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 billion^1,2; 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%.

"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.

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.