Analyst Note| Rebecca Scheuneman, CFA |
Sysco is using its scale advantages (the basis of its narrow moat) to solidify its competitive edge as it emerges from the pandemic. It's investing to eliminate customer pain points by removing customer minimum order sizes while maintaining delivery frequency and lengthening payment terms. While this contributed to a 220-basis-point erosion in adjusted operating margins to 2% (versus our 2.3% expectation) in the second quarter, we think these efforts are paying off, with Sysco winning more local customers in the quarter than in any other quarter over the last five years. Sysco also won an additional $200 million in national account contracts, taking total national account wins to $1.5 billion since the onset of the pandemic.