Operations

COVID-19 hammers Sysco’s 2021 Q2 sales and earnings

Logo provided.

February 2, 2021

Sysco Corp.'s sales fell 23.1% from $23.3 billion in last year's second quarter to $11.6 billion for the 2021 second quarter ending Dec. 26, 2020, according to an earnings release.

Operating income fell 61.6% to $212.1 million, while adjusted operating income fell 62.7% to $234.1 million.

Earnings per share fell by 61 cents to 13 cents, while adjusted EPS fell by 68 cents to 17 cents.

The sales missed analyst expectations by $740 million, according to Seeking Alpha, while the 13 cents EPS missed projections by 19 cents the adjusted EPS of 17 cents missed by 18 cents.
Shares traded at $71.59 today against a 52-week range of $30.25-$78.37.

"We are making bold progress against our transformation agenda, while managing our business in a complex climate, and enabling accelerated growth by improving how we serve our customers and differentiate ourselves from competitors," Kevin Hourican, Sysco president and CEO, said in the release. "Additionally, with a COVID business recovery in sight, we are preparing for the upcoming increase in demand, and Sysco will be best positioned for a strong rebound due to our industry-leading financial strength and ability to invest in inventory, staffing and service levels."

Sales for Sysco's U.S. foodservice operations fell 23.9% for last year's second quarter from $10.4 billion to $7.9 billion for the 2021 second quarter, according to the release.

Local case volume within U.S. broadline operations decreased 19.7% for the second quarter, of which a decrease of 19.7% was organic, while total case volume within U.S. broadline operations decreased 23.7%, of which a decrease of 23.7% was organic.

Gross profit for U.S. foodservice operations decreased 23.9% to $1.6 billion, and gross margin remained relatively unchanged at 19.7%, compared in each case to the same period last year. Product cost inflation was 1.6% in U.S. broadline, as measured by the estimated change in Sysco's product costs, primarily in the paper and disposables, poultry and dairy categories.

Operating expenses for U.S. foodservice operations decreased $270.0 million, or 20.1%, compared to the same period last year. Adjusted operating expenses decreased $252.9 million, or 18.9%, compared to the same period last year.

Operating income for U.S. foodservice operations fell 31.2%from $704,801 in last year's second quarter to $485.3 million, a decrease of $219.6 million. Adjusted operating income was $471.8 million, a decrease of $236.7 million, or 33.4%, compared to the same period last year.

Sales for international operations fell 31.9% from last year's second quarter of $2.89 billion to $2.0 billion. On a constant currency basis, sales for the second quarter were $1.9 billion, a decrease of 33.8% compared to the same period last year. Foreign exchange rates increased international foodservice operations sales by 1.8% and total Sysco sales by 0.4% during the quarter.

Gross profit for international operations decreased from $586 million by 36.2% to $373.8 million, and gross margin decreased 128 basis points to 19.0%, compared in each case to the same period last year.

Operating expenses for international operations decreased $97.4 million, or 17.7%, compared to the same period last year. Adjusted operating expenses decreased $82.9 million, or 16.2%, compared to the same period last year. On a constant currency basis, adjusted operating expenses decreased $98.1 million, or 19.2%, compared to the same period last year. Foreign exchange rates increased international foodservice operations operating expense by 3.0% and total Sysco operating expense by 0.8% during the quarter.

The international foodservice operations segment delivered an operating loss of $79.9 million, a decrease of $114.8 million compared to the same period last year. Adjusted operating loss was $55.2 million, a decrease of $129.3 million compared to the same period last year. On a constant currency basis, adjusted operating loss was $51.6 million, a decrease of $125.6 million, or 169.6%, compared to the same period last year. Foreign exchange rates reduced international foodservice operations operating loss by 4.9% and total Sysco operating income by 0.6% during the quarter.

For an update on how the coronavirus pandemic has affected the convenience services industry, click here.