Sysco 2Q and first half net earnings down, sales up

by Bryan Salvage
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HOUSTON – Sysco Corporation announced for its second quarter ended Jan. 1, net earnings were $258 million, a decrease of $10 million, or 3.8%. Diluted EPS was $0.44, including a $0.02 positive impact from COLI. Diluted EPS in the prior year period was $0.45, which included a $0.01 positive impact from COLI.

Second quarter sales were $9.4 billion, an increase of $516 million, or 5.8% compared to the same period last year due primarily to the impact of food-cost inflation. Food-cost inflation, as measured by the estimated change in Sysco's product costs, was 4.5%, driven by continued double-digit levels of inflation in the meat, dairy and seafood categories. This compares to deflation of 3.5% in the prior year period.

Operating income was $437 million, a decrease of 5.5% compared to $462 million in last year's second quarter.

"Our financial results for the second quarter reflect the unfavorable impact of certain market conditions and operational challenges that we were unable to fully overcome in the near term,” said Bill DeLaney, Sysco's president and CEO. “Specifically, accelerating and significant food-cost inflation negatively impacted our customers' purchasing budgets, contributed to increased gross margin pressure and meaningfully increased our selling expense.

Net earnings for the first half of fiscal 2011 were $557 million, a decrease of $37 million, or 6.3%. Diluted EPS was $0.95, aided by a $0.04 favorable impact from COLI. Diluted EPS in the prior year period was $1.00, aided by a $0.05 tax benefit related to the company's IRS settlement and a $0.04 favorable impact from COLI.

Sales for the first half of fiscal 2011 were $19.1 billion, an increase of 6.6% compared to the same period last year. Food-cost inflation, as measured by the estimated change in Sysco's cost of goods, was 3.9% for the first half of the year. Sales from acquisitions (within the last 12 months) increased sales by 0.6%. The impact of changes in foreign exchange rates for the first half of the year increased sales by 0.5%.
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