Sysco 1st-Quarter Profit Down Slightly; Higher Costs Offset Sales Growth

   By Tess Stynes 
 

Sysco Corp.'s (SYY) fiscal first-quarter earnings edged down 0.4% as lower margins and higher operating costs offset the food-service distributor's revenue growth.

Soft consumer spending at restaurants and higher restructuring costs have weighed on the company's performance in recent quarters. To operate more profitably as consumers remain cautious about spending for discretionary items such as eating out at restaurants, Sysco has been implementing a new technology system to improve its efficiency. However, the transition has been in the works for several years, and it is taking longer than expected to realize the benefits.

The company's food-cost inflation continued to moderate in the latest quarter, up 2.1% compared with an increase of 2.2% reported a year earlier. Cost inflation in the latest period was mostly driven by higher prices in the poultry category.

For the period ended Sept. 28, Sysco reported a profit of $285.6 million, or 48 cents a share, down from $286.6 million, or 49 cents a share, a year earlier. Excluding restructuring-related expenses and other items, adjusted earnings were lower at 56 cents from 58 cents. Revenue increased 5.7% to $11.71 billion.

Analysts polled by Thomson Reuters recently expected per-share earnings of 48 cents and revenue of $11.62 billion.

Gross margin fell to 17.6% from 18.3%. Operating expenses increased 2.3%.

Case volume for the company's Broadline and SYGMA operations combined grew 4.1%, and excluding acquisitions case volume improved 1.8%.

Shares were up 2.6% at $33.42 in recent premarket trading. Through Friday's close, the stock is up 2.8% this year.

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