Sysco Quarterly Profits Fall but Sales Advance

The company reported net earnings of $204.2 million, or 33 cents a share, in the second quarter ended on Dec 31, 2005, compared with $232.6 million, or 36 cents a share, a year earlier.

The results for the latest period include a net expense of 4 cents per share from expensing stock options.

Sysco said quarterly sales rose 8.7% to $7.97 billion from $7.33 billion a year earlier and topping the consensus target of $7.88 billion. The distributorship said sales growth was fueled by the addition of sales and marketing staff to serve key customers. Food price inflation also added 0.6% to sales growth.

Gross profit margins improved by 21 basis points, but expenses as a percent to sales rose by nearly a full percentage point, hurt by price inflation. The company said it spent an additional $13 million on fuel in the latest quarter.

First-half fiscal sales increased 7.5% to nearly $16 billion from $14.9 billion in the same period last year. Net earnings after the cumulative effect of an accounting change taken during Sysco's first fiscal quarter of 2006 were $412.7 million compared with $458.6 million in the first half of fiscal 2005.

Richard J. Schnieders, chairman, ceo and president, commented, "I am very pleased with this quarter's sales growth of 8.7 percent, which is a return to Sysco's historical performance levels. The results were due to sound execution of our growth strategies, including business reviews, increased staffing in our key customer contact areas and the efforts of our marketing associates.

"Our strategic investments in these areas were validated by the growth they produced, and we will continue to invest in these areas for future growth. Our industry has endured a variety of challenges in the past several quarters, especially in terms of fuel costs and the effects of food cost inflation. By remaining focused on our long-term goals, we have executed on the basic building blocks of our business and positioned ourselves for future success."


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