Chefs' Warehouse (CHEF) Q2 FY26 earnings call: guidance and Q&A

What is driving the strong demand, unique placements, and new customer growth? Is it winning from competitors or broadening customer types?

Chris Pappas attributed growth to comprehensive execution across all levels, including investments in sales force, new buildings, capacity, category additions, cross-selling, and maturing sales teams. He stated it's a combination of factors, not one single driver.

“It's kind of Goldilocks. It's the large investments we made into building a sales force, giving our team new buildings with capacity, ability to add categories, cross-selling, team building, specialists, maturing of a lot of new people that we've been hiring coming out of COVID.”

asked by Alex Slagle · answered by Christopher Pappas

How resilient is the Middle East business given turmoil, and how long does the slow summer period last? What's the impact on product sourcing?

The Middle East team has managed sourcing challenges by rerouting and using alternative logistics, increasing costs but maintaining supply. The slow summer period (due to extreme heat) has seen operations at 94% of prior year, but Q4 tourism levels remain uncertain, leading to conservatism in guidance.

“Our team over there has been dealing with some challenges around getting product in the Middle East, but they've done an amazing job of working with suppliers to reroute, go into different ports, go over the air, over the ground where we used to take it over the water.”

asked by Mark Carden · answered by James Leddy

Given the strong recent EBITDA margin performance and new higher 5-year targets, how should investors think about the pace of margin improvement (e.g., step-up year vs. consistent 20-30 bps/year)?

Management tends to be conservative in guidance, implying potential for upside. Chris Pappas explained that the business was historically higher EBITDA before infrastructure investments, and now with scale, the 'real EBITDA' is showing. The platform is built for leverage and better margins, but the pace will depend on future acquisitions and market conditions.

“I think I've said many, many times, we have a lot of our core business, way over 10% EBITDA businesses. But this is a model that purposely, we built the moat around. So it's very hard to copy because there's such a long tail to what we do.”

asked by Todd Brooks · answered by Christopher Pappas

What is the competitive environment like in specialty, and how is Chefs' Warehouse winning market share? Is it due to their capabilities or competitors underperforming?

Competition is fierce, but Chefs' Warehouse wins through better technology, making it easier for customers, and a relationship-based business model with highly trained sales and logistics teams. The expertise required to serve demanding chefs at a high level is difficult to duplicate, representing a lifetime investment in people.

“We sell the best chefs in the world, and they need information and they constantly need new product. And it's a stressful environment. You have to execute. When you're at the top, they're expecting a lot.”

asked by Todd Brooks · answered by Christopher Pappas

How are younger markets (e.g., Texas, Florida) contributing to the projected revenue growth, and where are they in their development compared to mature markets?

Younger markets are developing similarly to mature markets like New York and San Francisco. Texas and Florida show customer growth, maturing sales staff, and logistical efficiencies. Management expects 3-5x growth in these markets due to their large size and current small penetration.

“So when we look at Texas and Florida as big markets, and then we have our smaller markets, Nashville, Detroit and as we push into the Carolinas and Colorado, we see lots of similarity. So it gives us the ability to pretty much forecast.”

asked by Brian Harbour · answered by James Leddy

Any differences in the M&A environment compared to six months ago?

The M&A environment is 'frothier and frothier' with many businesses looking to exit post-COVID. Chefs' Warehouse remains disciplined, focusing on tuck-ins and new market acquisitions, but prioritizes organic growth through talent investment due to better ROI.

“My desk is full, but we continue to be very diligent and disciplined and probably do some tuck-ins, probably do some new market acquisitions, but our organic growth is so strong. I would still rather keep investing in people.”

asked by Margaret-May Binshtok · answered by James Leddy

What are the underlying customer and volume trends in Texas now that the non-core customer attrition has been fully lapped?

The Texas business is growing nicely, and the non-core customer attrition (low margin, no profitability) has been fully lapped. The overall Texas EBITDA margin has improved by 'multiple hundred basis points.' The company is also working on real estate solutions for new space in Dallas and Houston.

“Our Texas business is growing really nicely. We're in the process of working out the real estate solutions in both Dallas and the big markets there, Dallas and Houston, Dallas being first, we'll be looking to take on new space and build it out and consolidate some facilities.”

asked by Brian Mullan · answered by James Leddy