Sysco 2Q14 Earnings Call Notes

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This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

5% sales growth

“Sales for the fiscal year grew 5% to $47 billion and adjusted net earnings were $1 billion. ”

Inflation picked up significantly

“Inflation increased significantly at the end of Q3 and was 4.1% for Q4, contributing to our sales and gross profit growth while also pressuring our gross margin.’

Food service industry remains under pressure

“Our results reflect the impact of the slow and modest economic recovery in a food service industry that as a whole remains under pressure.”

Inflation continued throughout the quarter

“During our May earnings call we indicated that inflation jumped substantially at the end of March. That trend continued and we saw a meaningful increase in inflation throughout the quarter. The overall rate was driven by inflation in the meat, seafood and dairy categories which together total more than one-third of our annual sales.”

We expect inflation to fall, but so far it’s been comparable to what we’ve seen

“We haven’t seen it yet. I think what we’re saying is people that we all follow and just looking at some overview reports on commodities and that type of thing, and just the math of this thing as you get into the last third of next year we would expect it to subside some. But at this point it’s still very comparable to what we’ve seen in the last three or four months.’

Consumer wants new experiences at lower cost

“Our customers are under a lot of pressure from the consumer to offer innovative experiences in food and presentations and to do it more and more cost-effectively.”

You can’t wait for a merger to be approved to start integrating companies

“There’s been a tremendous amount of work that’s been done and we’ve had external consultancy professionals helping us all along the way. So it’s a tremendous amount of work that’s been done, a lot of hard work by a lot of people that is reflected in these dollars as well as the hours so that when the thing is approved you’re ready to go. Unfortunately you can’t wait for it to be approved and then decide that you’re going to plan for how to integrate the two companies together. It’s something we have to do every day.”

Customers have to pass on food costs at some point

“from what I’ve been reading which is I’m sure the same material you read in those categories, customers are… Obviously they have to pass them along at some point. These are double-digit increases. So I think they are selectively passing it along where they feel that they can support it in their business; I’m sure they’re also working their menus.”

Manage portions, menu mix, etc

“I think they’re managing the portions, I think they’re managing the mix of the menu and they’re passing it along where they can. That’s been my experience in terms of going out to eat.”