SYY Sysco Corp

By Anne Steele 

Sysco Corp. said profit shot up 23% in its latest quarter as volume improved in the U.S. and the food giant makes moves to manage expenses.

Results easily beat expectations, and shares added 0.9% premarket to $46.50.

Sysco, the No. 1 distributor of food and supplies to restaurants, hospitals and other venues in the U.S., has lately faced rising competition from smaller, specialty distributors and wholesale stores. In its fiscal third quarter, Sysco's domestic case volume grew 3.6%. Sales volume rose 3.4% among smaller, local restaurants -- a promising sign as Sysco has been struggling in that area, and those customers are more profitable than national chains.

Chief Executive Bill DeLaney said local growth and expense management helped drive operating profit, "and we are committed to sustaining this momentum in our fourth quarter and into fiscal 2017."

Sysco said in February it is eliminating 1,200 jobs -- about 2% of its workforce -- and abandoning a yearslong technology overhaul in an effort to accelerate profit growth. Mr. DeLaney has said the moves would help boost operating income by at least $500 million by the end of 2018.

In all for the quarter, Sysco earned $217.1 million, or 38 cents a share, up from $177 million, or 30 cents a share, a year earlier. Excluding certain items, adjusted earnings rose to 46 cents a share from 40 cents.

Revenue rose 2.2% to $12 billion.

Analysts had projected 42 cents in adjusted earnings per share on $11.87 billion in revenue, according to Thomson Reuters.

Gross margin improved 34 basis points to 17.9%.

Sysco posted $586,000 in acquisition-related costs, none related to its abandoned merger with rival US Foods Inc., which Sysco walked away from in June of last year. A year earlier, Sysco had booked $46.6 million in the quarter related to that deal.

The failed merger cost Sysco hundreds of millions of dollars -- and it opened the door for activist investor Nelson Peltz of Trian Fund Management LP. In August, the fund disclosed a 7% stake in Sysco, which Mr. Peltz said wasn't living up to its potential. Less than a week later, Sysco named Mr. Peltz and another Trian representative to its board.

Write to Anne Steele at Anne.Steele@wsj.com

(END) Dow Jones Newswires

May 02, 2016 09:25 ET (13:25 GMT)

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