2nd UPDATE: Sysco 1Q Net Jumps 18% On Gains; Sales Down 8.1%
(Adds details from conference call and updated stock price.)
By Paul Ziobro
Of DOW JONES NEWSWIRES
NEW YORK -(Dow Jones)- Sysco Corp. (SYY), already North America's largest
food-service distributor, will try to gobble up more market share as it begins
hiring sales representatives after several years of trimming.
Sysco is encouraged by some recent signs of stabilization, mainly that the
year-over-year decline in case volume has remained steady over the last several
weeks. Though noting that the economy is still in "very fragile stage," Sysco is
guardedly optimistic these indicators could translate to increased spending next
year.
Last quarter, Sysco started building its sales force to aggressively pursue
business, and it also plans to continue to acquire struggling competitors.
"We think it's our turn to start exerting some pressure on our competitors and
being more aggressive," Sysco President and Chief Operating Officer Kenneth
Spitler said Monday during the company's earnings call.
Sysco, North America's largest marketer and distributor of food-service
products, earlier reported fiscal first-quarter earnings that rose 18% on tax-
related and other gains. Sales continued to take a hit, with revenue down 8.1%
amid continuing declines in restaurant sales and food deflation.
Sysco took out more costs in its business, reducing the number of employees by
about 5% from last year while also paying out less in incentive-based pay,
resulting in earnings of 55 cents a share that were ahead of Wall Street
estimates of 45 cents.
"The end market's not doing great, but the company's finding opportunities to
cut costs," said Pali Capital analyst Robert Summers, who rates the stock at
buy.
Sysco is heavily exposed to the slump in eating out because it provides food
and other items to thousands of restaurants. As fewer customer visit,
restaurants are cutting back their purchases. Struggling locations are also
closing their doors, shrinking Sysco's customer base.
Investors have been waiting for a sign to show that Sysco's sales can turn a
corner. Sysco's shares, recently up 7 cents at $26.53, have risen 15.3% in 2009.
Another potential lift to Sysco's sales could be waning food deflation, which
hurt sales 3.4% in the latest quarter.
"We are hopeful that some of the promising signs and sentiments that are
beginning to materialize will soon result in increased consumer spending," Chief
Executive Bill DeLaney said
For the quarter ended Sept. 26, Sysco reported earnings of $326 million, or 55
cents a share, up from $276.8 million, or 46 cents, a year earlier. The latest
results included gains of 11 cents related to items such as the company's IRS
settlement and impact from the change in the value of corporate-owned life
insurance.
Revenue fell to $9.1 billion.
Analysts polled by Thomson Reuters had most recently forecast earnings of 45
cents on $9.16 billion in sales.
Gross margin rose to 19.2% from 19.1%.
-By Paul Ziobro, Dow Jones Newswires; 212-416-2194; paul.ziobro@dowjones.com
(Nathan Becker contributed to this article.)
(END) Dow Jones Newswires
11-02-091135ET
Copyright (c) 2009 Dow Jones & Company, Inc.
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