Sysco: Reports Third Quarter Fiscal 2021 Results

Houston / TX. (syy) Sysco Corporation, the leading global foodservice distribution company, announced financial results for its 13-week third fiscal quarter ended March 27, 2021.

  • Sales trends improving as markets reopen; Q3 decreased 13.7 percent versus FY20 and decreased 19.3 percent versus FY19; April increased 102.1 percent versus 2020 and decreased 8.8 percent versus 2019;
  • We are now serving more independent customers compared to pre-Covid;
  • Gross profit decreased 17.2 percent to USD 2.1 billion; industry-leading gross margin decreased 77 basis points on mix among businesses;
  • Operating income increased 291.4 percent to USD 235.9 million; adjusted operating income decreased 32.0 percent to USD 256.2 million;
  • Earnings before interest, taxes, depreciation and amortization (Ebitda) increased 76.5 percent to USD 425.8 million; adjusted Ebitda decreased 18.7 percent to USD 437.4 million;
  • Earnings per share (EPS) increased USD 0.18, to USD 0.17; adjusted EPS decreased USD 0.23, to USD 0.22;
  • Cash flow from operations was USD 543.1 million and free cash flow was USD 459.7 million in the quarter; and
  • Company reduced debt by USD 1.1 billion during the quarter.

«A robust business recovery is now upon us. We are seeing consistently improving demand trends from our customers in the United States and we are ready to execute in International as markets reopen,» said Kevin Hourican, Sysco’s president and chief executive officer. «Sysco has made substantial progress against our transformation agenda, as we simultaneously invest in growth and transform our company to better serve our customers.»

Earnings Per Share (EPS) are shown on a diluted basis unless otherwise specified. Adjusted financial results exclude certain items, which primarily include adjustments to our bad debt reserve specific to aged receivables existing prior to the Covid-19 pandemic, goodwill impairment charges, restructuring costs, transformational project costs and acquisition-related costs. Specific to EPS, this year’s third quarter and first 39 weeks Certain Items include the impact of a loss on the sale of our Spain operations. The first 39 weeks Certain Items include the impact of a loss on the sale of Cake Corporation and the impact of a new U.K. tax law change.

Third Quarter Fiscal 2021 Results

Total Sysco: Sales for the third quarter were USD 11.8 billion, a decrease of 13.7 percent compared to the same period last year. The exit rate for the third quarter was stronger than the overall quarter, as select geographic markets continue to drive the recovery as restrictions ease in the areas in which we operate.

Gross profit decreased 17.2 percent to USD 2.1 billion, and gross margin decreased 77 basis points to 18.0 percent, compared in each case to the same period last year. The decline in gross profit for the third quarter was primarily driven by lower volumes due to Covid-19.

Operating expenses decreased USD 617.2 million, or 24.6 percent, compared to the same period last year, driven by reduced costs from the achievement of cost-out initiatives, as well as a benefit from a reduction in our allowance for doubtful accounts. Adjusted operating expenses decreased USD 320.8 million, or 14.7 percent, compared to the same period last year.
Operating income was USD 235.9 million, an increase of USD 175.6 million, or 291.4 percent, compared to the same period last year. Adjusted operating income was USD 256.2 million, a decrease of USD 120.8 million, or 32.0 percent, compared to the same period last year.

«We are leveraging our balance sheet strength to invest in our business – inventory, fleet, people and technology – while simultaneously reducing our debt levels to reflect the improving business environment,» said Aaron Alt, Sysco’s chief financial officer.

U.S. Foodservice Operations: Sales for the third quarter were USD 8.4 billion, a decrease of 12.8 percent compared to the same period last year. Local case volume within U.S. Broadline operations decreased 9.7 percent for the third quarter, of which a decrease of 9.7 percent was organic, while total case volume within U.S. Broadline operations decreased 14.1 percent, of which a decrease of 14.1 percent was organic.

Gross profit decreased 13.7 percent to USD 1.6 billion, and gross margin decreased 22 basis points to 19.6 percent, compared in each case to the same period last year. Product cost inflation was 3.5 percent in U.S. Broadline, as measured by the estimated change in Sysco’s product costs, primarily in the paper and disposables, poultry, and meat categories.

Operating expenses decreased USD 341.9 million, or 23.9 percent, compared to the same period last year. Adjusted operating expenses decreased USD 212.9 million, or 16.1 percent, compared to the same period last year.

Operating income was USD 545.5 million, an increase of USD 81.3 million, or 17.5 percent, compared to the same period last year. Adjusted operating income was USD 525.1 million, a decrease of USD 47.7 million, or 8.3 percent, compared to the same period last year.

International Foodservice Operations: Sales for the third quarter were USD 1.7 billion, a decrease of 31.3 percent compared to the same period last year. On a constant currency basis, sales for the third quarter were USD 1.6 billion, a decrease of 35.4 percent compared to the same period last year. Foreign exchange rates increased International Foodservice Operations sales by 4.1 percent and total Sysco sales by 0.8 percent during the quarter.

Gross profit decreased 35.1 percent to USD 325.2 million, and gross margin decreased 110 basis points to 18.9 percent, compared in each case to the same period last year. On a constant currency basis, gross profit decreased 39.2 percent to USD 304.5 million. Foreign exchange rates increased International Foodservice Operations gross profit by 4.1 percent and total Sysco gross profit by 0.8 percent during the quarter.

Operating expenses decreased USD 138.0 million, or 23.6 percent, compared to the same period last year. Adjusted operating expenses decreased USD 78.4 million, or 15.8 percent, compared to the same period last year. On a constant currency basis, adjusted operating expenses decreased USD 107.2 million, or 21.6 percent, compared to the same period last year. Foreign exchange rates increased International Foodservice Operations operating expense by 5.8 percent and total Sysco operating expense by 1.3 percent during the quarter.

The International Foodservice Operations segment delivered an operating loss of USD 121.5 million, a decrease of USD 37.7 million compared to the same period last year. Adjusted operating loss was USD 92.4 million, a decrease of USD 97.4 million compared to the same period last year. On a constant currency basis, adjusted operating loss was USD 84.2 million, a decrease of USD 89.2 million compared to the same period last year. Foreign exchange rates increased International Foodservice Operations operating loss by USD 8.2 million and reduced total Sysco operating income by USD 8.0 million during the quarter.