S&P projects continued growth at the rate of 8-10% for FY 2004, spurred by modest food-cost inflation and further expansion of business units serving both chain and independent operators. Sysco itself expects real growth (adjusted for acquisitions and food cost inflation or deflation) of 5% to 7% and unadjusted net sales of 9% to 12%. This reflects food cost inflation of 1% to 2% and acquisition benefits of 3%. "We believe these goals are attainable, as the company has achieved a compounded annual growth rate over 10% in the past 5- and 10-year periods, respectively," S&P comments.
Moreover, the ratings service expects Sysco's gross margins to widen slightly in fiscal 2004, aided by increased sales to independent operators and a higher percentage of private-label volume. Operating margins, too, should benefit, thanks to productivity improvements resulting from company-wide information systems implementation. The latter gain will be partly offset by expenses incurred in construction of Sysco's new redistribution network; however, this network ultimately will enhance operational profitability. (See ID Management Report for full story, July 31, 2003).
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