Sysco Profit Drops, Hurt by US Foods-Related Costs

Sysco Corp. said profit in its latest quarter fell, as the company booked charges stemming from its abandoned plan to acquire rival US Foods Inc.

Adjusted earnings topped analysts' expectations.

Houston-based Sysco, the nation's largest distributor of food and other supplies to restaurants and cafeterias, in June dropped its $3.5 billion attempt to buy US Foods amid growing signs the deal wouldn't pass regulatory muster. Chief Executive Bill DeLaney in June said the company's focus would shift to the possibility of smaller acquisitions, cost-cutting and efforts to update its product offerings and technology to compete with rivals that have more natural and organic items and online ordering.

Operating expenses during the quarter jumped 21%—mainly due to $313 million in merger-termination charges. Mr. DeLaney highlighted 6% growth in adjusted operating income, which he credited to improved expense management. Gross margin improved to 17.9% from 17.5% a year earlier.

Food cost inflation was flat, Sysco said, with modest inflation in the meat, poultry and frozen categories offset by modest deflation in the dairy, produce and seafood categories.

In all for the period, Sysco reported a profit of $73 million, down from $254.2 million a year earlier. Per-share earnings fell to 12 cents from 43 cents. Excluding the aforementioned merger-related costs, among other items, earnings increased to 52 cents from 49 cents.

Revenue edged 0.9% higher to $12.40 billion. The strong dollar hit sales by 1.4%, the company said.

Analysts expected 51 cents in per-share profit on $12.67 billion in revenue.

Write to Lisa Beilfuss at [e-mail]

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