US Foods Holding Corp. (NYSE:USFD) Q2 2023 Earnings Call Transcript

They adjusted that to flat for the year in May. And then the recent Black Box data had the second quarter for changes down anywhere between 2% and 3%. And I think they pointed to about 2.7% in July. So it’s really a traffic issue in chains. And as you point out, that’s not our focus. We’re going to be opportunistic on change, and we’re going to lean in hard on healthcare, hospitality independents and continue to run our playbook.

Dirk Locascio : I think, Brian, hopefully what you continue to see here in the second quarter is in a pretty normalized operating environment has recovered. The fact that our overall independent is still growing at 5.5% in the broadline which, as I said in the first quarter call, we think sort of in the mid-5s, that’s a very strong case growth. We’re taking share. Healthcare and hospitality is not by chance that we’re growing still at 7%, well above market. And so those are the things that we’re going to continue to control the controllables despite the macro backdrop, we feel good about where we stand and our outlook.

Brian Harbour : Okay. Great. The deflation rate you saw, if that was sort of steady through the second quarter, is it — do you think it will be something similar in the second half? Or how are you thinking about that? And then also just you had kind of the LIFO benefit from lower inventory values. Will that still be kind of a factor in the third and fourth quarter?

David Flitman : Sure. Maybe I’ll take them in reverse. So LIFO is hard to predict based on deflation or inflation, what happens there. I mean, I’ll remind you that the way we reported adjusted, it’s backed out of there. So that is not a help for us in our adjusted EBITDA numbers. It does help in our overall GAAP numbers. And the second part is the — in the second half year, yes, it was pretty stable in the second quarter. I think in the second half of the year if we continue to see some deflation at this point based on what we’re seeing. I expect it to be — continue to be driven primarily by the center-of-the-plate categories. As grocery, as I mentioned before, still really hasn’t shown signs of deflation there. And even if we see some modest additional deflation in proteins, we feel very good about our ability to continue to drive our strong results.

Operator: And your next question comes from the line of Jeffrey Bernstein from Barclays.

Jeffrey Bernstein : Great. Two questions. The first one, just on the follow-up for the total case growth. I know we dissected and the independents were better and the chains were worse. But in total, I guess, a little bit of a slowdown. I’m just wondering whether there’s a concern of a slowing macro or maybe what your expectation is for the back half total case growth within your updated ’23 guidance. I mean, Dave, you mentioned the upper — or Dirk, you mentioned the upper end of earnings guidance of the macro holds. I’m just wondering what that assumes for total case growth for the second half or the full year?

David Flitman : Yes, I appreciate the questions. I would point to the comments I made earlier around the stability in the independent space and the health of the operator holding up quite well, particularly as we put the calendar here into the early part of the third quarter. Importantly, our ability to continue to take share. I’m getting nothing but more confident around that, given the strength of our team, our ability to lean in, in a local market basis and provide the best value and product offerings and really understand where we can target those independents. That continues to get very, very strong. All that’s contemplated in our back half outlook. So we would say we’re in a very stable environment, and we will continue to take share there. I already commented on the chain space and our focus there. Dirk?