Why The Chefs' Warehouse, Inc. Shares Tumbled

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our thesis.

What: Shares of The Chefs' Warehouse  (NASDAQ: CHEF  )  were dropping like a falling knife today, losing as much as 22% after the company revised its 2013 guidance downward.

So what: The distributor of specialty food products said it now expects revenue of $670 million to $673 million, which was in line with expectations, but the company also sees adjusted net income of $0.80 to $0.81, below estimates of $0.90 and even with last year's total, despite a 40% increase in revenue. CEO Christopher Pappas said, "Top-line performance of our core business for 2013 was toward the lower end of our expectations, due in part to adverse weather," and went on to say that December was much weaker than anticipated. Still, Pappas said management was confident in "our long-term business strategy of growing and building our core markets."

Now what: In the aftermath, Chefs' Warehouse was downgraded by BB&T Capital Markets, and Canaccord lowered its price target from $28 to $24. Another potential concern is an accounting issue that came up in its Michael's Finer Meats subsidiary, and management said it was taking a charge of $0.02 per share to correct for it, saying it was not material. Despite the downward revisions, Chef's Warehouse does seem to be moving in the right direction with its recent acquisition of Allen Brothers, and the growth potential in the "foodie" industry seems to be strong. Shares were trading down just 7% by the afternoon as the market seems to believe the stock was oversold initially. I would also see the early morning sell-off as an overreaction.

The right way to invest
It's no secret that investors tend to be impatient with the market, but the best investment strategy is to buy shares in solid businesses and keep them for the long term. In the special free report "3 Stocks That Will Help You Retire Rich," The Motley Fool shares investment ideas and strategies that could help you build wealth for years to come. Click here to grab your free copy today.

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2813188, ~/Articles/ArticleHandler.aspx, 9/3/2015 11:17:01 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Jeremy Bowman

Fool since 2011. I write about consumer goods, the big picture, and whatever else piques my interest. Follow me on Twitter to see my latest articles, and for commentary on hot topics in retail and the broad market.

Today's Market

updated Moments ago Sponsored by:
DOW 16,524.92 173.54 1.06%
S&P 500 1,973.90 25.04 1.28%
NASD 4,791.29 41.31 0.87%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/3/2015 10:51 AM
CHEF $15.62 Up +0.28 +1.83%
The Chefs' Warehou… CAPS Rating: **