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Why Chef's Warehouse Stock Jumped Almost 10% on Friday

What happened

Chef's Warehouse (NASDAQ: CHEF) stock was trading almost 10% higher as of 3:15 p.m. ET Friday, trouncing the S&P 500's 2.6% increase. The surge added to a great week for the food specialist, as shares are up by more than 20%.

So what

Chef's Warehouse announced on Wednesday that the company is likely to sail past the short-term sales and earnings outlook that its management had issued back in April. Revenue should now land between $2.3 billion and $2.4 billion, executives said, compared to the prior forecast range of $2.1 billion to $2.2 billion. Projected earnings also received an upgrade.

Wall Street responded by sending shares higher, as few other consumer-facing companies are enjoying such strong sales and profit gains. The specialty foods niche seems insulated from much of the price sensitivity that has harmed other segments. Prices jumped 22% last quarter, for example, yet demand was still strong across Chef's Warehouse's portfolio.

Now what

This week's guidance increase suggests that these favorable dynamics continued into the company's fiscal second quarter, which ends in late June. Chef's Warehouse will announce those detailed results in late July, and expectations for strong sales and earnings gains in that report are driving the stock higher.

The company may still face supply chain challenges or slowing growth if economic conditions worsen. But, to date, it appears that its customers are remaining engaged and are eager to continue spending as Chef's Warehouse adds more categories to its offering.

Wins in these areas pushed the company back into profitability last quarter. Given the demand growth that's occurring in the business, though, it is possible that its operating margin will soon set a new record, surpassing the pre-pandemic level of roughly 4% of sales.

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Demitri Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.


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