SYSCO Corporation (SYY), United Natural Foods, Inc. (UNFI): Food Distribution Is a Great Business

Page 2 of 2

The distributor all great chefs go to

The Chefs Warehouse, Inc (NASDAQ:CHEF) is considered the place all great chefs go to shop. It is a specialty food distributor that has been sourcing products for high-end chefs for the past 30 years. The company has locations in New York City, Washington, D.C., San Francisco, Los Angeles, Las Vegas, Miami, and Portland, Ore. The Chefs’ Warehouse caters to fine restaurants, hotels, caterers, and gourmet stores around the country.

In the fist quarter of this year, net sales increased 42.2% to $139.4 million. EBITDA increased 39.8% to $8.3 million. The growth is the result of the company’s most recent acquisitions. Same-store order patterns for its customers grew in the mid-single digits in the quarter. Even without the acquisitions, organic sales grew 5.7%.

Going forward, the company just issued a $100 million note to finance more acquisitions. Its focus on high-end restaurants gives it an edge over other food distributors. No other competitor is as focused on servicing high-end restaurants with the specialty foods they’re looking for like The Chefs’ Warehouse. According to the company, there are an estimated 2,000 specialty food distributors with $10 million to $70 million in revenue that the company can target for acquisition. What I like about this niche for The Chefs’ Warehouse is that chefs want premium products and are willing to pay premium prices to get the best.

For the full year, the company expects revenue to be between $650 million and $690 million and EBITDA of $46 million to $51 million. Earnings are expected to be between $0.84 and $0.94 per share compared to $0.69 per share last year.

Foolish assessment

The food-distribution business is a great business to be in. My favorite two are The Chefs’ Warehouse and United Natural Foods. They have the most room to grow. Conservative investors can buy SYSCO Corporation (NYSE:SYY) and collect a 3.3% annual yield. Either way, the prospects for the industry look great and it’s a great sector for investors to be in.

The article Food Distribution Is a Great Business originally appeared on and is written by Mark Yagalla.

Mark Yagalla has no position in any stocks mentioned. The Motley Fool recommends Sysco. The Motley Fool owns shares of The Chefs’ Warehouse. Mark is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Page 2 of 2