Foodservice Distributors Heavily Impacted by COVID-19

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Sysco Corp.’s fiscal second-quarter results came in below analysts’ estimates on pandemic-related constraints, with the Houston-based food distributor posting adjusted earnings of $0.17 per share, well under the Zacks consensus estimate of $0.35 per share and the $0.85 per share the company recorded a year ago.

The company generated revenue of $11.56 billion, compared to $15.03 billion last year.

In an earnings call with analysts, Sysco CEO Kevin Hourican said that COVID-19 has imposed “substantial restrictions upon the customers we serve in the food-away-from-home sector and has disrupted our marketplace,” noting that the month of December was especially tough due to a decline in restaurant traffic and sales as a result of renewed lockdown measures.

Aaron E. Alt, the company’s chief financial officer, added that the impact of the coronavirus on company operations varied by region.

“Europe went into lockdown in December and is expected to remain in varying degrees of lockdown for a significant portion of the second half,” he said, adding that Canadian and Latin America were also heavily impacted by lockdowns – citing that the international foodservice unit suffered a 32% drop in second quarter sales.

“However, since the week after the [Christmas] holidays, we have been seeing signs of life from volume improvements in our U.S. [Foodservice] business and SYGMA [foodservice supplier subsidiary] continues to grow,” Alt said. “This battle will be fought week by week.”

Analysts who follow Sysco are projecting consensus earnings of $1.69 per share (versus $2.01 last year) on revenues of $50.3 billion in fiscal 2021, a 9.6% jump from the prior year, reported


Meanwhile, Performance Food Group said second quarter revenue grew on its acquisition of Reinhart, another foodservice firm and former rival, reported Yahoo Finance.

PFG’s net sales rose by 12.8%, to $6.8 billion, from the year-ago period.

“Despite the new challenges the holiday season brought for our business, our foodservice segment still delivered a solid quarter while continuing the smooth integration of Reinhart,” said PFG CEO George Holm. “Looking ahead, I believe PFG is well-positioned to take advantage of a better operating environment in the not-too-distant future.”

In a call with analysts, Holm mentioned how much COVID-related closures have hurt the company.

“Our business did experience a modest slowdown in December,” he said. “And while January is typically a seasonally softer month for PFG, we are encouraged by a modest acceleration in sales trends in recent weeks in our foodservice business. With that said, until the pace of vaccination picks up dramatically, we do not expect to return to a more normal operating run rate for some time. However, once the public feels comfortable gathering in groups, we anticipate a surge of volume at restaurants.”