Despite Margin Pressure, Higher Wage Rates Should Help No-Moat US Foods Staff for Future Growth

Despite the mid-single-digit drop in the shares of no-moat US Foods, we are pleased with its third-quarter results, as our profit expectations were not as rosy as FactSet consensus. US Foods reported 35% sales growth (compared with our 28% mark and 30% for consensus) driven by 18.5% case growth as the market recovers from the pandemic, 11.5% food inflation, and a 4.9% mix benefit. Total sales were at 94% of the prepandemic level excluding acquisitions, including 101% for restaurants, 92% for healthcare, and 72% for hospitality. Management said the delta variant has not weakened demand, and it even cited an acceleration in volumes in October.