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Sysco Corp. net income up 18%, revenue falls

HOUSTON, TX (Nov 2, 2009)—Food distributor Sysco Corp (SYY.N) posted an 18 percent rise in quarterly profit, edging past market estimates, on lower expenses, but its sales fell for the fourth consecutive quarter as it was hurt by food cost deflation.

Food cost deflation hurts the company, which distributes food products and services to restaurants, hospitals, hotels, schools and colleges, as its ability to raise prices is constrained by tough competition.

Last quarter, Sysco started building its sales force to aggressively pursue business, and it also plans to continue to acquire struggling competitors.

"We think it's our turn to start exerting some pressure on our competitors and being more aggressive," Sysco President and Chief Operating Officer Kenneth Spitler said Monday during the company's earnings call.

Sysco, North America's largest marketer and distributor of food-service products, earlier reported fiscal first-quarter earnings that rose 18% on tax-related and other gains. Sales continued to take a hit, with revenue down 8.1% amid continuing declines in restaurant sales and food deflation.

For the first quarter ended Sept. 26, Sysco posted net income of $326.2 million, or 55 cents a share, compared with $276.8 million, or 46 cents a share, a year ago. Sysco took out more costs in its business, reducing the number of employees by about 5% from last year while also paying out less in incentive-based pay. Sales fell 8 percent to $9.08 billion.

"I am pleased with our solid operating performance this quarter," said Bill DeLaney, Sysco's chief executive officer. "In the midst of what continues to be an extremely challenging business environment, our operating companies managed expenses extraordinarily well. Our sales decline was largely caused by the impact of reduced consumer spending experienced by much of our customer base, as well as significant food cost deflation. Looking forward, we are encouraged by the stabilization of our volume trends in recent weeks and we remain committed to supporting our customers through this most difficult period in our industry's history." 

Sysco's first quarter fiscal 2010 earnings conference call was held on Monday, November 2, 2009. Follow this link to listen to the conference call or here to read a transcript

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