Chefs’ Warehouse grows sales, faces investor pressure
RIDGEFIELD — After a year of significant growth at the Chefs’ Warehouse, there is optimism among company officials and numerous shareholders and investment analysts about the prospects of the specialtyfood products distributor. There is debate, however, about the extent of changes needed for the company to reach its longterm goals.
The Ridgefield-based company reported Wednesday rising quarterly and annual revenues, growth that was praised by several analysts who joined a conference call to discuss the results. But the latest numbers were announced against the backdrop of an activist investment manager’s push for a boardroom shakeup because of dissatisfaction with the company’s current board directors.
“As we enter this next phase of our growth, we expect Chefs’ Warehouse to remain rooted in our DNA as the leading specialty food marketer and distributor to the upscale-casual and higher-end dining establishments in the markets we serve,” Christopher Pappas, Chefs’ Warehouse founder, CEO, chairman and president, said during the call.
Chefs’ Warehouse’s quarterly sales jumped about 20 percent year over year, to approximately $950 million. Its annual sales amounted to about $3.4 billion, up more than 30 percent from 2022. The company benefited from “organic growth” from existing operations, as well as sales from acquisitions, such as the additions last year of Hardie’s Fresh Foods and Greenleaf Produce & Specialty Foods.
For the fourth quarter, the company recorded a profit of $16 million, compared with about $1.2 million in the fourth quarter of 2022. It produced a profit of about $34.6 million for all of 2023, compared with about $27.8 million in 2022.
“I think things are going very well,” Pappas said. “I think the team has their arms around the acquisitions from the past two years.”
Following the release of the fourth-quarter results, Chefs’ Warehouse shares closed Wednesday at about $36, up 7.6 percent from their closing total on Tuesday. The company’s shares have reached a 52-week high of about $39 and hit a 52-week low of around $17.
Despite the growth, Los Angeles-based investment-management firm Legion Partners, which has an approximately 3 percent stake in Chefs’ Warehouse, argues that the company should be performing even better.
In a letter sent Feb. 8 to shareholders, Legion Partners’ cofounders, Christopher Kiper and Ted White, outlined a number of misgivings with the 10member Chefs’ Warehouse board of directors. Among their criticisms, they asserted that the board had not held management accountable for the company failing to achieve a key profit goal and, “watched Chef ’s executives deploy almost $800 million of capital since 2014 into an acquisition program that we would best describe as haphazard.”
Legion officials have made “multiple efforts” in the past seven years to “engage constructively” with Chefs’ management and board members, according to the letter.
“During this time, our goal has remained the same: to help the company sustainably improve profitability and enhance strategic discipline regarding acquisitions, ultimately to help the company reach its valuation potential for all shareholders,” the letter said. “Unfortunately, whenever that pressure has abated, the board has seemingly returned to its old ways — including by shunning highly qualified members we have previously recommended and making undisciplined acquisitions that lead to sub-par margin and profitability performance. We believe this lack of progress is a result of a stale board that lacks the skills and independence required to significantly improve results, and instead has enabled a culture of complacency at the company’s highest levels.”
In response to an inquiry from Hearst Connecticut Media, Chefs’ Warehouse officials declined to comment on the letter. None of the analysts on Wednesday’s conference call asked about the letter.
Legion has nominated four candidates for the Chefs’ Warehouse board, with the election to be held at the company’s annual meeting, which is expected to be held in the first half of May. They are Kiper, who is also Legion’s chief investment officer; Richard Peretz, formerly the chief financial officer at UPS; Keith Rohland, formerly the chief information officer at US Foods; and Wendy Weinstein, a restaurant and food-services consultant and marketing executive.
“Legion Partners believes that Chef has tremendous potential to thrive as a leader in specialty food distribution,” the letter added. “However, we feel strongly that substantial change to the board is required to put the company on a path to value creation for all shareholders and stakeholders.”
Chefs’ Warehouse focuses on, “serving the specific needs of chefs who own and/or operate some of the nation’s leading menu-driven independent restaurants, fine dining establishments, country clubs, hotels, caterers, culinary schools, bakeries, patisseries, chocolateries, cruise lines, casinos and specialty food stores,” according to its website. “The Chefs’ Warehouse, Inc. carries and distributes more than 70,000 products to more than 44,000 customer locations throughout the United States, Canada and the Middle East.”
With the exception of its headquarters, at 100 East Ridge Road in Ridgefield, the company’s other sites generally are distribution facilities. Some locations, such as its newest distribution centers, in Opa-Locka, Florida, and Walnut, California, also do protein processing.
Chefs’ Warehouse has approximately 5,000 employees worldwide. About 4,400 employees are based in the U.S., including about 300 people based at the headquarters. In addition, there are more than 60 employees in Canada and approximately 500 employees across the United Arab Emirates, Qatar and Oman.
“We continue to hire and train new sales people to the team. That’s been our engine driver for almost 40 years now,” Pappas said. “As sticky as our customer base is — we’ve had customers now for over 30 years — you’ve got to have new customers constantly coming in.”