First the bad news: Sales have slowed at SYSCO
The impact of product inflation, particularly in the dairy and meat categories, continues to be a concern. Price increases of 8% for the fourth quarter (6.3% for the year) were largely passed on to customers and recouped, but the end result was a slight reduction in gross profit margins. Sales for the period rose 16.7% to $8.14 billion but would have essentially been flat without the impact of rising prices and the benefit of an extra operating week. Earnings per share jumped 16.2% to $0.43, a penny shy of estimates.
This protracted period of sustained high prices has eased demand from SYSCO's 420,000 customers, which include hospitals, schools, and hotels, as well as fast-food chains such as Wendy's
Over the past five years, net margins have improved by 100 basis points to 3.1%. While in absolute terms this may seem razor-thin, the rate is double the industry average and triple the 1.0% of Performance Food Group
While sales growth may have moderated, the slowdown is likely temporary. It's a safe bet that demand for food will eventually pick up, particularly after inflation falls back in line. Meanwhile, SYSCO still trounced the 7.5% rise in sales posted by its closest competitor, Royal Ahold's
For more on SYSCO, read Bill Mann's coverage in Syzzlin' SYSCO.
Fool contributor Nathan Slaughter owns none of the companies mentioned.