While the overall market pulled back sharply late last week,
we wanted to profile a name that made a nice move Friday, hitting a new 52-week
high. Today, we want to revisit The Chefs' Warehouse (CHEF). CHEF is a
distributor of specialty food products in the U.S. and Canada that focuses on
serving the specific needs of chefs who own and/or operate some of the nation's
leading restaurants, fine dining establishments, hotels, country clubs, catering
businesses, bakeries, patisseries, chocolatiers, culinary schools, cruise
lines, casinos, and specialty food stores.
CHEF believes that its extensive selection of distinctive and hard-to-find specialty and center-of-the-plate food products differentiates the company from larger, more traditional broadline foodservice distributors and thus gives it a competitive edge in meeting the needs of its customer base. Marketing is directed principally at chefs and includes information about the sourcing and quality of available products. By simultaneously offering high-quality staples and specialty foods, Chefs’ Warehouse can provide its customers with efficient and cost-effective foodservice distribution solutions.
The company’s specialty food products include gourmet foods and ingredients that are of the highest grade, quality, or style as measured by their uniqueness, exotic origin, or particular processing method. Its product portfolio now includes over 48,000 SKUs from more than 2,500 different suppliers and is comprised primarily of specialty food products, such as artisan charcuterie, specialty cheeses, unique oils and vinegars, truffles, caviar, chocolate, and pastry products. Its extensive line of center-of-the-plate products includes custom cut beef, seafood, and hormone-free poultry, and its staple, broadline food product provisions include cooking oils, butter, eggs, milk, and flour.
CHEF has also been active on the M&A front, having completed eight acquisitions since 2013, adding complementary food products to the company’s portfolio in categories from pastry products to premium quality meats on both domestic and imported scales.
Excluding its direct-to-consumer business, CHEF currently serves more than 30,000 customer locations in its 15 primary geographic markets, including New York, Washington D.C., Los Angeles, San Francisco, Las Vegas, Miami, Portland, Seattle, Columbus, Cincinnati, Chicago, Sacramento, Vancouver, Edmonton and Toronto. CHEF operates 23 distribution centers and provides service six days a week in many of its service areas, using a fleet of delivery trucks to fill orders.
In terms of recent events, CHEF reported strong Q2 results on August 1. Adjusted EPS jumped 71% year/year to $0.24, which was better than market expectations. Revenue rose 11.7% year/year to $370.4 mln, which also was better than expected. Organic growth contributed 4.3% of that growth while the remaining 7.4% resulted from the acquisition of Fells Point Wholesale Meats and other specialty-related acquisitions. Organic case count grew 7.5% in the company's specialty category and growth in unique customers and placements grew 5.1% and 4.6%, respectively. For the full year, CHEF expects revenue of $1.41-1.45 bln and adjusted EPS of $0.71-0.80.
CHEF has been climbing nicely higher over the past year. CHEF seems to be doing well despite what has been a difficult time for the restaurant industry. It seems that their focus on hard-to-find food items coupled with center-of-the-plate offerings is helping them navigate a tough industry. The stock has made a strong move over the past year, up around 90% from its levels at this time last year. In addition, the stock hiked up notably on Friday (+11.5%) on news that the company’s shares will be added to the S&P SmallCap 600. That was a nice milestone for the company.
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