(Reuters) -Sysco maintained its annual forecasts despite beating first-quarter estimates on Tuesday, reflecting growing concerns about the impact of economic uncertainty on the food distributor’s foodservice customers.
WHY IT’S IMPORTANT
The rising inflationary prices triggered by the Trump administration’s ever-shifting trade policies are turning Americans, especially lower-income households, thriftier and are increasingly looking to cut expenses by eating more meals at home.
However, higher-income consumers remaining resilient while splurging on vacations, hotels, entertainment venues as well as restaurants, helped consumer spending in the U.S. rise slightly more-than-expected in August.
The moderate improvement in restaurant foot traffic, a key customer segment for Sysco, led to the food supplier’s sales growth during the quarter.
CONTEXT
Sysco’s strategy to improve costs such as transportation, warehouse maintenance and inventory levels has helped it to counter rising product costs, primarily in meat and seafood categories.
The company said the increase in gross profit for the first quarter was primarily driven by effective management of product cost inflation and strategic sourcing efficiencies.
Its quarterly gross margin expanded 13 basis points to 18.5%.
BY THE NUMBERS
The company reiterates its fiscal 2026 sales to grow in the range of 3% to 5% and also expects annual adjusted profit to grow between 1% and 3%.
Sales in its U.S. foodservice segment were up 2.9% during the reported quarter, after rising 4.6% a year earlier.
The company’s adjusted profit of $1.15 per share in the first quarter topped analysts’ estimates of $1.12, according to data compiled by LSEG.
Its quarterly net sales of $21.15 billion beat estimates of $21.08 billion.
MARKET REACTION
Shares of Sysco were down about 1% in premarket trading.
(Reporting by Anuja Bharat Mistry and Koyena Das in Bengaluru; Editing by Krishna Chandra Eluri)
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