Food distribution giant Sysco Corp. (SYY) on Monday reported a 22 percent decline in profit for the third quarter as sales growth was offset by food cost inflation and higher expenses, including charges related to a pension plan withdrawal. However, sales for the quarter missed analysts' expectations.
Food cost inflation in the quarter was 2.4 percent, as measured by the estimated change in Sysco's product costs. This was driven mainly by inflation in the produce and poultry categories.
Bill DeLaney, Sysco's president and chief executive officer said, "Our financial results reflect in part the difficult market conditions we experienced in our underlying business during the third quarter. Sales and operating earnings were negatively impacted by economic and weather related headwinds which dampened consumers' willingness to spend on meals away from home."
The company's Broadline sales for the quarter increased 4 percent to $8.86 billion, while sales at SYGMA declined 1 percent to $1.43 billion. Other segment sales grew 19 percent to $699.51 million.
Case volume for the company's Broadline and SYGMA operations combined grew 1.7 percent during the quarter, including acquisitions, and declined about 0.2 percent excluding acquisitions.
Total operating expenses rose 10 percent from the year-ago period to $1.57 billion. The higher expenses were due primarily to a $46 million increase in certain items - including a $41 million charge from an MEPP withdrawal, a $34 million increase in gross business transformation expenses, and a $22 million increase in payroll expense.
Houston, Texas-based Sysco's net earnings for the third quarter declined to $201.42 million or $0.34 per share from $259.55 million or $0.44 per share in the same quarter last year.
After adjusting for certain items, which mainly related to a multi-employer pension plan withdrawal, and business transformation expenses, earnings per share for the quarter were $0.49. This compared to earnings of $0.50 per share in the prior-year period.
On average, eleven analysts polled by Thomson Reuters expected the company to earn $0.43 per share for the quarter. Analysts' estimates typically exclude special items.
Sales for the quarter rose 4 percent to $10.93 billion from $10.50 billion in the same period last year. Analysts had a consensus revenue estimate of $11.10 billion.
Sales from acquisitions within the last twelve months increased sales by 1.8 percent, while the impact of changes in foreign exchange rates decreased sales by 0.1 percent.
SYY closed Friday's trading at $34.66, down $0.36 on a volume of 4.94 million shares.
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