Sysco reports second quarter 2019 results

Second Quarter Fiscal 2019 Highlights

• Sales increased 2.5% to $14.8 billion
• Gross profit increased 2.7% to $2.8 billion; gross margin increased 4 basis points
• Operating income decreased 14.5% to $451.9 million; adjusted¹ operating income increased 4.8% to $603.3 million
• EPS decreased $0.03 to $0.51; adjusted¹ EPS decreased $0.03 to $0.75

First Half Fiscal 2019 Highlights

• Sales increased 3.2% to $30.0 billion
• Gross profit increased 3.3% to $5.7 billion; gross margin increased 3 basis points
• Operating income decreased 5.9% to $1.1 billion; adjusted¹ operating income increased 5.0% to $1.3 billion
• EPS increased $0.10 to $1.33; adjusted¹ EPS increased $0.14 to $1.66

“Our second quarter results were in line with our expectations,” said Tom Bené, Sysco’s chairman, president and chief executive officer. “We saw solid topline growth, while we continue making investments in our business, particularly in our international segment. We remain focused on exceeding our customers’ expectations, while continuing to manage costs, and anticipate seeing additional benefit from our cost savings initiatives in the second half of this fiscal year.”

In order to drive continued growth and value creation, Sysco recently implemented organizational and executive leadership changes, which further align the company with its customer first operating model and streamline the business. This reorganization results in an approximate 10 percent reduction in salaried corporate support positions.

¹Earnings Per Share (EPS) are shown on a diluted basis unless otherwise specified. Adjusted financial results exclude certain items, which primarily include restructuring costs, acquisition-related costs, and transformational project costs. Reconciliations of all non-GAAP measures are included in this release.

Second Quarter Fiscal 2019 Results

U.S. Foodservice Operations

Sales for the second quarter were $10.1 billion, an increase of 4.2% compared to the same period last year. Local case volume within U.S. Broadline operations grew 3.3% for the second quarter, of which 2.4% was organic, while total case volume within U.S. Broadline operations grew 2.9%, of which 2.0% was organic.

Gross profit increased 4.5% to $2.0 billion, and gross margin increased 6 basis points to 19.8%, compared to the same period last year. Food cost inflation was 1.4% in U.S. Broadline, as measured by the estimated change in Sysco’s product costs, primarily in the frozen potato, meat, paper and produce categories.

Operating expenses increased $56.5 million, or 4.7%, compared to the same period last year, due mainly to supply chain costs in both warehouse and transportation.

Operating income was $737.5 million, an increase of $29.9 million, or 4.2%, compared to the same period last year.

International Foodservice Operations

Sales for the second quarter were $2.9 billion, an increase of 0.8% compared to the same period last year. The impact to total Sysco sales of foreign exchange during the quarter was negative 0.7%.

Gross profit decreased 1.6% to $589.9 million, and gross margin decreased 49 basis points to 20.4%, compared to the same period last year.

Operating expenses increased $57.8 million, or 10.6%, compared to the same period last year. Adjusted operating expenses decreased $13.8 million, or 2.6%, compared to the same period last year, due mainly to supply chain cost challenges.

Operating loss was $14.9 million, a decrease of $67.5 million, or 128.4%, compared to the same period last year. Adjusted operating income was $83.1 million, an increase of approximately $4.0 million, or 5.1%, compared to the same period last year. The impact to total Sysco operating income of foreign exchange during the quarter was negative 0.5%.