Houston / TX. (syy) Sysco Corporation, the leading global foodservice distribution company, announced financial results for its 13-week first fiscal quarter ended October 02, 2021.
Key highlights for the first quarter of fiscal year 2022
- Strong sales growth of 8 percent compared to 2019 levels, with meaningful market share gains;
- October sales growth of 10 percent compared to 2019 levels, continuing Q1 sequential sales improvement;
- Generated Ebitda comparable to pre-Covid 2019 levels;
- Inflation effectively managed, despite the dynamic supply chain environment;
- Gross profit per case increases across all segments;
- Sysco’s Recipe for Growth strategy advances; and
- International operations delivered substantial profitability.
«Sysco delivered strong results this quarter, fuelled by meaningful market share gains. These results reflected sequential top-line improvements and another quarter of net new business wins, continued efficient pass through of inflation, including an increase in gross profit per case, as well as substantial effort by our merchandising team to improve customer fill rates despite ongoing supply challenges,» said Kevin Hourican, Sysco’s president and chief executive officer. «I want to thank all of our Sysco associates for their tireless efforts during the quarter to support our customers in a dynamic environment, all while making continued advances against our Recipe for Growth strategy.»
Key financial results for the first quarter of fiscal year 2022 included:
- Sales trends improved as markets continue to reopen; first quarter sales increased 39.7 percent versus the same period in fiscal year 2021 and increased 8.2 percent versus the same period in fiscal year 2019;
- Gross profit increased 33.9 percent to USD 3.0 billion, as compared to the same period last year, and gross profit increased 2.3 percent, as compared to the same period in fiscal year 2019;
- Operating income increased 50.6 percent to USD 631.7 million, and adjusted(1) operating income increased to USD 685.1 million, as compared to the same period last year, while operating income increased 0.6 percent and adjusted(1) operating income decreased only 1.0 percent, as compared to the same period in fiscal year 2019;
- Earnings before interest, taxes, depreciation and amortization (Ebitda) increased to USD 821.4 million, and adjusted Ebitda increased to USD 852.8 million, in each case as compared to the same period last year, while Ebitda increased 0.8 percent and adjusted Ebitda decreased 0.6 percent, in each case as compared to the same period in fiscal year 2019;(2) and
(1) Adjusted financial results, including adjusted operating income (loss), adjusted operating expenses, and adjusted Earnings Per Share (EPS), are non-GAAP financial measures that exclude certain items, which primarily include acquisition-related costs, restructuring costs, transformational project costs and adjustments to our bad debt reserve specific to aged receivables existing prior to the Covid-19 pandemic. Specific to adjusted EPS, this year’s Certain Items include the impact of an increase in reserves for uncertain tax positions. The fiscal 2021 Certain Items include the impact of a loss on the sale of Cake Corporation and the impact of a U.K. tax law change.
(2) Ebitda and adjusted Ebitda are non-GAAP financial measures.
- Earnings per share (EPS)(3) increased to USD 0.73 compared to USD 0.42 in the same period last year; and adjusted(1) EPS increased to USD 0.83 compared to USD 0.34 in the same period last year, while EPS decreased USD 0.08 and adjusted EPS decreased USD 0.08, in each case as compared to the same period in fiscal year 2019.
«Our strong financial results this quarter reflect strong sales growth over the prior year and 2019 levels, along with excellent operating leverage. Notwithstanding significant snap back and transformation costs in the quarter, we generated Ebitda comparable to pre-Covid 2019 levels. We will continue to deploy Sysco’s strong cash flow and balance sheet consistent with our capital allocation strategy, as we invest for growth, maintain strong ratings and return capital to shareholders,» said Aaron Alt, Sysco’s chief financial officer.
First Quarter Fiscal 2022 Results
Total Sysco: Sales for the first quarter were USD 16.5 billion, an increase of 39.7 percent compared to the same period last year. The exit rate for the first quarter was stronger than the overall quarter, indicating increasing strength in the food away-from-home market. Gross profit increased 33.9 percent to USD 3.0 billion, and gross margin decreased 79 basis points to 18.1 percent, compared in each case to the same period last year. The increase in gross profit for the first quarter was primarily driven by higher volumes and high rates of inflation that were effectively passed on to customers. Operating expenses increased USD 539.8 million, or 30.0 percent, compared to the same period last year, driven by increased volumes, one-time expenses associated with the snap-back, and investments against our transformation initiatives. Adjusted operating expenses increased USD 431.5 million, or 23.3 percent, compared to the same period last year. Operating income was USD 631.7 million, an increase of USD 212.1 million, or 50.6 percent, compared to the same period last year. Adjusted operating income was USD 685.1 million, an increase of USD 320.4 million compared to the same period last year.
U.S. Foodservice Operations: The U.S. Foodservice Operations segment saw continued growth resulting in overall share gain. Sales for the first quarter were USD 11.6 billion, an increase of 46.5 percent compared to the same period last year. Local case volume within U.S. Broadline operations increased 23.8 percent for the first quarter, while total case volume within U.S. Broadline operations increased 28.1 percent. Both increases represent organic growth. Gross profit increased 36.6 percent to USD 2.2 billion, and gross margin decreased 136 basis points to 18.8 percent, compared in each case to the same period last year. Product cost inflation was 13.4 percent in U.S. Broadline, as measured by the estimated change in Sysco’s product costs, primarily in the meat, poultry, and canned and dry products categories. Operating expenses increased USD 376.3 million, or 37.2 percent, compared to the same period last year. Adjusted operating expenses increased USD 292.7 million, or 26.7 percent, compared to the same period last year. Operating income was USD 797.5 million, an increase of USD 209.1 million, compared to the same period last year. Adjusted operating income was USD 795.8 million, an increase of USD 292.7 million, compared to the same period last year.
(3) Earnings Per Share (EPS) are shown on a diluted basis unless otherwise specified.
International Foodservice Operations:The International Foodservice Operations segment returned to profitability, as it delivered operating income improvement compared to the prior quarter and prior year. Sales for the first quarter were USD 2.9 billion, an increase of 33.8 percent compared to the same period last year. On a constant currency basis(4), sales for the first quarter were USD 2.8 billion, an increase of 28.2 percent compared to the same period last year. Foreign exchange rates increased International Foodservice Operations sales by 5.6 percent and total Sysco sales by 1.1 percent during the quarter. Gross profit increased 30.8 percent to USD 589.1 million, and gross margin decreased 48 basis points to 20.3 percent, compared in each case to the same period last year. On a constant currency basis(4), gross profit increased 25.8 percent to USD 566.4 million. Foreign exchange rates increased International Foodservice Operations gross profit by 5.0 percent and total Sysco gross profit by 1.1 percent during the quarter. Operating expenses increased USD 101.5 million, or 22.5 percent, compared to the same period last year. Adjusted operating expenses increased USD 93.4 million, or 21.6 percent, compared to the same period last year, mainly due to increased volume and investments in the snap-back and transformation costs. On a constant currency basis(4), adjusted operating expenses increased USD 72.3 million, or 16.8 percent, compared to the same period last year. Foreign exchange rates increased International Foodservice Operations operating expense by 4.9 percent and total Sysco operating expense by 1.2 percent during the quarter. Operating income was USD 36.7 million, an improvement of USD 37.2 million compared to the same period last year. Adjusted operating income increased USD 45.3 million compared to the same period last year. On a constant currency basis(4), adjusted operating income was USD 62.5 million, an increase of USD 43.7 million compared to the same period last year. Foreign exchange rates increased International Foodservice Operations operating income by USD 1.7 million and increased total Sysco operating income by USD 2.1 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.
Cash Flow and Capital Spending
Cash flow from operations was USD 110.8 million for the first 13 weeks of fiscal 2022, as the Company prioritized investments in inventory in support of managing product availability during the snap back better than the industry and also purposefully invested in longer-lead inventory to support customers, such as K-12 schools and health care facilities, during the snap back, consistent with Sysco’s Purpose statement. Capital expenditures, net of proceeds from sales of plant and equipment, for the first 13 weeks of fiscal 2022 were USD 79.4 million. Free cash flow(5) for the first 13 weeks of fiscal 2022 was USD 31.4 million.
