Sysco Earnings Struggle After Failed US Foods Merger
November 02 2015 - 10:00AM
Dow Jones News
Sysco Corp., in the wake of its abandoned merger with rival US
Foods Inc., reported its profit tumbled 12% in the latest quarter
as revenue edged higher but just missed analysts' expectations.
Sysco, which delivers food and supplies to restaurants, has
lately faced rising competition from smaller, specialty
distributors and wholesale stores, such as Restaurant Depot. The
Houston company's $3.5 billion deal to buy US Foods was designed to
restore Sysco's diminishing margins by creating $600 million in
annual savings efficiencies.
Following the collapsed merger, from which Sysco walked away
because of regulatory hurdles, activist investor Nelson Peltz
through his hedge fund Trian Fund Management LP disclosed a 7%
stake in the company in August.
Trian has argued that Sysco hasn't lived up to its potential and
has pushed for changes that could improve operating results. In
August, Sysco agreed to add Mr. Peltz and Josh Frank of Trian to
its board.
In the latest quarter, Sysco earned $244.4 million, or 41 cents
a share, down from $278.8 million or 47 cents, a year earlier.
Excluding certain items, adjusted earnings were flat at 52
cents.
Revenue edged up 0.9% to $12.56 billion.
Analysts had projected 52 cents in earnings per share on $12.58
billion in revenue, according to Thomson Reuters.
Sysco posted $126.9 million of interest expense in the latest
quarter, compared with $30.9 million a year earlier, and the impact
of US Foods financing costs totaled $94.8 million in the quarter,
compared with $3.7 million in the year-earlier period.
The company also took a $9.8 million hit in the latest quarter
on planning and integration costs associated with the failed
merger, compared with $40.5 million a year ago.
Shares in the company, which have risen 15% over the past three
months, were inactive premarket.
Write to Lisa Beilfuss at lisa.beilfuss@wsj.com and Anne Steele
at Anne.Steele@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
November 02, 2015 09:45 ET (14:45 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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