Sysco Corporation (SYY), a leading food distributor, reported its first-quarter earnings on Tuesday, revealing mixed results. While the company surpassed sales expectations, its earnings fell short of analyst forecasts.
The company posted revenue of $20.50 billion for the quarter, exceeding the consensus estimate of $20.463 billion. This growth was primarily fueled by a 4.4% increase in overall sales, with the US Foodservice segment contributing a 2.7% rise in volume.
However, Sysco’s adjusted earnings per share (EPS) came in at $1.09, slightly below the anticipated $1.13. Despite the earnings miss, the company highlighted positive operational trends. Operating income saw a modest increase of 0.5% to $808 million, while adjusted operating income climbed 2.2% to $873 million. Gross profit also rose by 2.9% to $3.8 billion, though the gross margin dipped by 27 basis points to 18.3%.
Sysco attributed the margin decline to product cost inflation, particularly in the poultry and dairy categories, which rose by 2.2% across the enterprise.
Despite the mixed results, Sysco expressed confidence in its full-year outlook. The company reiterated its FY25 forecast, anticipating sales growth between 4% and 5% and adjusted EPS growth in the range of 6% to 7%. This optimism stems from a strong pipeline of investments and initiatives, along with an improved exit rate observed in September.
Kevin Hourican, Sysco’s chairman and CEO, highlighted the importance of the company’s international segment, which delivered an 8.6% increase in operating income and a 12.1% rise in adjusted operating income during the quarter. He also emphasized the success of Sysco’s specialty division, pointing to the continued growth of its team selling efforts.
As of the quarter’s end, Sysco held a cash balance of $733 million.
In response to the earnings report, SYY shares were trading higher by 0.3% at $75.35 at the time of writing.
The company’s mixed first-quarter results underscore the challenges faced by food distributors amid inflationary pressures. Despite the earnings miss, Sysco’s robust sales growth and optimistic outlook suggest a positive trajectory for the company in the coming months.
