Three of America’s largest foodservice distributors reported higher earnings in most recently quarterly financial results, but expressed concern about major headwinds facing the industry.
They said the COVID-19 omicron variant, inflation, and continued labor and supply chain issues lead the list of challenges in 2022.
Sysco’s U.S. broadline volume increased 22.5 percent in the quarter ending 1 January, 2022, versus the same period in fiscal year 2021, and decreased 4.9 percent versus the same period in fiscal year 2019. While Sysco’s gross profit jumped 37.8 percent to USD 2.9 billion (EUR 2.5 billion) in its second fiscal quarter, its profit was less than expected due to impacts of the COVID-19 omicron variant, Sysco President and CEO Kevin Hourican said on an investor earnings call.
“We delivered sales growth of 10.5 percent versus 2019 and sequential volume improvements throughout the quarter, until the omicron variant impacted our December performance,” Hourican said.
In addition, operational expenses within Sysco’s supply chain were “above expectations due to the challenges that COVID is presenting to our labor environment and our transportation costs,” Hourican said.
Likewise, the rapid spread of the omicron variant hurt consumer spending and job growth in December, and resulted in depressed restaurant bookings and less travel in January, the National Restaurant Association said in its 2022 State of the Restaurant Industry Report.
“The omicron variant is another speed bump on the industry’s road to recovery. Most operators across all the major restaurant segments say they’ve seen a decline in customer demand for indoor on-premises dining in late 2021 and early 2022,” the NRA said.
While the NRA expects the U.S. foodservice industry to grow 6 percent to reach USD 898 billion (EUR 790 billion) in sales in 2022, the organization said the industry faces rising business costs, an extremely shallow labor pool, and supply chain disruptions. Menu prices for quick-service meals rose 8 percent, while full-service menu prices jumped 7.1 percent. Seven in 10 U.S. foodservice operators across all major segments said their restaurant currently does not have enough employees to support customer demand and most operators expect their labor challenges to continue through next year. Forty percent of operators say they are not open to full capacity for indoor on-premises dining, and seven in 10 report it’s due to staffing shortages.
However, Sysco executives “remain confident these incremental expenses driven by labor costs are near-term challenges that will improve over time,” Hourican said.
Other leading food distributors also reported more positive news on the earnings front. On 17 February, US Foods announced its net sales jumped 28.8 percent to USD 29.5 billion (EUR 26 billion) for fiscal year 2021, while its net sales rose 24.5 percent in the fourth quarter of 2021. The company’s total case volume for 2021 increased 16.9 percent, while independent restaurant case volume increased 28 percent.
“2021 was a year of resilience and recovery," US Foods CEO Pietro Satriano said in a press release. "In the face of continued industry-wide supply chain and labor challenges, we increased adjusted EBITDA 63 percent by successfully growing volume and increasing market share with key customer types, delivered our highest gross profit per case since becoming a publicly traded company, and continued to improve operational efficiencies.”
Performance Food Group also reported significant earnings increases in its fiscal second quarter, as net sales jumped 87.6 percent to USD 12.8 billion (EUR 11.3 billion), and gross profit soared 57.7 percent versus the previous year. Conversely, the company’s net income declined 52.3 percent to USD 8.4 million (EUR 7.4 million), primarily as a result of a USD 3.1 million (EUR 2.7 million) decrease in operating profit and a USD 7.1 million (EUR 6.3 million) increase in interest expense.
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