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