US foodservice distributors feeling COVID-19 pain

Published on
May 7, 2020

Sysco and US Foods suffered a steep decline in profits in their quarterly earnings due to fallout from the COVID-19 pandemic.

Houston, Texas, U.S.A.-based Sysco said its overall sales declined 6.5 percent to USD 13.7 billion (EUR 12.7 billion), while gross profit dropped 6.9 percent for its fiscal third quarter.

In the United States, Sysco’s third quarter sales declined 5.1 percent to USD 9.6 billion (EUR 8.9 billion).

“The exit rate of the third quarter saw a dramatic decline in volume, sales, and gross profit across all of the business segments as a result of the pandemic,” Sysco said in a press release.

However, trends in April have shown sequential weekly improvement, which “reflects further momentum and upward trajectory,” Sysco said.

“We expect additional improvement throughout the month of May as certain states allow restaurants to re-open their dining areas," it said.

Sysco also removed more than USD 500 million (EUR 462 million) worth of business expenses for its fiscal fourth quarter of 2020, "which includes the difficult decision to reduce our staffing levels by approximately 33 percent through a combination of temporary workforce furloughs and permanent reductions in force,” Sysco said.

Surprisingly, Rosemont, Illinois U.S.A.-based US Foods’ gross profit increased 1.3 percent to USD 1.1 billion (EUR 1 billion) and its net sales jumped 5.1 percent to USD 6.3 billion (EUR 5.8 billion) for the first fiscal quarter of 2020.

However, total organic case volume decreased 7.3 percent and organic independent restaurant case volume dropped 7.4 percent.

Its net loss reached USD 132 million (EUR 122 million) for the quarter, and total case volume dropped around 50 percent in April, US Foods said in a press release.

“Both case volume and net sales were negatively impacted by social distancing measures and required closures of non-essential businesses that were put in place the second week of March to mitigate the spread of COVID-19,” the distributor said.

US Foods’ operating expenses surged nearly 30 percent to USD 1.2 billion (EUR 1.1 billion), “primarily driven by an incremental USD 170 million [EUR 157 million] charge to our reserve for uncollectible accounts due to the estimated impacts of COVID-19 on the collectability of our existing customer receivables,” the distributor said. 

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