Sysco Reports First Quarter Fiscal Year 2025 Results
HOUSTON, Oct. 29, 2024 (GLOBE NEWSWIRE) -- Sysco Corporation (NYSE:SYY) ("Sysco" or the "company") today announced financial results for its 13-week first fiscal quarter ended September 28, 2024.
Key financial results for the first quarter of fiscal year 2025 include the following (comparisons are to the same period in fiscal year 2024):
Sales increased 4.4%; U.S. Foodservice volume increased 2.7%;
Gross profit increased 2.9% to $3.8 billion;
Operating income increased 0.5% to $808 million, and adjusted operating income increased 2.2% to $873 million1;
EBITDA increased 3.4% to $1.0 billion, and adjusted EBITDA increased 4.4% to $1.1 billion1,2; and
EPS3 remained flat at $0.99, compared to the same period last year, and adjusted EPS1 increased 1.9% to $1.09.
Reiterating FY25 guidance, with sales growth of 4-5% and adjusted EPS growth of 6-7%.
"Sysco's financial performance for the quarter included top- and bottom-line growth, delivering sales growth across the USFS, International, and SYGMA segments. We are pleased with many aspects of our quarterly performance, and we see opportunities for improvement within our performance. International remains a growth vector, which delivered an 8.6% increase in operating income and a 12.1% increase in adjusted operating income for the quarter, and specialty continues to win in the marketplace, with total team selling continuing to pick up pace and momentum. Importantly, the rate of top- and bottom-line growth improved in the month of September. We remain on track to accelerate local volume growth and margins in the second half of the year, with an improving pipeline. We are confident in delivering our plan," said Kevin Hourican, Sysco's Chair of the Board and Chief Executive Officer.
"First quarter results included an improved exit rate during the month of September and a strong pipeline of investments and initiatives, adding to our confidence in our full year guidance of sales growth of 4%-5% and adjusted EPS growth of 6%-7%. We believe our recent actions are creating structural financial improvements, and as volumes improve, Sysco will be even better positioned to grow as the industry leader. Additionally, we remain on track to return approximately $2 billion back to shareholders for the fiscal year," said Kenny Cheung, Sysco's Chief Financial Officer.
1 Adjusted financial results, including adjusted operating expense, adjusted operating income (loss), adjusted earnings per share (EPS) and adjusted EBITDA, among others, are non-GAAP financial measures that exclude certain items, which primarily include acquisition-related costs, restructuring and severance costs, and transformational project costs. Reconciliations of all non-GAAP financial measures to the nearest corresponding GAAP financial measure are included at the end of this release.2 Earnings before interest, taxes, depreciation and amortization (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.
First Quarter Fiscal Year 2025 Results (comparisons are to the same period in fiscal year 2024)
Total Sysco
Sales for the first quarter increased 4.4% to $20.5 billion.
Gross profit increased 2.9% to $3.8 billion, and gross margin decreased 27 basis points to 18.3%. Product cost inflation was 2.2% at the total enterprise level, as measured by the estimated change in Sysco's product costs, primarily in the poultry and dairy categories. The increase in gross profit for the first quarter was primarily driven by positive volumes and effective management of product cost inflation.
Operating expenses increased 3.6%, driven by increased volumes, cost inflation, and higher selling costs. Adjusted operating expenses increased 3.1%.
Operating income increased 0.5% to $808 million, and adjusted operating income increased 2.2% to $873 million.
U.S. Foodservice Operations
The U.S. Foodservice Operations segment results were positively impacted by higher volumes offset by margin pressures driven by mix shift and selling investments.
Sales for the first quarter increased 4.6% to $14.4 billion. Total case volume within U.S. Foodservice grew 2.7% for the first quarter, while local case volume within U.S. Foodservice increased 0.2%.
Gross profit increased 2.3% to $2.7 billion, and gross margin decreased 43 basis points to 19.1%.
Operating expenses increased 5.4%, and adjusted operating expenses increased 5.3%.
Operating income decreased 3.5% to $908 million, and adjusted operating income decreased 3.0% to $925 million.
International Foodservice Operations
The International Foodservice Operations segment delivered sales growth, effective margin management, and outsized profit growth.
Sales for the first quarter increased 3.0% to $3.8 billion. On a constant currency basis4, sales for the first quarter were $3.8 billion, an increase of 2.9%. Foreign exchange rates increased both International Foodservice Operations sales by $5 million and total Sysco sales by $5 million during the quarter.
4 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.
Gross profit increased 5.7% to $774 million, and gross margin increased 52 basis points to 20.4%. On a constant currency basis4, gross profit increased 5.1% to $769 million. Foreign exchange rates increased both International Foodservice Operations gross profit by 0.6% and total Sysco gross profit by 0.2% during the quarter.
Operating expenses increased 5.3%, and adjusted operating expenses increased 4.5%. On a constant currency basis4, adjusted operating expenses increased 3.7%. Foreign exchange rates increased both International Foodservice Operations operating expenses by 0.8% and total Sysco operating expenses by 0.2% during the quarter.
Operating income increased 8.6% to $101 million, and adjusted operating income increased 12.1% to $130 million. On a constant currency basis4, adjusted operating income was $130 million, an increase of 12.1%.
Balance Sheet, Cash Flow and Capital Spending
As of the end of the quarter, the company had a cash balance of $733 million.
During the first 13 weeks of fiscal year 2025, Sysco returned $359 million to shareholders via $108 million of share repurchases and $251 million of dividends.
Cash flow from operations was $53 million for the first 13 weeks of fiscal year 2025, which was a decrease of $34 million compared to the prior year period.
Capital expenditures, net of proceeds from sales of plant and equipment, for the first 13 weeks of fiscal year 2025 were $45 million.
Free cash flow5 for the first 13 weeks of fiscal year 2025 was $8 million, which was an $81 million improvement compared to the prior year period.
5 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 fiscal year 2025 financial results on Tuesday, October 29, 2024, 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.
Key Highlights:
13-Week Period Ended
Financial Comparison:
September 28, 2024
September 30, 2023
Change
GAAP:
Sales
$20.5 billion
$19.6 billion
4.4%
Gross Profit
$3.8 billion
$3.6 billion
2.9%
Gross Margin
18.3%
18.6%
-27 bps
Operating Expenses
$2.9 billion
$2.8 billion
3.6%
Operating Income
$808 million
$804 million
0.5%
Operating Margin
3.9%
4.1%
-16 bps
Net Earnings
$490 million
$503 million
-2.6%
Diluted Earnings Per Share
$0.99
$0.99
—%
Non-GAAP (1):
Gross Profit
$3.8 billion
$3.6 billion
2.9%
Gross Margin
18.3%
18.6%
-27 bps
Operating Expenses
$2.9 billion
$2.8 billion
3.1%
Operating Income
$873 million
$854 million
2.2%
Operating Margin
4.3%
4.4%
-9 bps
EBITDA
$1.0 billion
$1.0 billion
3.4%
Adjusted EBITDA
$1.1 billion
$1.0 billion
4.4%
Net Earnings
$540 million
$542 million
-0.4%
Diluted Earnings Per Share (2)
$1.09
$1.07
1.9%
Case Growth:
U.S. Foodservice
2.7%
1.6%
Local
0.2%
-0.1%
Sysco Brand Sales as a % of Cases (3):
U.S. Broadline
36.5%
37.1%
-59 bps
Local
47.0%
47.5%
-55 bps
Note:
(1) Reconciliations of all non-GAAP financial measures to the nearest respective GAAP financial measures are included at the end of this release.
(2) Individual components in the table above may not sum to the totals due to the rounding.
(3) Amounts reflect the impact of current customer classifications; prior period history has been reclassified to match the current period customer classification.
Forward-Looking Statements
Statements made in this press release or in our earnings call for the first quarter of fiscal year 2025 that look forward in time or that express management's beliefs, expectations or hopes are forward-looking statements under the Private Securities Litigation Reform Act of 1995. Such forward-looking statements reflect the views of management at the time such statements are made and are subject to a number of risks, uncertainties, estimates, and assumptions that may cause actual results to differ materially from current expectations. These statements include statements concerning: our expectations regarding future improvements in productivity; our belief that improvements in our organizational capabilities will deliver compelling outcomes in future periods; our expectations regarding improvements in international volume; our expectations that our transformational agenda will drive long-term growth; our expectations regarding volume growth and benefits to gross margins; our expectations regarding the continuation of an inflationary environment; our expectations regarding improvements in the efficiency of our supply chain; our expectations regarding the impact of our Recipe for Growth strategy and the pace of progress in implementing the initiatives under that strategy; our expectations regarding Sysco's ability to outperform the market in future periods; our expectations that our strategic priorities will enable us to grow faster than the market; our expectations regarding our efforts to reduce overtime rates and the incremental investments in hiring; our expectations regarding the expansion of our Sysco Driver Academy and our belief that the academy will enable us to provide upward career path mobility for our warehouse colleagues and improve colleague retention; our expectations regarding the benefits of the six-day delivery and last mile distribution models; our plans to improve the capabilities of our sales team; our plans to refine our engineering labor standards; our expectations regarding the impact of our growth initiatives and their ability to enable Sysco to consistently outperform the market; our expectations to exceed our growth target by the end of fiscal 2025; our ability to deliver against our strategic priorities; economic trends in the United States and abroad; our belief that there is further opportunity for profit in the future; our future growth, including growth in sales and earnings per share; the pace of implementation of our business transformation initiatives; our expectations regarding our ability to execute our balanced approach to capital allocation and rewarding our shareholders; our plans to improve colleague retention, training and productivity; our belief that our Recipe for Growth transformation is creating capabilities that will help us profitably grow for the long term; our expectations regarding our long-term financial outlook; our expectations of the effects labor harmony will have on sales and case volume, as well as mitigation expenses; our expectations for customer acquisition in the local/street space; our expectations regarding the effectiveness of our Global Support Center expense control measures; and our expectations regarding the growth and resilience of our food away from home market.
It is important to note that actual results could differ materially from those projected in such forward-looking statements based on numerous factors, including those outside of Sysco's control. Therefore, you should not place undue reliance on any of the forward-looking statements contained herein. For more information concerning factors that could cause actual results to differ from those expressed or forecasted, see our Annual Report on Form 10-K for the year ended June 29, 2024, as filed with the SEC, and our subsequent filings with the SEC. We do not undertake to update our forward-looking statements, except as required by applicable law.
About Sysco
Sysco is the global leader in selling, marketing and distributing food products to restaurants, healthcare and educational facilities, lodging establishments and other customers who prepare meals away from home. Its family of products also includes equipment and supplies for the foodservice and hospitality industries. With more than 76,000 colleagues, the company operates 340 distribution facilities worldwide and serves approximately 730,000 customer locations. For fiscal year 2024 that ended June 29, 2024, the company generated sales of more than $78 billion. Information about our Sustainability program, including Sysco's 2023 Sustainability Report and 2023 Diversity, Equity & Inclusion Report, can be found at www.sysco.com.
For more information, visit www.sysco.com or connect with Sysco on Facebook at www.facebook.com/SyscoFoods. For important news and information regarding Sysco, visit the Investor Relations section of the company's Internet home page at investors.sysco.com, which Sysco plans to use as a primary channel for publishing key information to its investors, some of which may contain material and previously non-public information. In addition, investors should continue to review our news releases and filings with the SEC. It is possible that the information we disclose through any of these channels of distribution could be deemed to be material information.
For more information contact:
Kevin Kim
Cassandra Mauel
Investor Contact
Media Contact
T 281-584-1219
T 281-584-1390
Sysco Corporation and its Consolidated SubsidiariesCONSOLIDATED RESULTS OF OPERATIONS (Unaudited)(In Millions, Except for Share and Per Share Data)
Quarter Ended
Sep. 28, 2024
Sep. 30, 2023
Sales
$
20,484
$
19,620
Cost of sales
16,731
15,972
Gross profit
3,753
3,648
Operating expenses
2,945
2,844
Operating income
$
808
$
804
Interest expense
160
134
Other expense (income), net
6
7
Earnings before income taxes
642
663
Income taxes
152
160
Net earnings
$
490
$
503
Net earnings:
Basic earnings per share
$
1.00
$
1.00
Diluted earnings per share
0.99
0.99
Average shares outstanding
492,023,827
505,126,492
Diluted shares outstanding
493,785,973
507,069,435
Sysco Corporation and its Consolidated SubsidiariesCONSOLIDATED BALANCE SHEETS(In Millions, Except for Share Data)
Sep. 28, 2024
Jun. 29, 2024
(Unaudited)
ASSETS
Current assets
Cash and cash equivalents
$
733
$
696
Accounts receivable, less allowances of $65 and $54
5,778
5,324
Inventories
4,991
4,678
Prepaid expenses and other current assets
351
323
Income tax receivable
22
22
Total current assets
11,875
11,043
Plant and equipment at cost, less accumulated depreciation
5,558
5,497
Other long-term assets
Goodwill
5,253
5,153
Intangibles, less amortization
1,169
1,188
Deferred income taxes
464
445
Operating lease right-of-use assets, net
1,008
923
Other assets
553
668
Total other long-term assets
8,447
8,377
Total assets
$
25,880
$
24,917
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable
$
6,374
$
6,290
Accrued expenses
2,141
2,226
Accrued income taxes
271
131
Current operating lease liabilities
126
125
Current maturities of long-term debt
487
469
Total current liabilities
9,399
9,241
Long-term liabilities
Long-term debt
11,869
11,513
Deferred income taxes
333
345
Long-term operating lease liabilities
928
838
Other long-term liabilities
1,115
1,089
Total long-term liabilities
14,245
13,785
Commitments and contingencies
Noncontrolling interest
29
31
Shareholders' equity
Preferred stock, par value $1 per share Authorized 1,500,000 shares, issued none
—
—
Common stock, par value $1 per share Authorized 2,000,000,000 shares, issued 765,174,900 shares
765
765
Paid-in capital
1,925
1,908
Retained earnings
12,498
12,260
Accumulated other comprehensive loss
(1,166
)
(1,339
)
Treasury stock at cost, 274,104,348 and 273,416,685 shares
(11,815
)
(11,734
)
Total shareholders' equity
2,207
1,860
Total liabilities and shareholders' equity
$
25,880
$
24,917
Sysco Corporation and its Consolidated SubsidiariesCONSOLIDATED CASH FLOWS (Unaudited)(In Millions)
Year Ended
Sep. 28, 2024
Sep. 30, 2023
Cash flows from operating activities:
Net earnings
$
490
$
503
Adjustments to reconcile net earnings to cash provided by operating activities:
Share-based compensation expense
30
24
Depreciation and amortization
235
206
Operating lease asset amortization
34
29
Amortization of debt issuance and other debt-related costs
4
5
Deferred income taxes
(17
)
(22
)
Provision for losses on receivables
21
18
Other non-cash items
(40
)
(2
)
Additional changes in certain assets and liabilities, net of effect of businesses acquired:
Increase in receivables
(427
)
(285
)
Increase in inventories
(287
)
(185
)
Increase in prepaid expenses and other current assets
(16
)
(39
)
Increase (decrease) in accounts payable
27
(188
)
Decrease in accrued expenses
(128
)
(40
)
Decrease in operating lease liabilities
(42
)
(27
)
Increase in accrued income taxes
140
80
Decrease in other assets
2
20
Increase (decrease) in other long-term liabilities
27
(10