Chefs' Warehouse Says Decade of Investments Is Fueling Sales Momentum

Key Points

• Chefs' Warehouse says its recent sales momentum is being driven by both stronger customer demand and returns on a decade of investments in facilities, training, technology, and category expansion.
• Management said margin upside will depend on the mix of growth: faster acquisition-led expansion could limit margin gains, while more organic growth may produce higher EBITDA margins and better gross profit dollars.
• The company is leaning on technology, facility consolidation, and market expansion to improve efficiency, while its Middle East business remains pressured by regional conflict and lower hotel activity.

Chefs' Warehouse NASDAQ: CHEF executives said recent sales momentum reflects a combination of healthier customer demand and company-specific gains from years of investment in facilities, training, technology and category expansion.

Speaking at a BMO Capital Markets event hosted by food retail analyst Kelly Bania, Founder, Chairman and CEO Christopher Pappas said the company is benefiting from a “Goldilocks” environment in which customers are generally performing well while Chefs' Warehouse is beginning to see returns from investments made over the past decade.

Pappas said the company has added new facilities, entered new territories through acquisitions, rehired and trained teams, and expanded its technology platform. He said Chefs' Warehouse now has more than 1,000 people in its sales force and has invested heavily in teaching employees how to sell newer categories and support customers.

“It’s like going to culinary school and business school for us every week,” Pappas said, describing the company’s ongoing training process with producers, ranchers, farmers and artisans. “That does cost money, and it did cost us a lot of money over the last 10 years to build this, and we’re starting to see the fruits of our labor.”

Executives Say Margin Upside Depends on Growth Mix

Bania noted that Chefs' Warehouse’s trailing four-quarter EBITDA margin was recently 6.4%, within the 6% to 7% range the company has discussed for years. Pappas said that range is not necessarily a ceiling, but the ultimate margin profile depends on how the company reaches its growth targets.

He said if the company reaches $5 billion in sales more quickly through acquisitions or a mix shift toward more expensive items, EBITDA margins may not rise as much. If growth is more organic, he said, margins could be higher because the core business produces stronger EBITDA and requires less integration of lower-margin acquired companies.

Pappas said the company’s focus is not only on margin percentage, particularly after years of inflation, but also on gross profit dollars. “As long as we can grow the GP dollars faster than the overhead, we will have success,” he said.

He added that the company is still in the “first, second inning” of improving leverage from more pounds and boxes per route, fewer touches of inventory and better utilization of facilities.

Technology and Data Tools Remain a Focus

CFO James Leddy said the company’s Power BI tool, rolled out over roughly the past year, has improved the quality and availability of data across the organization. He said the system is not just for salespeople, but also for operators, logistics teams and procurement teams.

Leddy said the tool integrates with the company’s digital platform and gives salespeople real-time information about customer behavior, including how sensitive customers may be to product pricing. It also provides operators with real-time information on labor hours, costs, inventory and other key performance indicators.

Pappas said technology is also changing expectations for salespeople by reducing manual work and giving them more time to act as merchandisers and business managers. He said artificial intelligence tools can now provide in minutes information that previously took days to assemble.

“We give you tons of leads,” Pappas said. “We have so much inbound people that are interested in our products because we are special.”

Facility Consolidation Central to Market Strategy

Leddy said consolidating facilities is a key part of what Pappas calls “Chef-sizing” a market. In regions where the company has added categories and acquired businesses, Chefs' Warehouse often moves from several facilities into a larger, state-of-the-art location that can support broader distribution and customer engagement.

He pointed to Florida, Southern California and Northern California as examples where the company has built larger facilities to consolidate acquisitions, combine categories on the same trucks and create marketing spaces such as test kitchens and dry-aging rooms.

Pappas said different geographies are at different stages of maturity. He described New York as the company’s core market and said it is performing strongly. Texas, by contrast, remains in what he called the “second inning,” with Dallas as the “heart and soul” of the business there. He said Dallas is in three facilities and needs consolidation, while Houston will need a new building in a few years and Austin has already outgrown its current building.

Florida, Pappas said, is performing well and has room to grow significantly, supported by population growth and affluent consumers seeking better food and dining experiences.

Middle East Business Pressured by Conflict

Executives also addressed the company’s Middle East operations, which have been affected by regional conflict. Leddy said Chefs' Warehouse has not disclosed an exact revenue figure for the business, but said total international revenue, including Canada and the Middle East, represents between 5% and 10% of the company’s business.

Pappas said the Middle East business has been hurt by lower hotel occupancy and challenges getting product into the region. He said the business has been running at roughly 60% to 70% of prior levels, while Bania referenced a figure of about 75% since March.

Despite the disruption, Pappas praised the local management team, saying it has done an “unbelievable job” navigating logistics and maintaining sales under difficult circumstances.

In Canada, Pappas described the company’s business as small but profitable. He said a sizable acquisition there could be attractive over the long term, though he added that Chefs' Warehouse currently has significant opportunities in Texas, Florida and other existing markets.

M&A, Hardie’s and Restaurant Trends

On acquisitions, Pappas said the company’s leverage is now below 2x, which gives it flexibility and allows management to remain patient. He said Chefs' Warehouse does not “need anything right now,” though it would consider reasonable fold-in deals and has interest in entering the Carolinas.

Pappas also discussed Hardie’s, the Texas-based business acquired by Chefs' Warehouse. He said the company is nearing the end of difficult comparisons tied to business that was discontinued after the acquisition. He said he is “ecstatic” with the progress at Hardie’s, calling the territory profitable and still in an early stage of development.

Discussing restaurant trends, Pappas said demand from the company’s better restaurant customers remains strong despite high protein prices. He said some restaurants are using more pasta, rice and potatoes or adjusting portions, but higher-end customers continue to demand premium products.

He also said GLP-1 weight-loss drugs may be changing behavior, with some diners eating less and taking food home. He said alcohol consumption appears to be lower in some cases, contributing to the rise of more sophisticated mocktails that still carry meaningful costs for restaurants.

About Chefs' Warehouse NASDAQ: CHEF

Chefs' Warehouse, Inc is a specialty food distributor that supplies a broad range of high‐end ingredients and culinary products to professional chefs, restaurants, hotels, and other foodservice operators. Headquartered in Maspeth, New York, the company sources its portfolio from local artisans, boutique producers and leading global suppliers. Its core offerings include fresh and frozen proteins, specialty cuts of meat and seafood, handcrafted cheeses and charcuterie, seasonal produce, value‐added preparations, pantry staples and premium desserts and beverages.

The company operates a network of distribution centers strategically located in major metropolitan markets across North America.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.