Performance Food Group (NYSE:PFGC) executives told investors the company delivered fiscal second-quarter 2026 results within its prior guidance range despite what management described as a “difficult macro environment” that included declining restaurant foot traffic, a government shutdown, and softer sales per location across segments.
CEO Scott McPherson, who recently succeeded longtime chief executive George Holm, said the company remains committed to a three-year strategic plan that balances revenue growth and share gains with gross margin initiatives and improved operating leverage. CFO Patrick Hatcher added that strong cash flow in the first half of the year supported growth investments and debt reduction, which remains the company’s top capital allocation priority.
Leadership transition and strategic priorities
Management reiterated confidence in longer-term targets disclosed previously, emphasizing a combination of market share gains, margin enhancement and operating leverage. McPherson also pointed to technology as an area of personal focus, alongside continued organic growth and acquisitions.
Second-quarter performance: Sales, cases, and profitability
Hatcher said total net sales increased 5.2% in the fiscal second quarter, supported by growth across all three operating segments. Total company cases rose 3.4%, including 5.3% organic independent restaurant case growth and a 6.3% organic case increase in the convenience segment.
Profitability improved on several measures. Gross profit rose 7.6%, and gross profit per case increased $0.20 versus the prior year period, according to Hatcher. The company reported net income of $61.7 million, up 45.5% year-over-year. Adjusted EBITDA increased 6.7% to $451 million.
Diluted EPS was $0.39, while adjusted diluted EPS was $0.98, flat year-over-year. Hatcher said EPS was pressured by below-the-line items including higher interest expense and a higher effective tax rate. The effective tax rate rose to 28.8% from 25.2% a year ago, driven by lower deductible items related to stock-based compensation and higher foreign taxes as a percentage of income, partially offset by higher tax credits.
Segment commentary: Foodservice, Convenience, and Specialty
Foodservice: McPherson said the segment delivered 5.3% organic independent case growth, driven by 5.8% independent account growth, and that the company gained share across independent, regional and national business. He cited particular strength in chicken, burger, barbecue and seafood restaurant concepts. McPherson noted that after a strong October, trends moderated as the government shutdown took effect, then improved once it was lifted. He referenced Black Box data showing industry foot traffic decelerated through the quarter, with December traffic down 3.5%.
McPherson said total chain restaurant volume grew at a low single-digit rate, with new business wins offsetting softer traffic. He also discussed continued hiring in sales, ending December with nearly 6% more salespeople than at the end of calendar 2024, and emphasized that hiring is managed locally rather than through a corporate mandate.
On Cheney Brothers, McPherson said integration is progressing, but short-term performance has been impacted by infrastructure investments and integration costs. He referenced a new 350,000-square-foot facility in Florence, South Carolina, and a 42,000-square-foot facility in St. Cloud, Florida, along with other integration items. He said costs at Cheney are running somewhat higher than anticipated, and reiterated that most synergy benefits are expected to flow “late in year two through year three” after the acquisition close. He also cited cheese and poultry deflation as additional EBITDA hurdles that are likely to persist into the third quarter.
Convenience (Core-Mark): McPherson highlighted the onboarding of more than 500 Love’s stores late in September and more than 600 RaceTrac locations in December, which management said positioned the segment for a strong finish to fiscal 2026. Net sales rose 6.1% in the quarter. Management said industry data showed a mid-single-digit decline in key convenience categories as inflation pressured consumers, while Core-Mark’s results reflected market share gains.
Convenience segment sales were driven by low single-digit growth in food, foodservice and related products and mid-teen growth in non-combustible nicotine products, with cigarette sales described as “flattish.” Management reiterated that the mix shift away from cigarettes creates a revenue headwind but is “nicely accretive” to gross margin. Adjusted EBITDA for the convenience segment increased 13.4%, which management attributed to cost discipline, operating efficiencies, and contributions from Love’s and RaceTrac.
Specialty: McPherson said trends were broadly similar to the first quarter, with modest improvement in the top line and productivity gains driving adjusted EBITDA margin expansion. Theater remained a significant drag, with sales down over 30% and described as an approximately $50 million headwind to overall sales. Excluding theater, management said specialty grew at a high single-digit to low double-digit pace in vending, office coffee, retail, campus and travel channels. Segment adjusted EBITDA rose nearly 7%, and management cited roughly 40 basis points of margin expansion.
Inflation, deflation, and operational drivers
Hatcher said total company cost inflation was about 4.5% in the quarter. Foodservice inflation was 1.8%, below recent trends, with deflation in cheese and poultry partially offset by higher beef inflation. Specialty inflation was 5.4%, which he said was driven mainly by candy and hot drink price increases. Convenience inflation was 7.4%, reflecting inflation in tobacco and candy.
Management said it continues to model inflation remaining in the low- to mid-single-digit range through fiscal 2026. On deflation, executives said cheese and poultry stood out because those categories were more deflationary than expected and because the company “overindexes” in those commodities versus the broader basket.
Cash flow, capital allocation, and guidance update
In the first six months of fiscal 2026, Hatcher said operating cash flow totaled $456 million, up $77 million year-over-year. Capital expenditures were about $192 million in the first half, and the company reiterated an expectation for full-year 2026 CapEx of approximately 70 basis points of net revenue. Free cash flow was about $264 million, up nearly $89 million from the prior year period. The company did not repurchase shares during the quarter, with Hatcher emphasizing that debt reduction remains the priority, though repurchases may be opportunistic.
For the fiscal third quarter, the company guided to net sales of $16.0 billion to $16.3 billion and adjusted EBITDA of $390 million to $410 million. Management said the outlook includes continued cheese and poultry deflation, investments including onboarding new capacity at Cheney, a continuation of a difficult backdrop for specialty, and the impact of recent winter storms.
For the full fiscal year 2026, the company updated its targets to:
- Net sales: $67.25 billion to $68.25 billion
- Adjusted EBITDA: $1.875 billion to $1.975 billion
Hatcher said the changes largely reflected the more difficult second-quarter period. Management reiterated its fiscal 2028 targets of $73 billion to $75 billion in sales and adjusted EBITDA of $2.3 billion to $2.5 billion.
During Q&A, McPherson said January showed a “nice rebound” in independent case performance, while early February was “materially impacted” by weather. He also said management did not embed potential consumer tailwinds from tax refunds or policy-related changes into guidance due to uncertainty around the timing and magnitude of any spending impact.
About Performance Food Group (NYSE:PFGC)
Performance Food Group Company (NYSE: PFGC) is a leading foodservice distribution company headquartered in Richmond, Virginia. The company operates through multiple segments, offering a broad range of products including fresh, frozen and dry foods, as well as non-food items such as supplies, paper goods and equipment. Performance Food Group serves a diverse customer base that encompasses independent and multi-unit restaurants, healthcare facilities, hospitality venues, schools, and other institutional customers.
Through its national broadline division, Performance Food Group provides next-day delivery of products sourced from both company-owned processing facilities and third-party suppliers.
