By Annie Gasparro and Joshua Jamerson
Sysco Corp., the country's largest distributor of food supplies to restaurants, said its profit rose 33% in the latest quarter, but the company's executives warned of slower spending by consumers dining out in the U.S.
Sysco, which also distributes to cafeterias, has struggled in recent years amid heightened competition and a slowdown in the restaurant industry, which has been attributed to people buying more groceries and eating out less.
"There's clearly a softening now, whether it's because of the election or relative pricing between grocery stores and restaurants," saidChief Executive Bill DeLaney on a call with analysts on Monday.
But the quarter saw higher profitability from Sysco selling more of its own branded foods. An overseas acquisition of U.K.-based Brakes Group also helped. Sysco's shares rose 9% in recent Monday trading.
Previously, Sysco's plan to boost profits had relied heavily on a merger with rival distributor US Foods Holding Corp but after the deal was foiled by antitrust regulators last year, Sysco instead acquired Brakes, sharply expanding its overseas footprint.
The deal, completed in July, helped to nearly double Sysco's international foodservice sales to $2.7 billion in the latest quarter. In its much larger U.S. division, sales edged up 0.8% to $9.5 billion.
Meanwhile, Sysco has embarked on a plan to cut costs, including layoffs of some 1,200 employees, that it says would boost its operating income by at least $500 million by the end of 2018 -- a 28% increase oflast year's adjusted operating income.
Excluding the Brakes acquisition, Sysco's quarterly sales rose 1% and gross margin hit 18.5% -- an increase of seven-tenths of a percentage point, double the average growth over the prior five quarters.
Its sales by volume to smaller, independent restaurants in the U.S. -- a more profitable group than nationwide chains -- rose 1.9% in the quarter. While that wasn't as strong as prior quarters, it was better than BMO Capital Markets analyst Kelly Bania feared given the weak results from publicly traded chain restaurants, she said.
There are "ebbs and flows in many cycles of economies, and I think we're going through that right now," Mr. DeLaney said.
In all for its fiscal first quarter ended Oct. 1, Sysco earned $323.9 million, or 58 cents a share, up from $244.4 million, or 41 cents a share, a year prior. Total sales rose 11% to $13.97 billion.
Excluding restructuring and merger-related items and the impact of the Brakes acquisition, adjusted earnings rose to 63 cents a share from 52 cents.
Write to Annie Gasparro at firstname.lastname@example.org and Joshua Jamerson at email@example.com
(END) Dow Jones Newswires
November 07, 2016 14:27 ET (19:27 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.