Conditions in the food business have been extremely challenging lately, with strong competition from huge players threatening to squeeze out smaller companies in the industry. Specialty food distributor Chefs' Warehouse (NASDAQ:CHEF) has had to work hard to hold its own, and it still has to overcome all the obstacles that any business faces in trying to grow.

Coming into Wednesday's second-quarter financial report, investors wanted to see solid revenue growth but were willing to sacrifice some earnings to get it. Chefs' Warehouse's numbers were a bit better than expected, with earnings that held up reasonably well and favorable guidance for the future. Let's take a closer look at Chefs' Warehouse and the conclusions to be drawn from its most recent results.

Professional kitchen with stoves, pots, pans, and other kitchen tools on three large tables and several racks.

Image source: Getty Images.

Chefs' Warehouse makes progress

The second-quarter results showed the efforts that Chefs' Warehouse has made. Revenue climbed 14% to $331.7 million, accelerating from the 10% pace of growth in the first quarter and almost exactly matching the consensus forecast among those following the stock. The company reversed a year-ago loss by posting net income of $3.67 million, and that worked out to $0.14 per share, topping the $0.12 per share that most investors were expecting to see.

Looking more closely at the numbers, Chefs' Warehouse was able to get a lot more performance from its own internal efforts. Organic sales gains amounted to 10%, leaving just 4 percentage points of growth due to recent acquisitions. Case count growth weighed in with a greater than 6% rise, with unique customers rising 4.5% and placements gaining just over 6%.

Food prices also started to push higher, with inflation helping to boost sales figures. Pounds sold in the protein area were up 1.2%, and a 2.8% rise in protein prices also added to the top line. On the specialty side, inflation was even higher at 4.3%.

Expenses continue to be a struggle for Chefs' Warehouse. Even though gross margin figures rose slightly, a 16% jump in operating expenses led to a small deterioration in operating margin. Interest expense was lower because of a prepayment penalty in 2016's second quarter, without which costs of debt maintenance would have risen.

CEO Chris Pappas pointed to the importance of the company's strategic efforts. "The investments that we made in our infrastructure," Pappas said, "[including] additional talent, technology, and facilities, are being fruit and positioning us well for the future."

What's next for Chefs' Warehouse?

Chefs' Warehouse's conference call added to some of the optimism going forward. Pappas said that August is looking extremely strong so far, and cross-selling efforts are paying off well. The company's diversification has served it well amid tough competition, and even though the restaurant space is still seeing some tough times, the CEO thinks that Chefs' Warehouse can play that to its advantage by appealing to chains as well as independent operators.

Chefs' Warehouse made positive moves with its guidance for 2017. The specialty food distributor guided its revenue estimate to the top half of its previous range, now believing it will bring in between $1.28 billion and $1.29 billion. The company also boosted the bottom end of its earnings guidance by another $0.01, with a new range of $0.37 to $0.41 per share.

Investors were very happy with the strong performance, and the stock vaulted higher by 19% on Thursday following the Wednesday night announcement. Having waited a while to see better conditions, Chefs' Warehouse hopes that it can sustain its positive momentum and keep moving forward with stronger growth for the rest of the year and beyond.

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