Bernstein: Great. Thank you very much. First question is on the underlying consumer, excluding the weather noise you talked about in January. You noted the ongoing negative foot traffic for the restaurant industry. Talk specifically about the impact a spike in gas could have on your business. It does not seem like it has had much, but how have your segments been impacted in the past? It would seem like the Convenience store segment might be the most vulnerable as it ties in with gas stations. Any color you could provide in terms of that underlying consumer behavior excluding weather that you have seen in recent months and what you might expect as we close out the fiscal year?
And as a follow-up on the independents, your case growth is very strong at roughly 7%. You seem confident sustaining that in the fiscal fourth quarter. Who do you think you are taking share from—large national peers, or perhaps the big three taking from the rest of the industry?
Scott E. McPherson: When I think about the restaurant consumer, we have seen our independents hold up exceptionally well, and with our share gain that has been really nice. We have seen a little downdraft on the chains; chains feel more of the foot traffic headwind. So right now, independents tend to be outperforming chains. On overall fuel impact, it comes down to discretionary income. In restaurants, if fuel prices continue to climb higher, that can impact discretionary income. In Convenience, my history would tell me that as price goes up, there is an environment where trips actually go up. The Convenience store consumer getting gas may not fill the tank every time.
We have seen trips tick up over the last few months in Convenience stores. There is an inflection point where if fuel gets pretty high, then it is a discretionary income issue. Right now, the consumer has been very resilient across Convenience and Foodservice, and we anticipate they will continue to perform that way as we look to the fourth quarter. On share gains in independents, it is hard for us to tell exactly who we are taking it from. Some is certainly coming from specialty players; some might be coming from bigger or smaller competitors. We are focused on gaining share in each and every customer we service, and we saw that in the penetration numbers.
Our brands are a big lever. Another big lever has been our tech stack around customer-facing ordering—Customer First. The combination of our physical relationship with the rep and the digital relationship with Customer First has helped our penetration and share gains.
Operator: Thank you. We will move next to Brian James Harbour with Morgan Stanley. Please go ahead. Your line is now open.
Brian James Harbour: Thanks. Good morning. Following up on Convenience stores, what does penetration there look like lately? If you separate out the new customer wins, which certainly help, how would you describe that in the Convenience segment? And you said you have done a little bit better with chains, notwithstanding tougher industry traffic. Anything you would call out that is helping there—specific segments you cover?
Scott E. McPherson: Convenience is a little different than traditional Foodservice because in Convenience you really have a primary supplier. You do not typically split between multiple broadliners like you might in Foodservice. Where you might have penetration is in foodservice programs within the store—you might have an external vendor there—and that is where we have done a great job of penetrating in our Convenience segment. Over the last couple of years, our Convenience segment on a same-store basis has greatly outperformed the industry. The tools we bring to customers around product mix, how to set your store, how to grow foodservice, and our customer-facing technology have really helped us outperform the market. On chains, it is really two things.
We have partnered with a couple of the more progressive foodservice players in the space—those continuing to grow—which has helped us on a same-store basis. The other is share gain. We have had a really nice pipeline in the chain space, and we see that continuing into 2027. Our ability to resonate with chain customers and be a great partner has really helped us.
Operator: Thank you. We will move next to Peter Mokhlis Saleh with BTIG. Please go ahead. Your line is now open.
Peter Mokhlis Saleh: Great. Thanks for taking the question. I am curious if you could give us a little bit more color on strength and weakness by cuisine. More specifically on the Italian segment, if you are seeing any major changes at all, and then I have a follow-up.
Scott E. McPherson: Looking at some of the publicly reporting chains, pizza and Italian growth has been a little muted as of late. Internally, we continue to grow share in pizza and Italian, which is a really big, strong part of our business. Interestingly, we are growing pizza and Italian outside of traditional pizza and Italian locations—growing it in bar and grill, and in our Convenience segment through both Foodservice and Core Mark. So we are holding our own in pizza and Italian, although the segment has been a little more challenged. We are seeing really nice growth in other specialty segments—nice growth in our Asian segment, continued market share gains in our Hispanic segment.
One of the biggest share gain areas we have in Foodservice right now is sales into Convenience. The share gains there have been very significant and a big driver for us.
Peter Mokhlis Saleh: Great. There has been a lot of discussion in the industry around GLP-1s and the impact. Are you seeing any sort of impact or changes in behavior among restaurants and what they are purchasing that would indicate any change?
Scott E. McPherson: We follow the statistics on GLP-1 and eating behavior. In the first year that someone is on those, there could be a tick down in their consumption across food in general—across grocery and all channels. There is a little bit of compression on snack and candy in that first year, but that consumer seems to bounce right back afterward. In restaurants, there is certainly a focus on protein and fiber. We are seeing demand for smaller portions in some places and more to-go containers—so we are selling more containers. There has been some behavior shift.
I think that is one of the reasons the independent restaurant has done so well; they are able to react, change menus, change pricing fairly rapidly, and they have reacted to that behavior really well.
Operator: Thank you. We will move next to Analyst with Bernstein. Please go ahead.
Analyst: Thank you. I would like to ask a couple of strategic questions. First on your M&A pipeline and potential future moves. In your framework, you highlight pursuing transformational opportunities, and recently we have seen two major players acquire cash-and-carry businesses and provide more vertical integration through the customer life cycle. Is this a strategy that you would entertain? Why or why not? And then on the strength you are seeing in the chain business, could you expand on what is causing the incremental focus on the chain business and whether you have seen this as a strategic fit given that it could be a potentially lower margin business?
Scott E. McPherson: We spent a lot of time at Investor Day outlining our M&A strategy. Our M&A strategy is really focused around broadline Foodservice. Cash-Wa is a great example, Cheney was a great example, and we continue to have a pipeline of opportunity in broadline Foodservice. There are tangential areas around Foodservice we continue to look at, including protein and seafood. In Convenience and Specialty, we made a small acquisition last year in Convenience, and we will continue to look at opportunities there. But our core focus is broadline Foodservice—that is the field we want to play in. On chain business, there has not been a strategic shift.
The chain business has been an important part of our portfolio for a long time. Our independent-to-chain mix in Foodservice is about 40% independent and about 60% chain—a really balanced portfolio. We consistently grow independents faster than chains, and that has been a calling card. But when a big portion of your sales are chain, we are just as focused on growing that as well. We are resonating with customers in both segments and gaining share. We are happy with how our salesforce is performing in both areas.
Operator: Thank you. We will move next to Karen Holthouse with Citi. Please go ahead. Your line is now open.
Karen Holthouse: Great. Thank you for taking the question. A couple on the Convenience side. Some of the packaged food companies have started to talk about understanding pushback to inflation in the grocery aisle and proactively decreasing prices on some things. Are you seeing anything similar on the single-serve Convenience side of things? And looking out over the next six to twelve months, is there anything that should be on our radar for incremental new customers that might be onboarded specific to the Convenience side?
Scott E. McPherson: We have not seen any deflationary noise at all in the Convenience segment. Historically, we do not see actual price deflation. What we see is manufacturers discounting at point of sale—promotional activity that lowers the end cost to the consumer. It really has no impact on us or our margins. That activity has probably ticked up a little, and it would not surprise me if that continues, but it does not impact us from a revenue or profit standpoint. Specific to Convenience customer onboarding, we will lap the Love’s and RaceTrac next year. We have a really nice pipeline.
We have a couple of other customers we will onboard and a couple we will offboard over the next six to twelve months. We have had some competitive reaction, and competitors have put a little pressure on the competitive market, but overall the setup for Convenience for 2027 is really strong. The customer shifts I am talking about are much smaller in magnitude than a Love’s or a RaceTrac. The setup is really good.
Operator: Thank you. We will take our question from Analyst with Melius Research. Please go ahead. Your line is now open.
Analyst: Hey. Good morning. Could you talk about the pipeline or just conversations you are having in the Convenience segment with potential customers? How much of your Foodservice capabilities or broader PFG One capabilities impact those conversations? And then a question on Cheney—thoughts on putting Performance Food Group Company private label into Cheney or taking some of Cheney private label—where you think the opportunities are there and how we should think about that going forward?
Scott E. McPherson: The Convenience segment’s core competency around Foodservice over the past three years has increased dramatically. The product mix we offer in our opcos, the turnkey solutions we offer, and the knowledge of that organization around food have been a big feather in our cap in customer interactions. We have to be a great partner, an efficient distributor, and supply the full basket of goods, but having that core competency around Foodservice has helped in negotiations on new chains and account wins. On Cheney and private label, I see it going both ways. We have already taken a couple of Cheney’s private labels and started to roll those out across the broader Performance Food Group Company organization.
We have been evaluating the labels that we would put into the Cheney organization as well. Cheney’s brand penetration was in the 15%–20% range at acquisition. We just had a record brand penetration in the legacy Foodservice segment at 54%. Combined, if we were going to reset a target, we would be right at 50% in brand cases to independents. That is a number I think we can grow, and Cheney will be a big portion of that growth.
Operator: Thank you. At this time, this concludes our question and answer session. We will now turn the meeting back to Bill Marshall.
Bill Marshall: Thank you for joining our call today. If you have any follow-up questions, please reach out to Investor Relations.
Operator: Thank you. This concludes today’s meeting. We appreciate your time and participation. You may now disconnect.
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PFGC Q3 2026 Earnings Transcript was originally published by The Motley Fool