Chefs' Warehouse CFO Says Fourth-Quarter Guide Implies About 10% Organic Growth, Against 11% So Far
The CFO tied the implied slowdown to a lapped acquisition, Middle East caution and a tougher comparison, and cited double-digit October growth.
Chefs' Warehouse, the specialty-food and center-of-the-plate distributor, built a modest slowdown into its fourth-quarter outlook, CFO Jim Leddy said on the company's third-quarter earnings call on Wednesday. Organic growth ran about 11% over the first three quarters, while the top end of guidance implies about 10%.
Why the guide implies a slowdown
A UBS analyst asked whether anything seen so far this quarter explained the implied deceleration. "No, actually," Leddy answered, saying the top end of the guide implies consistent growth that is almost entirely organic.
He gave three reasons. Lapping the Italco acquisition removes about 50 to 80 basis points (0.5 to 0.8 percentage points) of year-over-year growth, the comparison with last year is about 1% tougher, and the company is "a little bit of conservatism on the Middle East" for December, a strong tourism month there, even though operations are running a little above 100% of last year.
Pressed by a BMO Capital Markets analyst on whether domestic growth had slowed, Leddy said October was "a really good October, double-digit growth." Nothing in the guidance change, he said, needed calling out.
Raised outlook and third-quarter results
The company raised its full-year 2026 outlook: net sales of $4.56 billion to $4.61 billion, gross profit of $1.13 billion to $1.14 billion and adjusted EBITDA of $317 million to $321 million. Leddy said the guide implies an adjusted EBITDA margin above 7% in the fourth quarter.
Third-quarter net sales rose about 11.2% to $1.135 billion from $1.021 billion, with organic sales up about 10.3%. Operating income was $51.5 million against $38.9 million a year earlier, and net income was $29.6 million, or $0.67 per diluted share. Adjusted EBITDA was $82.2 million, up from $65.1 million.
CEO Chris Pappas said the only negatives he hears are certain conferences with "10-12% less people attending" and softer à la carte dining at some private clubs, which he said private events more than offset.
Refinancing and share count
Chefs' Warehouse, which sells more than 90,000 products to restaurants, hotels, clubs and other food-service customers, closed a new $675 million seven-year term loan on October 15. Proceeds prepaid the 2029 term loan and settled the 2028 convertible notes' principal and part of their premium. About 2.7 million shares went to note holders for the rest of the premium.
Leddy expects a fully diluted share count of 43 million to 43.5 million in the fourth quarter and 42 million to 43 million in 2027. Net debt was about $448.5 million at September 25, and he expects $550 million to $600 million by year-end.
Leddy expects net debt to adjusted EBITDA of 1.7 to 2 times by year-end, up from about 1.4 times at the end of the third quarter.
Sources
- Chefs’ Warehouse drops despite Q3 earnings, sales beats (CHEF:NASDAQ) | Seeking Alpha — seekingalpha.com
- Chefs' Warehouse (CHEF) Q3 Earnings and Revenues Surpass Estimates — Yahoo Finance
- What to Expect From The Chefs' Warehouse Q3 Earnings Release? — Yahoo Finance
- The Chefs’ Warehouse Reports Third Quarter 2026 Financial — globenewswire.com
