Sodexo Stock Down 15% On Weak H1 Results, Lowered FY26 Outlook

(RTTNews) - Shares of Sodexo S.A. were losing around 15 percent in the morning trading in Paris after the French food and facilities management services provider on Friday trimmed its fiscal 2026 outlook, after reporting weak first-half results.

Thierry Delaporte, Chief Executive Officer of Sodexo, said, "we have undeniably underperformed the market and our main competitors. The root causes have been building over time and relate primarily to under-investment and execution: commercial intensity, decision-making and prioritization, and consistency in delivery. We have conducted a thorough review of our contracts and assets, with short-term financial implications reflected in both our first-half results and in the revised outlook we are setting for Fiscal 2026."

Delaporte added, "While we know this will not be an overnight fix, we are moving with a strong sense of urgency on our action plan to restore growth. ...The entire Sodexo organization is shifting gears, and we are seeing early positive signals."

Looking ahead for fiscal 2026, the food services company now expects organic revenue growth between 0.5 percent and 1 percent, down from the previous guidance of 1.5 percent to 2.5 percent growth. The adjustment reflects weaker first-half commercial momentum, as well as lower volumes expected in an uncertain external environment.

The company also expects its underlying operating profit margin to be between 3.2 percent and 3.4 percent, compared to previous view of slightly lower than fiscal 2025.

In the prior year, underlying operating profit margin was at 4.7%.

The change in outlook reflects softer top-line growth, execution challenges in certain areas, and the impact of the review of contracts and assets

Sodexo plans to present its execution agenda and medium-term ambitions at its Investor update in Paris on July 16.

In the first half, the company's group net profit declined 56.7 percent to 188 million euros from last year's 434 million euros. Basic earnings per share fell to 1.29 euros from 2.98 euros a year ago.

Group underlying net profit was 285 million euros or 1.96 euros per basic share, compared to 450 million euros or 3.08 euros per basic share last year.

Operating profit dropped 46.2 percent year-over-year to 312 million euros, and underlying operating profit fell 32.1 percent to 442 million euros.

The company's underlying operating profit margin declined by 150 basis points from last year to 3.7 percent, impacted by execution challenges and initial management actions.

Revenues decreased 3.7 percent to 12.02 billion euros from 12.48 billion euros last year, while it grew 1.6 percent on a constant currency rate.

Organic revenue growth was 1.7 percent, with pricing contributing around 2.4 percent and like-for-like volume growth of around 0.2 percent.

Food services edged up 0.8 percent organically, mainly affected by past Education contract losses, while FM services grew 3.6 percent benefited by new contract ramp-ups in Europe and Rest of the World.

Sodexo's performance varied across its geographic segments. North America saw a 1.8 percent decline in organic revenue, mainly reflecting contract losses in the Education and Business & Administrations segments.

Europe, on the other hand, reported 2.8 percent organic growth, supported by the Healthcare & Seniors and Sodexo Live! businesses, while the Education segment remained weaker. The Rest of the World segment delivered strong 9.2 percent organic growth, driven by new contract ramp-ups and robust underlying dynamics, particularly in India, Australia, and Brazil.

In Paris, the shares were trading at 37.74 euros, down 14.86 percent.

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