Aramark CFO Discusses Growth Strategies and Financial Outlook at Baird Global Consumer, Technology & Services Conference 2025

Key Takeaways

TL;DR: Aramark is seeing accelerated organic growth and margin expansion driven by its post-2019 transformation, strong retention (98% YTD), and strategic investments in tech and scale. The co is well-positioned in both U.S. and intl markets, with favorable trends in collegiate athletics and sustained FX improvements offering upside potential.

Transformation & Growth Strategy

• Leadership Change Impact: Since John Zillmer’s return in 2019, Aramark reoriented its strategy toward growth and hospitality. Jim Tarangelo emphasized a shift to a growth-oriented model by decentralizing decision-making and realigning incentives (40% of compensation tied to net new wins).
• New Biz Focus: Targets annualized new biz in the 8%–10% range, with a math split of about 9% new wins against a 5% loss from retention, delivering a net organic growth of 4%–5%.

Revenue Growth & Margin Expansion

• Accelerated Growth: After a 3% organic growth in Q2, the co. reported a 6% growth run rate in April, anticipating the exits of prior year contracts (≈2% reset) to contribute to an 8% overall exit rate.
• Margin Levers: Margins improved from 4.6% in FY23 to 5.1% in FY24, with midpoint guidance around 5.5%. Key drivers include:
  • Scale benefits – enhanced procurement and negotiating power akin to an “AMZN or Walmart model.”
  • Discipline in overhead growth post the Uniforms biz spin-off.
  • New biz margin progression, where initial headwinds from startup costs convert into margin tailwinds as accounts mature.

Customer Retention & New Wins

• Strong Retention Performance: Retention rates above 98% in H1, target consistently at 95%–96%. Wins like retaining Arizona State University with expanded svcs highlight the firm’s competitive advantage in recurring rev. segments.
• Steady New Biz Pipeline: About 40% of wins come from first-time outsourcing, with additional wins from regional and global players.

Segment & Regional Highlights

• Intl. Biz: Although representing a smaller slice (roughly 1/3 of rev.), the intl. segment is growing at DD rates. Consistent margin improvements (around 40–50 basis points per Q) set the stage for eventual convergence with U.S. margins.
• U.S. Biz & Corporate/Facilities Segment: This behemoth, contributing about 2/3 of rev., benefits from new biz across sectors. In the B&I segment, strong growth (e.g., +13% in Q2) driven by increased same-store sales and higher participation.

Sports & Collegiate Athletics Developments

• Collegiate Market Oppt'y: A pivotal oppt'y as collegiate programs professionalize due to name, image, and likeness changes. Enhanced alcohol sales and upgraded stadium experiences have pushed avg. check sizes to levels “approaching the NFL.”
• Tech & Operational Efficiency: Investment in tech, such as frictionless automated checkout systems in stadiums, is improving throughput and transaction efficiency.