By Annie Gasparro And Lisa Beilfuss
Sysco Corp. said quarterly profit fell 71%, hammered by $430
million in costs related to its abandoned acquisition of rival US
Foods Inc., though earnings otherwise rose.
Houston-based Sysco, the nation's largest distributor of food
and other supplies to restaurants and cafeterias, has been piecing
together a new growth strategy after dropping its $3.5 billion plan
to buy US Foods, following a June ruling by a federal judge
effectively blocking the deal on antitrust grounds.
Chief Executive Bill DeLaney said Monday that after a
year-and-a-half of investing time and money into integration
efforts for that planned deal, Sysco has shifted its focus to
smaller acquisitions, internal cost-cutting and updating its
product assortment and technology to compete with rivals that have
more natural and organic items and better online ordering.
"We continue to look for acquisitions," Mr. DeLaney said on a
conference call. "Both within the core [business] and potentially
beyond the core, whether it be [adjacent industries] or continuing
to build our international platform."
Sysco's stock--which had fallen on news of the defunct
merger--rose 2% in Monday afternoon trading as its earnings
excluding merger-related costs topped analysts' expectations.
Sysco's adjusted operating income, taking out the $313 million
in merger-termination fees and $117 million in legal, interest and
other related expenses, rose 5.8% to $509 million in the quarter.
Its gross margin inched up to 17.9% from 17.5% a year earlier.
Mr. DeLaney said that even without the acquisition of US
Foods--which the companies argued would help trim $600 million from
their combined annual budget--there is still "significant potential
to improve our productivity and reduce overhead costs throughout
our supply chain organization and in the administrative areas of
our business."
For Sysco's fiscal fourth quarter ended June 7, it reported a
profit of $73 million, down from $254.2 million a year earlier.
Per-share earnings fell to 12 cents from 43 cents. Excluding the
merger-related costs, among other items, earnings increased to 52
cents from 49 cents.
Revenue edged 0.9% higher to $12.40 billion. The strong dollar
hit sales by 1.4%, the company said.
Analysts expected 51 cents in per-share profit on $12.67 billion
in revenue.
Write to Annie Gasparro at annie.gasparro@wsj.com and Lisa
Beilfuss at lisa.beilfuss@wsj.com
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