We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Sysco Margins Pressured by Mix: Can Strategic Shifts Rebound?
Read MoreHide Full Article
Key Takeaways
SYY's Q3 gross profit fell 0.8% as margin dipped to 18.3% due to weak volume and mix pressure.
Margin mix skewed by strong national accounts and lower Sysco-branded product penetration.
New sourcing deals and local segment focus aim to improve margins in a tough operating environment.
Sysco Corporation (SYY - Free Report) experienced margin pressure in the third quarter of fiscal 2025, with gross profit falling 0.8% and gross margin contracting 35 basis points to 18.3%. Despite improved gross profit per case, overall margin was impacted by volume softness and an unfavorable shift in mix, specifically, stronger performance from lower-margin national accounts and reduced penetration of Sysco-branded products.
The company cited macroeconomic headwinds and declining restaurant traffic as primary factors behind the volume decline. In addition, national business outpaced local performance during the quarter, further skewing the mix.
Strategic sourcing initiatives, expected to bolster gross margin, fell short of internal timelines in the quarter. Fewer deals were finalized than anticipated, due in part to the challenging operating environment. However, management stated that several sourcing agreements closed shortly after quarter-end and are expected to contribute in the near term.
Looking ahead, the company expects gross margin improvement supported by recently completed strategic sourcing agreements, which are set to take effect in the near term. These initiatives, part of a broader cost savings program, are anticipated to deliver incremental benefits. In addition, management is focused on improving mix through increased penetration of Sysco-branded products and renewed momentum in the local customer segment, both key to restoring margin quality.
The company noted that margin improvement will depend on executing planned cost-efficiency measures and gradually rebalancing its business mix. In a competitive environment with continued customer price sensitivity, aligning internal initiatives with market dynamics will be essential to supporting profitability and offsetting recent margin pressure.
Sysco’s Zacks Rank & Share Price Performance
Shares of this Zacks Rank #3 (Hold) company have risen 8.5% in the past three months, outperforming the industry and the broader Consumer Staples sector’s 3.7% and 0.3% decline, respectively. However, the stock underperformed the S&P 500 index, which advanced 16% over the same period.
SYY Stock's Past 3-Month Performance
Image Source: Zacks Investment Research
Closing the last trading session at $77.46, SYY stock is trading 5.8% below its 52-week high of $82.23 attained on Dec. 6, 2024. Technical indicators show the company’s strong performance. The stock is trading above its 50 and 200-day SMA (simple moving average) of $73.10 and $73.33, respectively, highlighting a continued uptrend. This technical strength, along with sustained momentum, indicates positive market sentiment and investors’ confidence in SYY’s financial health and growth prospects.
SYY Trades Above 50 and 200-Day SMA
Image Source: Zacks Investment Research
Is SYY a Value Play Stock?
Sysco currently trades at a forward 12-month P/E ratio of 16.44 compared with the industry average of 15.97. This valuation places the stock at a premium relative to peers, reflecting broader market expectations around its business stability and ability to navigate current cost and demand dynamics.
The Zacks Consensus Estimate for TreeHouse Foods’ current financial-year sales indicates growth of 0.4% from the year-ago numbers. THS delivered a trailing four-quarter earnings surprise of 58.8%, on average.
Post Holdings, Inc. (POST - Free Report) operates as a consumer-packaged goods holding company in the United States and internationally. It currently holds a Zacks Rank of 2 (Buy). POST delivered a trailing four-quarter earnings surprise of 22.9%, on average.
The consensus estimate for Post Holdings’ current fiscal-year earnings implies growth of 5.7% from the year-ago figures.
BRF S.A. (BRFS - Free Report) raises, produces and slaughters poultry and pork for processing, production and sale of fresh meat, processed products, pasta, margarine, pet food and other products. It currently carries a Zacks Rank of 2. BRFS delivered a trailing four-quarter earnings surprise of 5.4%, on average.
The Zacks Consensus Estimate for BRF S.A.'s current fiscal-year sales and earnings indicates growth of 11.1% and 8.33%, respectively, from the prior-year levels.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Shutterstock
Sysco Margins Pressured by Mix: Can Strategic Shifts Rebound?
Key Takeaways
Sysco Corporation (SYY - Free Report) experienced margin pressure in the third quarter of fiscal 2025, with gross profit falling 0.8% and gross margin contracting 35 basis points to 18.3%. Despite improved gross profit per case, overall margin was impacted by volume softness and an unfavorable shift in mix, specifically, stronger performance from lower-margin national accounts and reduced penetration of Sysco-branded products.
The company cited macroeconomic headwinds and declining restaurant traffic as primary factors behind the volume decline. In addition, national business outpaced local performance during the quarter, further skewing the mix.
Strategic sourcing initiatives, expected to bolster gross margin, fell short of internal timelines in the quarter. Fewer deals were finalized than anticipated, due in part to the challenging operating environment. However, management stated that several sourcing agreements closed shortly after quarter-end and are expected to contribute in the near term.
Looking ahead, the company expects gross margin improvement supported by recently completed strategic sourcing agreements, which are set to take effect in the near term. These initiatives, part of a broader cost savings program, are anticipated to deliver incremental benefits. In addition, management is focused on improving mix through increased penetration of Sysco-branded products and renewed momentum in the local customer segment, both key to restoring margin quality.
The company noted that margin improvement will depend on executing planned cost-efficiency measures and gradually rebalancing its business mix. In a competitive environment with continued customer price sensitivity, aligning internal initiatives with market dynamics will be essential to supporting profitability and offsetting recent margin pressure.
Sysco’s Zacks Rank & Share Price Performance
Shares of this Zacks Rank #3 (Hold) company have risen 8.5% in the past three months, outperforming the industry and the broader Consumer Staples sector’s 3.7% and 0.3% decline, respectively. However, the stock underperformed the S&P 500 index, which advanced 16% over the same period.
SYY Stock's Past 3-Month Performance
Image Source: Zacks Investment Research
Closing the last trading session at $77.46, SYY stock is trading 5.8% below its 52-week high of $82.23 attained on Dec. 6, 2024. Technical indicators show the company’s strong performance. The stock is trading above its 50 and 200-day SMA (simple moving average) of $73.10 and $73.33, respectively, highlighting a continued uptrend. This technical strength, along with sustained momentum, indicates positive market sentiment and investors’ confidence in SYY’s financial health and growth prospects.
SYY Trades Above 50 and 200-Day SMA
Image Source: Zacks Investment Research
Is SYY a Value Play Stock?
Sysco currently trades at a forward 12-month P/E ratio of 16.44 compared with the industry average of 15.97. This valuation places the stock at a premium relative to peers, reflecting broader market expectations around its business stability and ability to navigate current cost and demand dynamics.
SYY P/E Ratio (Forward 12 Months)
Image Source: Zacks Investment Research
Some Solid Bets
TreeHouse Foods, Inc. (THS - Free Report) manufactures and distributes private-brands snacks and beverages in the United States and internationally and presently flaunts a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for TreeHouse Foods’ current financial-year sales indicates growth of 0.4% from the year-ago numbers. THS delivered a trailing four-quarter earnings surprise of 58.8%, on average.
Post Holdings, Inc. (POST - Free Report) operates as a consumer-packaged goods holding company in the United States and internationally. It currently holds a Zacks Rank of 2 (Buy). POST delivered a trailing four-quarter earnings surprise of 22.9%, on average.
The consensus estimate for Post Holdings’ current fiscal-year earnings implies growth of 5.7% from the year-ago figures.
BRF S.A. (BRFS - Free Report) raises, produces and slaughters poultry and pork for processing, production and sale of fresh meat, processed products, pasta, margarine, pet food and other products. It currently carries a Zacks Rank of 2. BRFS delivered a trailing four-quarter earnings surprise of 5.4%, on average.
The Zacks Consensus Estimate for BRF S.A.'s current fiscal-year sales and earnings indicates growth of 11.1% and 8.33%, respectively, from the prior-year levels.