Although Sysco’s Market Share Gains Are Admirable, the Macro Environment Poses Risks

Sysco’s fiscal first-quarter results reinforce our view that the company is effectively managing the variables under its control. Given the success of its Recipe for Growth strategy, Sysco’s U.S. segment (71% of sales) grew 1.4 times the pace of the industry per Technomic, topping our 1.35 times full-year estimate. Sysco gained share with local restaurants and national accounts alike, closing multiyear contracts in the education, healthcare, and restaurant sectors, with profitability above historical norms. While servicing national accounts is a low-margin business, it plays an important role in helping Sysco achieve the scale that underpins its cost advantage, the foundation of its narrow moat.