Chefs’ Warehouse Reports Quarterly Profit; Shares Pop

Shares of The Chefs’ Warehouse Inc. (NASDAQ: CHEF) increased 1.2% in Wednesday’s extended trading session, after closing 12.3% higher on the day. The premier distributor of specialty food products in the United States and Canada reported better-than-expected fiscal Q2 results, increasing investors’ optimism.

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According to the reports, which were released on July 28, the company reported Q2 adjusted earnings per share of $0.04, compared to the adjusted loss of $0.57 recorded in the prior-year quarter. That also beat analysts’ expectations of a loss of $0.32 per share. Strong top-line growth, aided by a rise in existing and new customers, along with eased COVID-related restrictions in many key markets, were the primary drivers for CHEF’s gains.

Net sales also surpassed the consensus estimate, increasing 111% year-over-year to $423 million, instead of the predicted $355.02 million.

In other positive news, Gross profit margin was 22.7%, up 101 basis points (bps) year-over-year. Additionally, as a percentage of net sales, operating expenses decreased to 21.4%, from 34% in the same quarter last year. (See Chefs’ Warehouse stock charts on TipRanks)

Following the fiscal Q2 results, Lake Street analyst Ben Klieve reiterated a Buy rating and a price target of $40 (33.9% upside potential) on the stock.

Klieve expressed optimism about the company, saying, “As a foodservice distributor focused on the independent restaurant niche, The Chefs’ Warehouse faced unprecedented headwind throughout 2020 which we believe is subsiding. As more consumers get vaccinated and indoor dining restrictions are lifted, we see considerable pent-up demand for the foodservice industry which we believe will flow to Chefs’ Warehouse. As a result, we look for material sequential improvement on the top and bottom lines throughout 2021 and into 2022, and we believe the company will emerge from the pandemic with its leadership position in the high growth independent restaurant niche intact.”

The analyst added, “CHEF represents a compelling stock for long term investors.”

Not all analysts are as enthusiastic about CHEF as Klieve is. Indeed, the rest of the Street is cautiously optimistic about the stock, with a Moderate Buy consensus rating. That’s based on 1 Buy and 1 Hold.

Overall, the average Chefs’ Warehouse price target of $37 implies 23.8% upside potential to current levels. Shares have increased 16.3% so far this year.

Investors should always be aware of the risks involved in any stock. According to the new TipRanks Risk Factors tool, the CHEF stock is at risk mainly from two factors: Finance and Corporate, and Production, which contribute 40%, and 17%, respectively, to the total risk for the stock. Within the Finance and Corporate risk category, Chefs’ Warehouse has 14 risks.