Sysco Corp (NYSE:SYY) reported quality results in the fiscal third quarter. Sales increased 2.4% to $8.9 billion while diluted EPS was up over 10% to 42 cents a share. Like the improving economy, Sysco continued to demonstrate its resilience as a business that thousands of other businesses depend on during expansion and recession. While Sysco managed to weather the recession's storm in relatively fine fashion, the fiscal third-quarter results were the first since September of 2008 in which Sysco reported an increase in sales. (For more, see The Impact Of Recession On Businesses.)
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It's Always the Economy
Sysco is the world's largest food distributor and serves the entire economic pie. In addition to restaurants and grocery stores, Sysco provides its services to hospitals, schools and restaurants. So it's pretty to safe to say that Sysco gets a front-line taste of economic strength or weakness. Dominance and the stability and necessity of food distribution ensure that the company will have the wherewithal to handle even the worst economic conditions better than most. Indeed, for fiscal years ending June 30, 2008 and 2009, Sysco's profits remained stable at approximately $1 billion.
Nevertheless, it doesn't mean that the company is immune. Businesses like hotels and restaurants have fewer guests to serve when the economy is weak and consumption is muted. And that translates into fewer deliveries or smaller orders from companies like Sysco. Yet that decline is supported by supplying major names like McDonald's (NYSE:MCD) and Yum! Brands (NYSE:YUM) whose low-priced menus actually thrive in weak economies.
Strength in Size
Yet decades of organic growth and acquisitions have given Sysco a formidable edge in the food distribution segment. Because Sysco's principal competitors are privately-owned names like Performance Food Group, it's difficult to compare Sysco's results against the competition in times of distress. Names like food distributor Nash Finch (Nasdaq:NAFC) has market cap of some $420 million against Sysco's $18 billion, so it's of no help to compare relative results. Sysco's sheer dominance of its industry without being subject to monopolistic consequences is very rare to find.
A Good Sign
In addition to increased sales and profitability, the best sign that Sysco's results are improving from a recovering economy was the growth in cases volume of products shipped in the quarter. Such metrics, when coming from an $18 billion dollar company with 400,000 customers, provides meaningful data that this recession is being replaced by gradual economic growth. (For more, see Profiting In A Post-Recession Economy.)
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