HOUSTON, Nov. 01, 2022 (GLOBE NEWSWIRE) — Sysco Corporation BB #:105962 today announced financial results for its 13-week first fiscal quarter ended October 1, 2022.
Key highlights for the first quarter of fiscal year 2023 include:
- Continued market share gains and volume growth;
- Gross profit per case improved;
- Double-digit profit growth; and
- Continued investment for growth and return of capital to shareholders.
“Sysco began the fiscal year generating double-digit top-line and bottom-line growth, as we effectively managed inflation, increased case volume and grew market share. We remain on target to grow over 1.35 times the market for the year, as we continue to advance our Recipe For Growth strategy. Our enhanced customer-centric supply chain and selling capabilities will drive long-term returns for our investors,” said Kevin Hourican, Sysco’s President and Chief Executive Officer. “I want to thank our global colleagues for helping us to deliver on Sysco’s purpose of connecting the world to share food and care for one another.”
Key financial results for the first quarter of fiscal year 2023 include:
- Sales increased 16.2% versus the same period in fiscal year 2022;
- U.S. Foodservice volume increased 7.3% versus the same period in fiscal year 2022;
- Gross profit increased 17.4% to $3.5 billion, as compared to the same period last year;
- Operating income increased 16.3% to $734.3 million, and adjusted1 operating income increased to $770.3 million, as compared to the same period last year;
- Earnings before interest, taxes, depreciation and amortization (“EBITDA”) increased to $908.0 million, and adjusted EBITDA increased to $916.9 million, in each case as compared to the same period last year;2 and
- Earnings per share (“EPS”)3 increased to $0.91, as compared to $0.73 in the same period last year. Adjusted1 EPS increased to $0.97, as compared to $0.83 in the same period last year.
“We delivered strong financials for the first quarter by continuing to make progress with our Recipe For Growth, while addressing operational improvement opportunities and operating in a dynamic environment. We are upbeat about our business, while remaining appropriately cautious about the macro-environment, and are reaffirming our expectations to grow adjusted EPS by 26% – 35%, to $4.09 – $4.394, and to return $1.5 billion to our shareholders during fiscal year 2023,” said Aaron Alt, Sysco’s Chief Financial Officer.
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1 Adjusted financial results, including adjusted operating income (loss), adjusted earnings per share (EPS) and adjusted EBITDA, are non-GAAP financial measures that exclude certain items, which primarily include acquisition-related costs, restructuring costs, transformational project costs, adjustments to our bad debt reserve specific to aged receivables existing prior to the COVID-19 pandemic and adjustments to a product return allowance related to COVID-related personal protection equipment inventory. Specific to adjusted EPS, last year’s Certain Items include the impact of an increase in reserves for uncertain tax positions.
2 EBITDA and adjusted EBITDA are non-GAAP financial measures. Reconciliations of all non-GAAP financial measures to the nearest corresponding GAAP financial measure are included at the end of this release.
3 Earnings per share (EPS) are shown on a diluted basis, unless otherwise specified.
4 Adjusted EPS is a non-GAAP financial measure; however, we cannot predict with certainty the particular certain items that would be excluded from the calculation of this measure for future periods. Due to these uncertainties, we cannot provide a quantitative reconciliation of this non-GAAP financial measure to the most directly comparable GAAP financial measure without unreasonable effort. However, we expect to calculate adjusted earnings per share for future periods in the same manner as the reconciliations provided for the historical periods that are included at the end of this release.
First Quarter Fiscal Year 2023 Results
Total Sysco
Sales for the first quarter were $19.1 billion, an increase of 16.2% compared to the same period last year.
Gross profit increased 17.4% to $3.5 billion, gross margin increased 18 basis points to 18.2% and adjusted gross margin increased 17 basis points to 18.2%, compared in each case to the same period last year. Product cost inflation was 9.7% at the total enterprise level, as measured by the estimated change in Sysco’s product costs, primarily in the dairy and frozen categories. The increase in gross profit for the first quarter was primarily driven by higher volumes, the effective management of product cost inflation and progress against our partnership growth management initiatives.
Operating expenses increased $414.5 million, or 17.7%, compared to the same period last year, driven by increased volumes, cost inflation, continued operational pressures from the operating environment and our planned investments to drive our transformation initiatives. Adjusted operating expenses increased $429.4 million, or 18.8%, compared to the same period last year.
Operating income was $734.3 million, an increase of $102.7 million, or 16.3%, compared to the same period last year. Adjusted operating income was $770.3 million, an increase of $85.2 million compared to the same period last year.
U.S. Foodservice Operations
The U.S. Foodservice Operations segment generated strong sales growth, overall share gains and improved profitability.
Sales for the first quarter were $13.6 billion, an increase of 17.2% compared to the same period last year. Local case volume within U.S. Foodservice (reported for the first time to include the local volume from the U.S. FreshPoint produce operations and U.S. Italian businesses) grew 5.4% for the first quarter, while total case volume within U.S. Foodservice (also reported to include the FreshPoint and Italian businesses) grew 7.3%, in each case as compared to the same period last year.
Gross profit increased 19.5% to $2.6 billion, and gross margin increased 37 basis points to 19.2%, compared in each case to the same period last year. Product cost inflation was 12.0% in U.S. Broadline, as measured by the estimated change in Sysco’s product costs, primarily in the dairy and frozen categories.
Operating expenses increased $320.9 million, or 23.1%, compared to the same period last year. Adjusted operating expenses increased $309.2 million, or 22.3%, compared to the same period last year.
Operating income was $903.8 million, an increase of $106.3 million compared to the same period last year. Adjusted operating income was $913.8 million, an increase of $118.0 million compared to the same period last year.
International Foodservice Operations
The International Foodservice Operations segment delivered strong sales and significant profit growth, exceeding pre-COVID 2019 profit levels.
Sales for the first quarter were $3.3 billion, an increase of 13.4% compared to the same period last year. On a constant currency basis5, sales for the first quarter were $3.6 billion, an increase of 24.3% compared to the same period last year. Foreign exchange rates decreased both International Foodservice Operations sales by 10.9% and total Sysco sales by 2.0% during the quarter.
Gross profit increased 10.2% to $649.3 million, and gross margin decreased 58 basis points to 19.8%, compared in each case to the same period last year. On a constant currency basis5, gross profit increased 22.4% to $721.0 million. Foreign exchange rates decreased both International Foodservice Operations gross profit by 12.2% and total Sysco gross profit by 2.5% during the quarter.
Operating expenses increased $9.6 million, or 1.7%, compared to the same period last year. Adjusted operating expenses increased $17.1 million, or 3.3%, compared to the same period last year. On a constant currency basis5, adjusted operating expenses increased $81.8 million, or 15.6%, compared to the same period last year. Foreign exchange rates decreased both International Foodservice Operations operating expenses by 12.3% and total Sysco operating expenses by 3.1% during the quarter.
Operating income was $87.2 million, an improvement of $50.5 million compared to the same period last year. Adjusted operating income increased $43.0 million compared to the same period last year. On a constant currency basis5, adjusted operating income was $114.2 million, an increase of $50.1 million compared to the same period last year. Foreign exchange rates decreased both International Foodservice Operations operating income by $7.1 million and total Sysco operating income by $2.3 million during the quarter.
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5 Represents a constant currency adjustment, which eliminates the impact of foreign currency fluctuations on current year results. These adjusted measures are non-GAAP financial measures. Reconciliations of all non-GAAP financial measures to the nearest corresponding GAAP financial measure are included at the end of this release.
Balance Sheet, Cash Flow and Capital Spending
As of the end of the quarter, the company had a cash balance of $437.7 million and approximately $10.8 billion of debt outstanding.
During the first 13 weeks of fiscal 2023, Sysco returned $517.0 million to shareholders via $267.7 million of share repurchases and $249.3 million of dividends.
Cash flow from operations was $158.6 million for the first 13 weeks of fiscal 2023, which was $47.8 million higher compared to the prior year period.
Capital expenditures, net of proceeds from sales of plant and equipment, for the first 13 weeks of fiscal 2023 were $144.8 million.
Free cash flow6 for the first 13 weeks of fiscal 2023 was $13.8 million.
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6 Free cash flow is a non-GAAP financial measure that represents net cash provided from operating activities less purchases of plant and equipment and includes proceeds from sales of plant and equipment. Reconciliations for all non-GAAP financial measures are included at the end of this release.
Conference Call & Webcast
Sysco will host a conference call to review the company’s first quarter and full fiscal year 2023 financial results on Tuesday, November 1, 2022, at 10:00 a.m. Eastern Daylight Time. A live webcast of the call, accompanying slide presentation and a copy of this news release will be available online at investors.sysco.com.
