What happened
Shares of US Foods Holding Corp. (USFD 0.04%) plunged 10.6% in July, according to data provided by S&P Global Market Intelligence, after the food distributor reported a disappointing second quarter.
So what
In late July, US Foods released second-quarter results that didn't exactly please investors. Revenue was flat at $6.2 billion, falling short of the $6.3 billion consensus estimate from Wall Street, and EPS of $0.57 came in $0.01 below estimates.
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That may sound like a small earnings miss, and it was, but investors are concerned that companies like US Foods may not have any growth at all in the future. Case volume was down 0.9% in the second quarter as large customers ordered less. Smaller customers did grow their volume, but they're less reliable long-term customers because they'll change suppliers quickly and may be more able to work with smaller farmers or distributors.
Now what
The food business is changing rapidly and old guard companies like US Foods are falling victim to smaller upstarts. Not only are people spending more at small, local restaurants, they're looking for fresh, local food that may not come from a large distributor like US Foods. Those aren't trends the company will be able to adapt to easily, and they may limit growth potential in the long term.
