Food Service Distribution Companies Face Lower Margins

11/20/2018

Inflation, especially due to transport costs and lower availability of labor is reducing profits of the major food service distribution companies. Operating and net margins are in the low single digits reflected in lower returns on both assets and equity. Three of the four public traded food service companies are trading at the low end of their 12-month range with the largest, Sysco slightly above the midpoint.

The CFO of Sysco noted, "We are having to struggle to get as many people where we need them, when we need them." The CEO of Sysco reporting on Q1 FY 2019 results stated, "We continue to see significant cost challenges. All of the food distribution companies followed Sysco down after the November 5 th release of results for their most recent quarter. Sysco fell 9.4 percent, US Foods Holding Company by 4.2 percent, Performance Food Group by 2.9 percent and Spartan Nash by 0.6 percent.

Financial values for the four food service distributors are shown in the table below:

  12 Month 12 Month

Trading Return % Margins % Share Price

  12 month
Trading Return %
Margins 12 month
Share Price

Company

Symbol

 

M.Cap

Q Sales

Op Profit

Net Profit

Assets

Equity

Operating

Net

Low

High

Nov 14

Open

Sysco

(SYY)

2019 Q1

$34.38B

$15.2B

$628M

$431M

8.5

59.8

4.3

2.5

$56.02

$75.98

$67.02

US Foods

(USFD)

2018 Q3

$6.9B

$6.2B

$179M

$114M

4.5

19.3

2.8

2.3

$26.38

$40.92

$31.98

Performance

(PFGC)

2018 Q3

$3.43B

$4.5B

$843M

$28M

4.0

19.3

1.4

1.1

$28.05

39.45

$32.61

Spartan Nash

(SPTN)

2018 Q3

$626M

$1.9B

$27M

$18M

3.5

11.4

1.4

1.0

$16.10

20.72

$17.51






















































































































































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