Company reports food price inflation during fourth quarter
By MATEUSZ PERKOWSKI
Food price deflation has resulted in stagnating revenues for a major U.S. food distributor, but the company believes that trend has begun to reverse.
Sysco Corp., based in Houston, Texas, has reported $37 billion in total sales for its 2010 fiscal year, basically unchanged since last year, according to a filing with the U.S. Securities and Exchange Commission.
However, the flat revenue belies significant changes that have occurred in the past year, said Chris Kreidler, the firm's chief financial officer, during a recent conference call with analysts.
"It really was a year with two distinctly different halves," he said.
The first part of Sysco's fiscal year was marked by falling volumes and prices, but the firm made up for that drop during the latter half of the year, Kreidler said.
In the fourth quarter, the company saw food price inflation for the first time in a year, particularly in the dairy, meat and produce sectors, said Bill DeLaney, Sysco's president and CEO.
These goods all experienced deflation in 2009, with prices dropping by about 6.4 percent for dairy products, 0.6 percent for meat and 2.1 percent for produce, according to the USDA's Economic Research Service.
The restaurants and institutions served by Sysco are seeing some economic improvement, but the situation is expected to remain stressful for the foreseeable future, he said during the conference call.
"What we haven't seen is a step up in that rate of growth," DeLaney said. "It's choppy, but it's definitely still positive."
Sysco's flat revenues during the recession may be a positive sign for the company, since the overall food service industry has seen sales weaken, he said. That would indicate Sysco has gained a stronger position among distributors.
"We think we're taking share," DeLaney said.
Since 2008, Sysco has reduced its workforce by about 8 percent in reaction to the economic downturn, but the company has now begun hiring back more marketing associates due to the expected recovery, Kreidler said.
Profits have remained healthy for the firm, which reported a 12 percent increase in net income during fiscal 2010, to about $1.2 billion, according to an SEC filing.