Sysco (NYSE:SYY), a leading foodservice distributor, reported a strong performance in the first quarter of fiscal year 2024, with a sales growth of 2.6% and double-digit growth in adjusted operating income and adjusted EPS. The company also announced its plans to acquire Edward Don, a food service equipment and supplies distributor, to further bolster its Recipe for Growth strategy. Sysco CEO, Kevin Hourican, highlighted the company's intention to focus on capabilities, service, and outcomes rather than leading with price.
Key takeaways from the call include:
- Sysco reported its highest operating income quarter and sixth consecutive period of record profits.
- The company plans to increase local sales volume growth by investing in sales headcount, enhancing the sales compensation model, and focusing on visit frequency and quality expectations.
- Sysco is implementing a global operating model to accelerate international progress and improve supply chain performance.
- The company expects mid single-digit net sales growth and adjusted EPS growth of 5% to 10% for fiscal year 2024.
- Sysco is focused on expanding its fulfillment capacity, investing in technology, and strengthening its product range and selling process.
- The company plans to be disciplined and deliberate in adding new staff while still achieving positive operating leverage.
- Sysco aims to improve profitability with existing national customers by further penetrating Sysco brand products and creating win-win partnerships.
- The company expects a return to modest inflation in the second quarter, driven by increases in center plate commodities such as beef.
In an earnings call, Sysco executives discussed the company's growth potential in neighborhoods where it currently doesn't serve every customer. They mentioned splitting some neighborhoods into two or three separate areas and hiring additional staff to cater to these neighborhoods. The executives also highlighted their high share count with existing national customers and the opportunities for profit improvement through further penetration with Sysco brand products and efficiency improvements.
Hourican also mentioned that the company has implemented a staffing tool that will have long-term benefits, and is focused on improving key operational metrics such as pieces per truck, overall productivity, pieces per labor hour, and safety. Despite lower volume growth and deflation, Sysco has posted double-digit profit growth and is confident in the long-term prospects of the industry.
The company maintains its annual guidance for fiscal year 2024, emphasizing its market leadership, strong balance sheet, and positioning for long-term profitable growth. The call concluded with an invitation for investors to reach out to the Investor Relations group for any further inquiries.
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