The Chefs' Warehouse Inc.

10/28/2026 | Press release | Distributed by Public on 10/28/2026 06:37

Quarterly Report for Quarter Ending September 25, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is provided as a supplement to the accompanying condensed consolidated financial statements and footnotes to help provide an understanding of our financial condition, changes in our financial condition and results of operations. The following discussion should be read in conjunction with information included in our Annual Report on Form 10-K for the fiscal year ended December 26, 2025 (the "2025 Form 10-K") filed with the SEC. Unless otherwise indicated, the terms "Company", "Chefs' Warehouse", "we", "us" and "our" refer to The Chefs' Warehouse, Inc. and its subsidiaries. All dollar amounts included in the tables in the following discussion are presented in thousands.
Business Overview
We are a premier distributor of specialty foods in the leading culinary markets in the United States, the Middle East and Canada. We offer more than 90,000 stock-keeping units ("SKUs"), ranging from high-quality specialty foods and ingredients to basic ingredients and staples and center-of-the-plate proteins, such as beef, seafood and poultry. We serve more than 55,000 core customer locations, primarily located in our 23 geographic markets across the United States, the Middle East and Canada, and the majority of our customers are independent restaurants and fine dining establishments. We also sell certain of our center-of-the-plate products directly to consumers through our Allen Brothers subsidiary.
Performance Indicators
In assessing the performance of our business, our management team considers a variety of performance and financial measures. The key measures used by our management are discussed below.
•Net sales growth. Our net sales growth is driven principally by changes in volume and, to a lesser degree, changes in price related to the impact of inflation in commodity prices and product mix. In particular, product cost inflation and deflation impact our results of operations and, depending on the amount of inflation or deflation, such impact may be material. For example, inflation may increase the dollar value of our sales, and deflation may cause the dollar value of our sales to fall despite our unit sales remaining constant or growing.
•Gross profit and gross profit margin. Our gross profit and gross profit as a percentage of net sales, or gross profit margin, are driven principally by changes in volume and fluctuations in food and commodity prices and our ability to pass on any price increases to our customers in an inflationary environment and maintain or increase gross profit margin when our costs decline.
Inflation. The majority of our pricing is set at the time of order and we typically pass cost increases or decreases to our customers. Our ability to fully pass along cost changes and the timing of those changes can cause fluctuations in our gross profit margin. Also, some of our pricing to customers is based on a cost-plus methodology, which impacts gross profit in periods of cost inflation or deflation.
Product Mix. Our gross profit margin is also a function of the product mix of our net sales in any period. Given our wide selection of product categories, as well as the continuous introduction of new products, we can experience shifts in product sales mix that have an impact on net sales and gross profit margins. Product mix is most significantly impacted by the introduction of new product categories in markets that we have more recently entered and from acquisitions, as well as the continued growth in item penetration on higher velocity items such as dairy products.
•Volume Measurements. In assessing our results, we utilize both total and organic growth, which excludes growth from an acquired business until it has been reflected in our results of operations for at least 12 months. We use case count as the volume measurement in our specialty product category and pounds sold as the volume measurement in our center-of-the-plate category.
Case count. Case count represents the volume of specialty products sold to customers during a given time period. Case growth is calculated by dividing the change in case volumes sold by the number of cases sold in the prior period. We define a case as the lowest level of packaged products as received from our suppliers, with one case containing several individually packaged units of the same product. Where individual packaged units are sold separately, case volume is calculated using the case equivalent quantity sold.
Pounds sold. Pounds represent the volume of center-of-the-plate products sold to customers during a given time period. Pounds growth is calculated by dividing the change in pound volumes sold by the number of pounds sold in the prior period.
•Other Performance Indicators. While case count is used for the volume measurement in the specialty category, we also disclose changes in specialty unique customers and specialty placements to provide additional context to our results and to the performance of our business. We define unique customers as the number of customers who purchase product in a given week. Each customer, regardless of the number of deliveries made during the week, is counted only once. Placements is the sum of the unique stock-keeping units ("SKUs") sold per customer, also in a given week. Our customer count and placements measures are subject to adjustments for acquisitions, consolidations, spin-offs, and other market activity, and we present these measures for historical periods reflecting these adjustments.
Recent Acquisitions
On October 1, 2025, we entered into an asset purchase agreement to acquire substantially all of the assets of Italco Food Products ("Italco"), a premier specialty food distributor based in Denver, Colorado.
RESULTS OF OPERATIONS
Thirteen Weeks Ended Thirty-Nine Weeks Ended
September 25, 2026 September 26, 2025 September 25, 2026 September 26, 2025
Net sales $ 1,135,379 $ 1,021,319 $ 3,363,002 $ 3,006,973
Cost of sales 851,044 774,128 2,528,412 2,279,448
Gross profit 284,335 247,191 834,590 727,525
Selling, general and administrative expenses 233,407 208,125 691,729 624,638
Other operating (income) expenses, net (558) 130 (388) 1,000
Operating income 51,486 38,936 143,249 101,887
Interest expense 8,999 10,535 28,806 31,503
Income before income taxes 42,487 28,401 114,443 70,384
Income tax expense 12,870 9,253 33,692 19,707
Net income $ 29,617 $ 19,148 $ 80,751 $ 50,677
Thirteen Weeks Ended September 25, 2026 Compared to Thirteen Weeks Ended September 26, 2025
Net Sales
2026 2025 $ Change % Change
Net sales $ 1,135,379 $ 1,021,319 $ 114,060 11.2 %
Organic growth contributed $105.4 million, or 10.3%, to sales growth and the remaining growth of $8.7 million, or 0.9%, primarily resulted from our acquisition of Italco. Organic case count increased approximately 6.1% in our specialty category, representing an increase in net sales of $38.3 million. In addition, unique customers and placements in our specialty category increased 4.4% and 7.2%, respectively, compared to the prior year quarter. Organic pounds sold in our center-of-the-plate category increased 6.6% compared to the prior year quarter, representing an increase in net sales of $26.0 million. Estimated inflation increased sales by $16.2 million, or 2.6% in our specialty category and by $26.0 million, or 6.6% in our center-of-the-plate category compared to the prior year quarter.
Gross Profit
2026 2025 $ Change % Change
Gross profit $ 284,335 $ 247,191 $ 37,144 15.0 %
Gross profit margin 25.0 % 24.2 %
Gross profit dollars increased $27.6 million as a result of sales growth, which includes inflation and acquisitions, with the remainder of the increase primarily due to improved gross profit margin rates. Gross profit margin increased approximately 84 basis points due to effective pricing and product cost management in an inflationary "food away from home" environment, together with growth in certain higher-margin products within our aggregate product mix. Gross profit margins increased 63 basis points in the Company's specialty category, or $4.3 million, and increased 137 basis points in the Company's center-of-the-plate category, or $6.1 million, compared to the prior year quarter.
Selling, General and Administrative Expenses
2026 2025 $ Change % Change
Selling, general and administrative expenses $ 233,407 $ 208,125 $ 25,282 12.1 %
Percentage of net sales 20.6 % 20.4 %
The increase in selling, general and administrative expenses was primarily due to higher costs associated with compensation and benefits, facilities and distribution to support sales growth and higher depreciation expense driven by facility and fleet investments. Our ratio of selling, general and administrative expenses to net sales increased 20 basis points due to higher stock-based compensation costs associated with certain performance-based awards and higher fuel costs.
Other Operating (Income) Expenses, Net
2026 2025 $ Change % Change
Other operating (income) expenses, net $ (558) $ 130 $ (688) NM
NM - Not meaningful
Other operating (income) expenses, net was income of $558 thousand for the thirteen weeks ended September 25, 2026, which primarily reflected the reversal of a contingent earn-out liability related to a prior year acquisition, partially offset by third-party deal costs. Other operating (income) expenses, net was expense of $130 thousand for the thirteen weeks ended September 26, 2025, which was primarily comprised of third-party deal costs.
Interest Expense
2026 2025 $ Change % Change
Interest expense $ 8,999 $ 10,535 $ (1,536) (14.6) %
Interest expense decreased primarily due to lower aggregate principal amounts of debt outstanding and lower interest rates in the current period compared to the prior year.
Income Tax Expense
2026 2025 $ Change % Change
Income tax expense $ 12,870 $ 9,253 $ 3,617 39.1 %
Effective tax rate 30.3 % 32.6 %
The Company's effective tax rate was 30.3% and 32.6% for the thirteen weeks ended September 25, 2026 and September 26, 2025, respectively. The effective tax rate for the thirteen weeks ended September 25, 2026 includes a discrete tax benefit related to the vesting of stock awards.
Thirty-Nine Weeks Ended September 25, 2026 Compared to Thirty-Nine Weeks Ended September 26, 2025
Net Sales
2026 2025 $ Change % Change
Net sales $ 3,363,002 $ 3,006,973 $ 356,029 11.8 %
Organic growth contributed $329.7 million, or 10.9%, to sales growth and the remaining growth of $26.3 million, or 0.9%, primarily resulted from our acquisition of Italco. Organic case count increased approximately 6.0% in our specialty category, representing an increase in net sales of $110.5 million. In addition, unique customers and placements in our specialty category increased 3.3% and 6.9%, respectively, compared to the prior year period. Organic pounds sold in our center-of-the-plate category increased 7.2% compared to the prior year period, representing an increase in net sales of $82.9 million. Estimated inflation increased sales by $50.9 million, or 2.7%, in our specialty category and by $80.9 million, or 7.0%, in our center-of-the-plate category compared to the prior year period.
Gross Profit
2026 2025 $ Change % Change
Gross profit $ 834,590 $ 727,525 $ 107,065 14.7 %
Gross profit margin 24.8 % 24.2 %
Gross profit dollars increased $86.1 million as a result of sales growth, which includes inflation and acquisitions, with the remainder of the increase primarily due to improved gross profit margin rates. Gross profit margin increased approximately 62 basis points due to effective pricing and product cost management in an inflationary "food away from home" environment, together with growth in certain higher-margin products within our aggregate product mix. Gross profit margins increased 51 basis points in the Company's specialty category, or $10.5 million, and increased 107 basis points in the Company's center-of-the-plate category, or $14.2 million, compared to the prior year period.
Selling, General and Administrative Expenses
2026 2025 $ Change % Change
Selling, general and administrative expenses $ 691,729 $ 624,638 $ 67,091 10.7 %
Percentage of net sales 20.6 % 20.8 %
The increase in selling, general and administrative expenses was primarily due to higher costs associated with compensation and benefits, facilities and distribution to support sales growth, and higher depreciation expense driven by facility and fleet investments. Our ratio of selling, general and administrative expenses to net sales decreased 20 basis points due to sales growth combined with certain benefits derived from our investments in our facility and distribution operations partially offset by higher stock-based compensation costs associated with certain performance-based awards and higher fuel costs.
Other Operating (Income) Expenses, Net
2026 2025 $ Change % Change
Other operating (income) expenses, net $ (388) $ 1,000 $ (1,388) NM
NM - Not meaningful
Other operating (income) expenses, net was income of $388 thousand for the thirty-nine weeks ended September 25, 2026, which primarily reflected the reversal of a contingent earn-out liability related to a prior year acquisition, partially offset by third-party deal costs. Other operating (income) expenses, net was expense of $1.0 million for the thirty-nine weeks ended September 26, 2025, which was primarily comprised of third-party deal costs.
Interest Expense
2026 2025 $ Change % Change
Interest expense $ 28,806 $ 31,503 $ (2,697) (8.6) %
Interest expense decreased primarily due to lower aggregate principal amounts of debt outstanding and lower interest rates in the current period compared to the prior year.
Income Tax Expense
2026 2025 $ Change % Change
Income tax expense $ 33,692 $ 19,707 $ 13,985 71.0 %
Effective tax rate 29.4 % 28.0 %
The Company's effective tax rate was 29.4% and 28.0% for the thirty-nine weeks ended September 25, 2026 and September 26, 2025, respectively. The increase in the effective tax rate for the thirty-nine weeks ended September 25, 2026 resulted from increased permanent tax differences related to compensation expense.
LIQUIDITY AND CAPITAL RESOURCES
We finance our day-to-day operations and growth primarily with cash flows from operations, borrowings under our senior secured credit facilities and other indebtedness, operating and finance leases, trade payables and equity financing.
Indebtedness
The following table presents selected financial information on our indebtedness:
September 25, 2026 December 26, 2025
Senior secured term loan $ 244,750 $ 252,000
Convertible senior notes 287,500 287,500
Borrowings outstanding on asset-based loan facility 70,000 100,000
Finance leases and other financing obligations 134,552 119,451
Financing Transactions
In January 2026, we entered into an amendment to our senior secured term loan agreement, which reduced the interest rate spread by 50 basis points on our senior secured term loan facility.
In February 2026, the board of directors authorized the extension of our share repurchase program for ten years, subject to the original $100.0 million limit. During the thirty-nine weeks ended September 25, 2026, we repurchased 156,861 shares of our common stock at an average purchase price of $63.75 per share. The share repurchases were funded by our available cash. The remaining share purchase authorization was $57.6 million at September 25, 2026. We are not obligated to repurchase any specific number of shares and may suspend or discontinue the program at any time.
On October 15, 2026, we entered into a new term loan agreement (the "2033 Term Loan") in an aggregate principal amount of $675.0 million that matures on October 15, 2033. The proceeds from the 2033 Term Loan were used to refinance the existing term loan facility, redeem the outstanding convertible senior notes (the "2028 Convertible Notes"), pay related fees, costs and expenses, pay capital expenditures and for general corporate purposes.
Holders of approximately $287.2 million aggregate principal amount of the 2028 Convertible Notes elected to convert and on October 15, 2026, we delivered to converting holders (i) aggregate cash payments totaling approximately $437.1 million (including cash paid in lieu of fractional shares) and (ii) 2,671,056 shares of common stock. In addition, we redeemed all of the approximately $341 thousand aggregate principal amount of 2028 Convertible Notes that had not been previously surrendered for conversion at a redemption price in cash equal to 100% of the principal amount, plus accrued and unpaid interest. We funded the cash portion of the conversion settlements as well as the redemption price with a portion of the proceeds from the 2033 Term Loan, together with cash on hand.
On September 28, 2026, after the close of the third quarter, we made a voluntary principal payment of $20.0 million on the asset-based loan facility (the "ABL Facility"). Additionally, as part of the refinancing transactions that occurred on October 15, 2026, we entered into an amendment to the ABL Facility, which, among other things, amends certain covenants to conform to the 2033 Term Loan and increases the letter of credit sublimit from $50.0 million to $75.0 million.
Liquidity
The following table presents selected financial information on liquidity:
September 25, 2026 December 26, 2025
Cash and cash equivalents $ 164,725 $ 120,982
Working capital(1), excluding cash and cash equivalents
406,161 375,448
Availability under asset-based loan facility 183,377 159,516
(1) We define working capital as current assets less current liabilities.
We expect our capital expenditures, excluding cash paid for acquisitions, for fiscal 2026 will be approximately $50.0 million to $60.0 million. We believe our existing balances of cash and cash equivalents, working capital and the availability under our asset-based loan facility, are sufficient to satisfy our working capital needs, capital expenditures, debt service and other liquidity requirements associated with our current operations over the next twelve months.
Cash Flows
The following table presents selected financial information on cash flows:
Thirty-Nine Weeks Ended
September 25, 2026 September 26, 2025
Net cash provided by operating activities $ 141,138 $ 55,352
Net cash used in investing activities (25,696) (33,340)
Net cash used in financing activities (71,602) (71,589)
Our cash provided by operating activities is predominately driven by net sales to our customers. Our cash used in operating activities is primarily driven by our payments to suppliers for our inventory, employee compensation, payments to support our facilities, our distribution network, interest on our indebtedness, payments to tax authorities and other general corporate expenditures. Net cash provided by operations was $141.1 million for the thirty-nine weeks ended September 25, 2026 compared to $55.4 million for the thirty-nine weeks ended September 26, 2025. The increase in cash provided by operating activities was primarily due to sales growth and a strategic pull-forward of inventory purchases in the prior year period.
Net cash used in investing activities was $25.7 million for the thirty-nine weeks ended September 25, 2026, primarily driven by capital expenditures.
Net cash used in financing activities was $71.6 million for the thirty-nine weeks ended September 25, 2026 driven by $30.0 million of payments under our asset-based loan facility, $15.9 million of finance lease payments, $10.5 million paid for shares surrendered to pay tax withholding related to the vesting of equity incentive plan awards, $10.0 million used to repurchase our common stock and $7.3 million of payments of term loan debt.
The Chefs' Warehouse Inc. published this content on October 28, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on October 28, 2026 at 12:37 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]