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Sysco Q2 Profit Down 11% Despite Higher Sales

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2/4/2013 8:31 AM ET

Food distribution giant Sysco Corp. (SYY: Quote) on Monday reported an 11 percent decline in profit for the second quarter from last year, as rising food costs and higher operating expenses more than offset better-than-expected sales.

Food cost inflation in the second quarter was 2.5 percent, as measured by the estimated change in Sysco's product costs, driven mainly by inflation in the meat and poultry categories.

The company's Broadline sales for the quarter increased 5 percent to $8.78 billion, while sales at SYGMA rose less than 1 percent to $1.41 billion. Other segment sales grew 18 percent to $659.86 million.

Case volume for the company's Broadline and SYGMA operations combined grew 2.8 percent during the quarter, including acquisitions, and about 1.8 percent excluding acquisitions.

Total operating expenses rose 8 percent from the year-ago period to $1.53 billion, reflecting increases in gross business transformation expenses as well as payroll expense. In addition, operating expenses reflected $22 million in charges related to certain items.

Houston, Texas-based Sysco's net earnings for the second quarter declined to $221.37 million or $0.38 per share from $250.11 million or $0.43 per share in the same quarter last year.

Adjusting for certain items, mainly relating to restructuring charges, quarterly adjusted earnings per share were $0.40. This compared to earnings of $0.43 per share in the prior-year quarter.

After further adjusting for business transformation expenses to reflect the performance of the company's underlying business, adjusted earnings per share were $0.49 in the quarter. This compared to $0.47 per share in the year-ago period.

On average, 12 analysts polled by Thomson Reuters expected the company to report earnings per share of $0.41 for the quarter. Analysts' estimates typically exclude one-time items.

Sales for the quarter rose 5 percent to $10.80 billion from $10.24 billion in the same period last year. Analysts had a consensus revenue estimate of $10.70 billion.

Sales from acquisitions within the last twelve months increased sales by 1.1 percent, while the impact of changes in foreign exchange rates increased sales by 0.3 percent.

SYY closed Friday's trading at $32.09. In Monday's pre-market, the stock is up $0.34 or 1.06 percent to $32.42.

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by RTT Staff Writer

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