Foodservice

Aramark reports 6.7% revenue decline for second quarter

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May 5, 2020

Aramark's consolidated revenue declined 6.7% year-over-year for the second quarter to $3.7 billion, with underlying growth in the overall business more than offset by an estimated $325 million impact on business operations related to COVID-19, according to a press release. Organic revenue, which adjusts for currency impact, declined 5.4% in the quarter.

Food and support services in the U.S. experienced interruption primarily within education, business and industry and sports and leisure, although most clients maintained operations on a limited basis that included alternative meal programs and services to essential businesses. Healthcare, facilities and corrections had relatively stable performance with increased demand across many locations.

FSS international, with verticals across 18 countries, managed through different stages of the impact from COVID-19 as Germany and Spain were particularly affected due to government imposed shutdowns. China operations have largely recovered and been awarded new contracts based on the business' response to COVID-19 and commitment to client services.

An operating loss of $98 million was primarily due to the pre-tax non-cash goodwill impairment of $199 million in FSS International as well as the impact from COVID-19. Adjusted operating income was $164 million, down 30%, due to an estimated $70 million unfavorable impact on business operations related to COVID-19, that included lower personnel costs and equity-based compensation expense.

FSS U.S. performance was impacted by COVID-19 — especially in education, business and industry and sports and leisure; negative net-new business in education; as well as planned targeted reinvestment early in the quarter to accelerate longer-term growth that included additional resources for new account sales and client retention efforts.

FSS international was at the forefront of the virus, specifically in China early in the quarter, with performance then affected by government imposed shutdowns in Europe and Canada, where labor costs tend to be less variable in the near-term due to country-specific labor laws and regulations.

For an update on how the coronavirus is affecting the convenience services industry, click here.