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Sysco Corp Reports Decline in Earnings Post Failed Deal with US Foods

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Published on : Nov 03, 2015

Sysco Corp., the U.S.-based food giant, has reported a decline in its expected profit. The failed deal with U.S. Foods is stated to be the cause for this drop. According to a report, the company’s profit fell 12% in the recent quarter. The sales, however, increased 0.9%, but failed to materialize analysts’ expectations, which was estimated at US$12.8 bn.

The company reported the sales value at US$12.6 bn for this quarter, whereas its profit decreased 12% and reached US$244.4 mn from a US$278.8 mn in the previous quarter.

The firm, which produces and supplies food to restaurants, has been facing a rise in competition from wholesale stores as well as smaller specialty suppliers. The company has proposed a deal of US$3.5 bn for the procurement of US Foods. The deal was specifically designed to reinstate the shrinking margins of Sysco by generating US$600 mn in the annual savings efficacies. The main reason behind the collapsed acquisition was regulatory hurdles from which the firm walked away.

Just after the merger failed, the activist investor, Mr. Nelson Peltz divulged a 7% stake in Sysco in August through Trian Fund Management, his hedge fund. The hedge fund has argued that the food supplier couldn’t live up to its potential. Trian pushed the firm to implement changes that could enhance the company’s operating results.

Sysco has earned US$244.4 mn in the latest quarter, summing up to 41 cents per share. Its earnings have dropped down from US$278.8 mn a year ago. Per share price of this stock was 47 cents during the same time period in 2014. The adjusted earnings of this company were reported at 52 cents per share while the revenue rose 0.9% to US$12.6 bn.