April 10 (Reuters) - French food caterer Sodexo cut its 2026 sales and profitability targets on Friday, citing execution challenges and its management's review of contracts and assets. "We have
Sodexo cuts 2026 targets as new CEO gears to tackle long-standing issues
Sodexo's Financial Performance and Strategic Challenges
By Dimitri Rhodes
April 10 (Reuters) - French food caterer Sodexo slashed its annual sales and profitability targets on Friday, citing execution challenges and its management's review of contracts and assets, which sent its shares falling 13%.
Revised Revenue and Profitability Targets
The group sees organic revenue growth of between 0.5% and 1% this year, down from the previously expected 1.5% to 2.5%. It expects its underlying operating margin to be clearly lower at between 3.2% and 3.4%, having earlier guided for a slight decline from last year's 4.7%.
Market Reaction and Analyst Commentary
"Shares should react negatively given a bigger-than-expected earnings reset and deteriorating commercial performance in H1," Jefferies analysts said in their first take on the half-year report.
CEO Thierry Delaporte's Assessment
Sodexo’s shares have lost around 40% of their value in the past two years, clearly underperforming key food services rivals Compass and Aramark, an issue new CEO Thierry Delaporte highlighted in his comments to the press.
Identified Long-standing Issues
"We have consistently underperformed compared to the market and our competitors," Delaporte told journalists. "The causes are deep-rooted and long-standing."
Underinvestment and Management Structure
Delaporte, who replaced Sophie Bellon in November, said Sodexo had underinvested in key skills and lacked consistency in its performance and forecasts.
He also pointed to issues in commercial intensity, priority management and an overly cumbersome decision-making structure, all of which he aims to tackle.
Analyst Expectations for Capital Spending
AlphaValue analyst Yi Zhong said she expected Sodexo to increase capital spending to match its peers, while potentially lowering dividend payouts.
Weakness in North America
Sodexo's revenue fell 3.7% to 12.02 billion euros ($14.05 billion) in the first half of its financial year, weighed down by the effects of converting U.S. dollars into euros, and as the North American business continued to struggle. That was some 60 million euros below analysts' consensus.
Competitive Pressures in the U.S. Market
Rising competition from Aramark may explain some of the troubles in the U.S. markets, Morningstar analyst Ben Slupecki said.
"Sodexo has failed to adjust, has been caught flat-footed, and has seen net new deceleration into losses in the first half of the year," Slupecki told Reuters.
($1 = 0.8552 euros)
(Reporting by Dimitri Rhodes in Gdansk, editing by Milla Nissi-Prussak)
