Performance Food Group Co. (NYSE: PFGC) is one of the largest food service distributors in the United States. The company sources, markets, and delivers food and food-related products through a network of over 150 distribution facilities to over 125,000 businesses in the food service industry. The company is acquiring food service distributor Cheney Brothers for $2.1 billion, which will expand its footprint with restaurant and hospitality customers in the Southeastern region of the United States. The drop in inflation back under 3% and the impending interest rate cuts are positive tailwinds that the market anticipates for the company.
Disinflation Should Not Be Mistaken for Deflation
Performance Food Group is a benefactor of disinflation, which is not to be confused with deflation. Disinflation occurs when the rate of inflation slows down, which means prices are still rising but at a slower pace. For example, when inflation drops from 9% to 2.9%, as indicated by the recent July consumer price index (CPI) report. Disinflation eases procurement costs and improves gross margins. It also improves demand and business spending power. Interest rate cuts are meant to be disinflationary.
Deflation occurs when general prices actually fall. This can result in a negative inflation rate, which can be harmful to the economy. Deflation occurs during severe economic downturns.
Performance Food Group operates in the ...
