Food Supplier Sysco Beats Estimates, But Shares Fall
High Prices Keep Consumers Cooking at Home
Despite beating revenue estimates for the second quarter, packaged and fresh food supplier Sysco has maintained its full-year sales and profit forecasts. This decision comes as the recovery in demand from restaurants remains uneven, with many budget-conscious consumers opting to eat at home due to high prices of essentials in the U.S.
Slower Growth in Food Service Business
Sysco’s food service business in the U.S., which caters to offices, amusement parks, and other entertainment venues, saw a 4.1% increase in sales during the quarter ended December 28, compared to the same period last year. While this growth is slower than the 4.6% year-on-year increase in the prior quarter, it still indicates a steady demand for Sysco’s products.
Rising Costs Pressure Margins
However, higher costs of products such as dairy and poultry have put pressure on Sysco’s quarterly margins, leading to an 11-basis-point decrease to 18.1% in the second quarter. The company is working to source raw materials from suppliers at lower prices and keep production costs in check, but these efforts are expected to bear fruit only in the second half of the fiscal year.
Market Reaction
Sysco’s shares fell 4% after the results were published, likely due to concerns over the company’s ability to maintain its growth momentum in a challenging market.
About Sysco
As a leading distributor of a range of food items, from meats and fresh produce to frozen foods and baked goods, Sysco plays a critical role in the food supply chain. The Houston-based company is committed to delivering high-quality products to its customers while keeping costs under control.
Full-Year Forecasts
Sysco has reiterated its full-year forecasts for the second time, expecting net sales to grow between 4% and 5% and adjusted earnings per share to grow between 6% and 7%. The company’s second-quarter sales rose 4.5% to $20.15 billion, beating analysts’ expectations of $20.10 billion.
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