Overview of Sysco’s Financial Performance

Sysco Corporation, a leading global foodservice distribution company, has reported its financial results for the third quarter and first 39 weeks of fiscal year 2025. The company’s performance was impacted by a challenging macroeconomic environment, including lower consumer confidence and adverse weather conditions, which led to decreased restaurant foot traffic.

In the third quarter of fiscal 2025, Sysco’s sales grew 1.1% to $19.6 billion compared to the prior year period. However, operating income decreased 5.7% to $681 million, and net earnings declined 5.6% to $401 million. Adjusted operating income, which excludes certain one-time items, decreased 3.3% to $773 million, while adjusted net earnings decreased 2.9% to $469 million.

For the first 39 weeks of fiscal 2025, sales increased 3.3% to $60.2 billion, but operating income declined 1.2% to $2.2 billion. Adjusted operating income increased 1.3% to $2.4 billion, while adjusted net earnings decreased 0.5% to $1.5 billion.

Revenue and Profit Trends

Sysco’s sales growth was driven by higher inflation, which increased 2.1% in the third quarter and 2.6% in the first 39 weeks. However, this was partially offset by decreases in case volume, particularly from local customers, which fell 3.5% in the third quarter. The company’s gross margin also declined, dropping 35 basis points in the third quarter and 25 basis points in the first 39 weeks, primarily due to a shift in customer mix and lower Sysco brand penetration.

Operating expenses increased 0.5% in the third quarter and 2.8% in the first 39 weeks, driven by higher costs related to expanded facilities, sales headcount investments, and supply chain labor rates. Adjusted operating expenses, which exclude certain one-time items, decreased 0.1% in the third quarter but increased 2.2% in the first 39 weeks.

The decline in operating income and net earnings was largely attributable to the lower sales volumes, margin compression, and increased operating expenses. Sysco’s adjusted diluted earnings per share was unchanged in the third quarter at $0.96 but increased 2.1% to $2.98 in the first 39 weeks.

Strengths and Weaknesses

One of Sysco’s key strengths is its diversified business model, with the U.S. Foodservice Operations and International Foodservice Operations segments accounting for over 88% of the company’s overall sales and nearly 98% of total segment operating income. This diversification helps mitigate the impact of challenges in any one market or region.

However, Sysco’s performance was negatively impacted by broader macroeconomic trends, including decreased consumer confidence and adverse weather conditions, which led to lower restaurant foot traffic and weaker sales volumes, particularly from local customers. The company’s gross margin also faced pressure from changes in customer mix and lower Sysco brand penetration.

To address these challenges, Sysco has been focused on implementing its “Recipe for Growth” transformation strategy, which aims to better serve customers through digital initiatives, product and solutions offerings, supply chain improvements, and other strategic pillars. The company believes these efforts will enable it to grow faster than the overall foodservice distribution industry and deliver profitable growth.

Outlook and Future Prospects

Looking ahead, Sysco expects net sales growth of approximately 3% for the full fiscal 2025 year, down from its previous target of 4-5%, due to lower than expected volume growth. The company also anticipates earnings per share and adjusted earnings per share growth of approximately 1% for the full fiscal year, compared to its previous target of 6-7% growth.

These revised guidance figures reflect the current uncertain macroeconomic environment and concerns regarding consumer confidence. However, Sysco remains confident in its long-term growth prospects, as it continues to execute on its “Recipe for Growth” strategy and leverage its market-leading position and diversified business model.

The company’s liquidity and capital resources also remain strong, with $1.5 billion in cash and cash equivalents as of March 29, 2025. Sysco generated $954 million in free cash flow in the first 39 weeks of fiscal 2025, up from $864 million in the prior year period, and the company has ample borrowing capacity to fund its strategic initiatives and shareholder returns.

Overall, Sysco’s financial performance in the third quarter and first 39 weeks of fiscal 2025 was impacted by macroeconomic headwinds, but the company’s diversified business model, strategic transformation efforts, and strong financial position position it well to navigate the current challenges and capitalize on long-term growth opportunities in the foodservice distribution industry.