Acquisitions contributed 1.9% to overall sales growth, in contrast to 5.4% last year. Marketing associate-served sales comprised 56.0% of traditional broadline U.S. sales, slightly less than 56.4% last year. Sysco brand items accounted for 56.9% of marketing associate-served sales and 48.8% of all traditional broadline U.S. sales.
Operating expenses as a percent to sales improved to 14.36%; last year, they were 14.95%. Net earnings climbed 14.4% to $208.8 million, vs. $182.6 million in the equivalent 2003 quarter.
Inflation, as measured by Sysco's rise in food costs compared with the same period a year ago, was 5.0%. Rising prices in meat, dairy, poultry and canned and dry categories were cited as primary factors. By comparison, the company experienced food cost deflation of 2.2% at the end of its prior-year first fiscal quarter.
"The diligent efforts of our 47,400 associates, including their daily focus on the success of our customers, resulted in a strong first quarter performance," comments Richard J. Schnieders, Sysco chairman and ceo. "Despite facing a headwind of inflation and a tough comparison against last year's extremely robust first quarter, each operating segment of our company performed impressively, as we began our new fiscal year.
"Rising food cost inflation, as well as a change in customer and product mix, lowered our gross margins by 41 basis points. This was offset by operating expenses, which as a percent to sales, declined 59 basis points in the quarter," Schnieders points out. "It's important to note that while inflation impacted our cost of goods, it did not affect our fixed expenses and, for the fourth consecutive quarter, we have leveraged operating expenses to generate increased operating income."
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