Aramark reported first quarter fiscal 2024 results.
Year-over-year summary
Revenue +13%; organic revenue +13%
- FSS United States +10%; FSS international +21%
- Record revenue performance due to stronger sales volume, pricing, and net new business
Operating income +10%; adjusted operating income (AOI) +28%
- Operating income margin (9) bps; AOI margin +64 bps
- Growth driven by scale efficiencies from higher revenue, supply chain initiatives, and cost management.
EPS (27)% to $0.11; adjusted EPS +33% to $0.41
- Results reflected consistent execution on profitable growth strategies across organization.
- GAAP EPS included expenses associated with the completion of Uniform Services spin-off.
"Aramark is off to a great start in this new fiscal year, achieving record revenue across both our FSS U.S. and International segments, along with record first quarter profit in International,” said John Zillmer, Aramark's chief executive officer, said in the announcement. “Our teams around the globe are successfully executing on our growth strategies, which are driving top- and bottom- line performance. We’ve seen inflation continue to moderate, which provided a tailwind to profitability during the quarter. We believe the current market landscape presents tremendous opportunities, and both our growth leaders and our supply chain organization are hard at work implementing strategies to further unlock this potential.”
First quarter results
Consolidated revenue was $4.4 billion in the first quarter, a 13% increase year-over-year, due to a strong increase in base business volume, pricing actions, and net new business growth. The effect of currency translation reduced revenue by $3 million.
Organic revenue, which adjusts for the effect of currency translation, also grew 13% compared to the prior year period.
FSS United States revenue growth was led by 1) education, particularly in collegiate hospitality with strong performance in residential dining, retail and catering, as well as contract price increases with the start of the academic year; 2) higher per capita spending and attendance levels at stadiums, along with increased concert activity, in the Sports & Entertainment business; and 3) the startup of significant new client wins and strong base business growth in the Business & Industry sector.
FSS international revenue grew across all geographies from consistent net new business performance and ongoing base business growth — particularly in the U.K., Canada, and Germany, as well as throughout Latin America.
Operating income increased 10% year-over-year to $167 million, and AOI grew 28% to $231 million. Operating income margin was 9 basis points less than the prior year from higher expenses associated with the completion of the Uniform Services spin-off. AOI margin improved by 64 basis points year-over-year. Increased profitability was driven by effective cost management across significantly higher revenue levels and the early benefits from favorable inflation trends.
Year-over-year profitability growth resulted from the following segment performance:
FSS United States drove effective cost management across higher base business volume and benefited from improved supply chain economics related to product sourcing and purchasing initiatives.
FSS International effectively scaled significant growth in base business and net new business, along with stronger supply chain economics. The segment had record first quarter profitability, despite not having the contribution of AIM Services following the company's sale of its noncontrolling interest in the third quarter of fiscal 2023.
Business update
Aramark is off to a strong start in fiscal 2024, reflecting the company's commitment to its strategic and financial goals. Top-line performance demonstrated the growth mindset firmly in place across the organization, which contributed to increased volume, revenue from net new business, and pricing actions. Improved bottom-line results were primarily due to effective cost management and supply chain strategies, combined with favorable inflation trends. The company anticipates continued profitable growth and margin expansion through the operational maturing of new business, ongoing supply chain initiatives, front-line contribution from leveraging a flexible operating model and cost control measures. Aramark continues to expect its typical "U-shaped" margin seasonality.
Outlook
Aramark is highly encouraged by the favorable trends in the business. As a result, the Company updated its fiscal 2024 outlook for both AOI and adjusted EPS growth and reaffirmed expectations for organic revenue growth. Aramark expects full year organic revenue to rise 7% to 9% and adjusted EPS to rise 30% to 35%.
“I am really pleased by our financial performance in the first quarter with the business strengthening as the quarter progressed,” Zillmer continued in the announcement. “The work we’ve done has centered on building a consistent and sustainable business focused on providing valued services to our clients. We believe the foundation is set for continued success, and we expect our momentum to carry through this year and beyond. I couldn’t be more excited about what’s to come.”
