Chefs' Warehouse - $CHEF - Earnings Analysis: Consistent revenue growth and improvement in gross profit margins.

Business Model

The Chefs' Warehouse generates revenue by distributing specialty and center-of-the-plate food products to upscale-casual and fine-dining restaurants, hotels, caterers, and other premium food service establishments in the United States, Middle East, and Canada.

Revenue Sources

• Specialty food product distribution
• Center-of-the-plate products distribution, including meat, poultry, and seafood
• Digital platform sales contributing to margin enhancement

Income Statement Analysis

• Net sales increased by 8.7% in Q4 2024 compared to Q4 2023 due to higher sales in specialty and center-of-the-plate categories.
• Gross profit increased by 9.8%, with gross profit margin rising approximately 23 basis points to 24.3%.
• Operating income increased by 21.7% driven by higher gross profit and controlled operating expenses.
• Net income increased by 49.5%, reflecting strong operational performance.
• Basic earnings per share increased by 50% to $0.63 in Q4 2024.

Balance Sheet Analysis

• Total assets increased by 9% primarily due to increases in cash and accounts receivable.
• Total stockholders' equity increased by 18.2%, reflecting retained earnings from net income during the period.
• Total liabilities increased by 5.6%, indicating stable leverage and effective debt management.

Cash Flow Analysis

• Net cash provided by operating activities increased by 148.3% due to higher net income and favorable changes in working capital.
• Net cash used in investing activities decreased significantly due to lower cash paid for acquisitions.
• Net cash used in financing activities reflects debt repayments and share repurchases.
• Overall, cash position improved with a net increase of $64.8 million in cash and cash equivalents.

Capital Allocation

Management is focusing on business reinvestment through facility expansions and technology enhancements to support future growth. In 2024, capital expenditures were $49.5 million, mainly for facility investments. The company also initiated share repurchases, buying back $17.4 million worth of shares under the authorized $100 million plan. No dividends were declared or paid during this period.

Management Commentary

Business activity and demand remained consistently strong through the fourth quarter amidst a healthy environment for our core upscale-casual to higher-end dining customer base.

Our teams provided excellent product and service amidst a busy holiday season and delivered the first one-billion-dollar-plus revenue quarter in Chefs' Warehouse history.

We continued to grow market share, closing the year with strong year-over-year growth in unique item placement and new customer acquisition.

Eggs are up due to the avian flu, causing some headwinds in that category.

Labor in certain areas remains a challenge due to the hard nature of the work.

Overall Sentiment: Management is optimistic about future growth and confident in achieving financial goals despite minor challenges.

Disclaimer: This analysis is based on company filings and public information as of February 12, 2025. It is for informational purposes only and not investment advice. Past performance does not guarantee future results. Investing in securities involves risks, including potential loss of principal. Always conduct your own research, understand the risks, and consult a financial professional before making investment decisions.