Sysco expects a return to normal levels of volume growth & inflation for the foodservice distribution industry. Management is confident that food-away-from-home will continue gaining market share from the grocery channel as it has for 24 of the last 25 years, except for 2020 (due to covid).
Macro/Consumer
- Sysco expects a slightly positive inflation level in 2Q24 for its U.S. Broadline business, a rate which is expected to continue into the second half of FY24.
- Center-plate inflation (30% of its volume) is currently highest with beef up double-digits.
- Sysco’s initial 2QFY24 results include strength in all restaurant types (including local) & other segments as well, portending well for the remainder of the year.
- In any case, full-year FY24 volume is expected to be softer than FY23.
Financial Performance
- Fiscal 1Q24 enterprise sales grew +2.6% y/y, with U.S. Foodservice up +0.9% y/y & International up +12.2% y/y. Gross profit increased +4.6% & operating income increased +9.1%.
- Total case volumes increased +1.6% y/y in its U.S. Foodservice segment, with local case volume remaining flat.
- While overall industry growth was flat during the quarter, the company grew share, with substantial growth in the healthcare, restaurant, and hospitality sectors.
- Sysco enjoys a natural commodity inflation hedge given a diverse set of product categories, with no category representing more than 15-20% of the basket.
- Despite prospects for top-line weakness driven by deflation & lower volume growth, the company is confident of its ability to drive a FY24 bottom-line increase based upon expectations that its gross profit will grow at a faster rate than its OpEx (reflecting the benefit of past price increases & operational efficiencies).
