Canaccord Genuity Morning Coffee on Sysco (SYY): Rising Costs Took A Bite Out Of Bottom Line
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Canaccord Genuity Morning Coffee on Sysco (NYSE: SYY)
“Back in my day we called sandwiches flat bready. It cost four playing cards a bite.” – Grandpa Simpson.
Rising food costs took a bite out of Sysco’s bottom line, sending shares of the food distributor lower on Monday. Q2 earnings came in at $0.43 per share on revenue of $10.24 billion while analysts were looking for $0.44 on $10.06 billion. Net income fell to $254.0 million from $258.2 million the prior year as gross margin shrank to 18% from 18.8%. Management said that food inflation increased to 6.3% from 4.5% the previous year, but was down from 7.3% in the prior quarter. On top of rising food cost, higher fuel prices and overhead costs have hurt margins and increasing competition has forced the company to offer discounts and promotions to achieve sales growth. Looking ahead, management expects F12 capital spending to total $700-750 million dollars. Fuel expenses are expected to increase by $30-40 million from F11, though this will be partially offset by a $25-million decrease in pension expenses. While Sysco’s bottom line is being squeezed, the company said its volume growth indicates
“favourable market conditions” for restaurants.
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“Back in my day we called sandwiches flat bready. It cost four playing cards a bite.” – Grandpa Simpson.
Rising food costs took a bite out of Sysco’s bottom line, sending shares of the food distributor lower on Monday. Q2 earnings came in at $0.43 per share on revenue of $10.24 billion while analysts were looking for $0.44 on $10.06 billion. Net income fell to $254.0 million from $258.2 million the prior year as gross margin shrank to 18% from 18.8%. Management said that food inflation increased to 6.3% from 4.5% the previous year, but was down from 7.3% in the prior quarter. On top of rising food cost, higher fuel prices and overhead costs have hurt margins and increasing competition has forced the company to offer discounts and promotions to achieve sales growth. Looking ahead, management expects F12 capital spending to total $700-750 million dollars. Fuel expenses are expected to increase by $30-40 million from F11, though this will be partially offset by a $25-million decrease in pension expenses. While Sysco’s bottom line is being squeezed, the company said its volume growth indicates
“favourable market conditions” for restaurants.
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