August 10, 2009 / 6:24 PM / 10 years ago

UPDATE 1-Sysco Q4 revenue falls on weak demand

* Q4 revenue falls 7 percent to $9.09 bln vs est $9.20 bln

* Q4 EPS $0.53 vs est $0.49 * Shares up slightly

BANGALORE, Aug 10 (Reuters) - Food distributor Sysco Corp (SYY.N) posted lower revenue for the third straight quarter on weak demand, but its profit came in ahead of market expectations, aided by cost-cutting efforts and gains related to company-owned insurance.

In the early weeks of fiscal 2010, the company has recorded “modest levels of deflation” — as measured by the change in Sysco’s cost of goods — after more than two years of about 6 percent annualized inflation, Chief Executive Bill DeLaney said on a conference call with analysts.

Sysco had passed on the rising costs to its customers, partially offsetting the decline in volumes the past few quarters. However, as food costs decrease, the company’s ability to raise prices is constrained by a tough promotional environment.

DeLaney said sales comparisons will be particularly challenging early in 2010 due to last year’s sales growth, which was fueled by prices increases.

The company has been cutting costs by reducing headcount to offset weak demand from its restaurant and other food-service outlet customers.

Chief Operating Officer Kenneth Spitler said the company’s headcount fell about 6 percent from the year-ago period, and bonuses and commissions were “down substantially.”


For the fourth quarter ended June 27, the company posted net income of $315.3 million, or 53 cents a share, compared with $334.1 million, or 55 cents a share, a year ago.

The Houston-based company said it saw a benefit of 3 cents a share to earnings due to a higher cash surrender value of its corporate-owned life insurance investments. These investments are used to fund some of the company’s retirement plans and are linked to market performance.

Revenue fell 7 percent to $9.09 billion, partly hurt by a weaker Canadian dollar and an ongoing declines in volume.

Analysts on average were expecting earnings of 49 cents a share, before special items, on revenue of $9.20 billion, according to Reuters Estimates.

“Sysco’s fourth-quarter operating result was similar to many discretionary retailers’: weak sales, significant cost-cutting, and outperformance off sharply lowered expectations,” Goldman Sachs analyst John Heinbockel said in a note to clients.

Heinbockel said the stock, which has rallied over 10 percent in the past few weeks, “could well see a modest near-term pullback.”

Shares of the company were trading up 10 cents at $24.95 Monday afternoon. (Reporting by Mihir Dalal in Bangalore; Editing by Anne Pallivathuckal)

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