Houston TX-based foodservice provider Sysco Corporation (NYSE:SYY) has reported results for its 13-week fiscal 2011 first quarter ended October 2, 2010.
Sales were $9.8 billion, a gain of $700 million, or 7.4%, from $9.1 billion in the fiscal 2010 first quarter. This was mainly due to the impact of food cost inflation and the strongest year-over-year broadline and case volume growth since the fiscal 2007 second quarter. Food cost inflation, as measured by the estimated change in product costs, was 3.3%, driven by nearly 10% inflation in the combined categories of meat, dairy, and seafood. This compares with deflation of 3.4% in the prior-year period. Sales from acquisitions (within the past 12 months) boosted sales by 0.6%, and the impact of changes in foreign exchange rates for the first quarter increased sales by 0.5%.
Operating income was $506 million, an increase of $9 million, or 1.8%, versus $497 million in the prior year’s first quarter, and Sysco’s highest first quarter on record. While sales rose 7.4% during the first quarter, gross margin increased 4.8%, or $84 million, and operating expense advanced 6%.
Net earnings for the first quarter were $299 million, a loss of $27 million, or 8.3%. These earnings reflect a $39 million increase in tax expense year-over-year.
Bill DeLaney, Sysco’s president and chief executive officer, said, “I am pleased with the volume growth and productivity improvements our operating companies produced during the quarter. While our overall sales increase and operating expense management were encouraging, we missed our goal for operating income growth, largely due to a decline in gross profit margin and higher pension costs. Our entire leadership team is focused on effectively leveraging sales growth as the fiscal year progresses.”