Analyst Note
| Rebecca Scheuneman, CFA |The new strategy Sysco is pursuing under the leadership of CEO Kevin Hourican (in place since February 2020) is bearing fruit, with the firm growing fiscal first-quarter sales at 1.2 times the pace of the industry, reaching this goal three quarters ahead of schedule. Share gains were led by new account wins, enabled by an expanded sales force, realigned incentives, and service levels that are superior to industry averages, per Sysco. Further, the firm is developing pricing and marketing tools that should help it increase its share of wallet over time, providing another driver of long-term growth. We also think Sysco’s cost advantage (which underpins its narrow moat) is enabling share gains. First quarter sales grew 40% on an easy comparison (topping our 30% mark), which was 8% higher than the same period two years ago. Sales were aided by 13% food inflation, as U.S. case volumes remained 5% below prepandemic levels, although this should be fully restored by the third quarter. Encouragingly, the delta variant does not seem to be hindering demand, which accelerated every month through the quarter and into October.