"The third quarter typically is our most challenging, due to unpredictable winter weather, and this winter has been worse than those of the past few years," notes Thomas E. Lankford, president and coo.
Sysco continues to focus on service at such times, although transportation departments may experience some higher costs as a result of the weather, he adds. "On the other hand, March usually is the strongest month of the third quarter and typically produces approximately 50 percent of the sales and profitability in the quarter."
Sysco is optimistic that real growth-excluding acquisitions and inflation-will continue at least at a mid-single-digit pace, if there is milder weather through the rest of the quarter and providing that the political climate is relatively stable, he adds. "We are especially pleased with the continuing growth in our independent customer base."
Meanwhile, the public distributor, which rang up $24.7 billion in calendar 2002, saw its stock price slide 7 percent on Wednesday, March 5. This was the result of fallout from the problems that have surfaced at industry rival U.S. Foodservice (USF), Columbia, MD, according to the Wall Street Journal. However, the stock started to recover Thursday.
While Sysco has not been tied to any of the accounting issues raised at USF, the situation has aroused investor concerns that the broadliner giant could face slower pricing problems and slower growth, according to a research note by Stephen Chick, analyst at J.P. Morgan, referenced by the WSJ. "We are apprehensive about the pricing environment and the actions of U.S. Foodservice, as that company attempts to regain traction, particularly with independent customers, where switching-costs appear to be relatively low," Chick opined. However, Sysco should benefit in the long term, through market share gains, he added.
While Sysco does not comment on analyst speculation, the distributor's positive performance during the third quarter speaks for itself, a spokesperson points out.