01—Abstract
Summary
Summary of the 10-Q filed January 29, 2025. Cited figures are marked; the original filing is the authoritative source.
Sysco Corporation's 10-Q for the second quarter of fiscal 2025 (13 weeks ended December 28, 2024) reports sales of $20.15 billiona, up 4.5% from $19.29 billion a year earlier, driven primarily by U.S. Foodservice Operations volume growth and moderate inflation.
Operating income rose 1.7% to $712 millionb, while net earnings declined 2.2% to $406 million, reflecting higher restructuring and transformation costs and acquisition-related costs. Diluted earnings per share were $0.82, unchanged year over year. Excluding Certain Items, adjusted diluted earnings per share increased 4.5% to $0.93, and adjusted operating income rose 5.1% to $783 million.
For the first 26 weeks of fiscal 2025, sales increased 4.4% to $40.63 billionc and net earnings decreased 2.5% to $896 million, with diluted EPS of $1.82. Free cash flow was $331 million, down from $527 million, as net cash provided by operating activities fell to $498 million from $856 million, largely due to unfavorable working capital comparisons. Cash and cash equivalents were $793 million at December 28, 2024, while total debt carrying value was $12.6 billion, up from $12.0 billion at June 29, 2024, driven by new commercial paper issuances and new leases.
Current maturities of long-term debt rose to $1.22 billiond. Management stated it expects to grow both sales and net earnings in fiscal 2025, cites improving restaurant foot traffic in the second half, and intends to repurchase up to $1.25 billion of stock in fiscal 2025.
The company also disclosed the sale of its Mexico joint venture interest and the acquisition of Campbells Prime Meat, neither of which was material to results. The filing notes a pending IRS dispute over foreign tax credits, where a previously recorded $131 million benefit could be partially or fully reversed if Sysco is unsuccessful.
02—Key points
Key Highlights
- Sales rose 4.5% to $20.15 billion in the second quarter, driven mainly by U.S. Foodservice Operations volume growth and 2.7% inflation in that segment.
- Net earnings decreased 2.2% to $406 million, while adjusted net earnings increased 2.0% to $458 million excluding restructuring, transformation and acquisition-related costs.
- Diluted EPS was $0.82, unchanged year over year; adjusted diluted EPS increased 4.5% to $0.93.
- Gross margin declined 11 basis points to 18.11% in the quarter, attributed to customer mix shift, lower Sysco brand penetration and timing of sourcing benefits.
- Free cash flow was $331 million for the first 26 weeks, down from $527 million, as operating cash flow fell to $498 million from $856 million.
- Total debt carrying value rose to $12.6 billion from $12.0 billion at June 29, 2024, and current maturities of long-term debt increased to $1.22 billion.
- Management expects sales and net earnings growth in fiscal 2025 and plans up to $1.25 billion in share repurchases this fiscal year; a $131 million tax benefit remains subject to IRS litigation.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2025, Sysco kept $0.02.
- Revenue$20.15B100.0%
- Cost of revenue−$16.50B81.9%
- Gross profit$3.65B18.1%
- Operating costs−$2.94B14.6%
- Operating income$712.0M3.5%
- Interest, other & tax−$306.0M1.5%
- Net income$406.0M2.0%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2025filed January 29, 2025Financial Statements
Q2 FY2025 against Q2 FY2024
| Line item | Q2 FY2025Q2 FY2024 | Change |
|---|---|---|
| Revenue | $20.15B$19.29B | +4.5% |
| Cost of Revenue | $16.50B$15.77B | +4.6% |
| Gross Profit | $3.65B$3.51B | +3.9% |
| Operating Expenses | $2.94B$2.81B | +4.4% |
| Operating Income | $712.00M$700.00M | +1.7% |
| Net Income | $406.00M$415.00M | −2.2% |
| EPS (Basic) | $0.83$0.82 | +1.2% |
| EPS (Diluted) | $0.82$0.82 | 0.0% |
| Shares Outstanding (Basic) | 490.70M504.31M | −2.7% |
| Shares Outstanding (Diluted) | 492.80M505.93M | −2.6% |
05—Questions
Frequently Asked Questions
How did Sysco perform in the second quarter of fiscal 2025?
Sales increased 4.5% to $20.15 billion and operating income rose 1.7% to $712 million. Net earnings fell 2.2% to $406 million, mainly due to higher restructuring, transformation and acquisition-related costs, while diluted EPS was flat at $0.82. Adjusted diluted EPS, excluding Certain Items, rose 4.5% to $0.93.
What drove sales growth?
U.S. Foodservice Operations sales grew 4.1% in the quarter, with case volume up 1.4% and inflation contributing 2.7%. Management attributed volume growth primarily to national customers, while local customer case volume declined 0.9%. Edward Don, acquired in fiscal 2024, added 1.6 points to U.S. volumes.
How is Sysco's cash position and debt structure?
Cash and cash equivalents were $793 million at December 28, 2024, with about 92% held by international subsidiaries. Total debt carrying value was $12.6 billion, up from $12.0 billion at June 29, 2024, due to new commercial paper and new leases. Free cash flow for the first 26 weeks was $331 million, and the company had no borrowings outstanding under its $3.0 billion revolving credit facility.
What are the main risks or contingencies disclosed?
Sysco received an IRS Statutory Notice of Deficiency related to foreign tax credits and filed suit in U.S. Tax Court. The company previously recorded a $131 million benefit and may have to reverse all or part of it if unsuccessful. Management also cited inflation, foot traffic trends, customer mix, and cybersecurity as ongoing risk factors, and stated that legal proceedings are not expected to be material.
What capital allocation actions did Sysco take?
In the first 26 weeks of fiscal 2025, Sysco repurchased 3,949,641 shares for $300 million and paid $503 million in dividends ($1.02 per share). It intends to repurchase up to $1.25 billion in fiscal 2025 and had about $2.5 billion remaining under its $5.0 billion authorization. The quarterly dividend declared in November 2024 was $0.51 per share.
06—Continue