(By Balaseshan) Food product supplier Sysco Corp. (NYSE: SYY) reported a 11.5% decline in quarterly earnings due to an increase in operating expenses. Despite revenue beating consensus, adjusted earnings missed Street's expectations.
Profit for the second quarter declined 11.5% to $221 million, while earnings per share (EPS) decreased 11.6% to $0.38. Adjusted EPS for special items fell 7% to $0.40, while adjusted EPS for underlying business rose 4.3% to $0.49.
Sales increased 5.4% to $10.8 billion. Food cost inflation, as measured by the estimated change in Sysco's product costs, was 2.5%. Inflation in the first quarter was mainly driven by rises in the meat and poultry categories.
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Analysts, on average, polled by Thomson Reuters had expected a profit of $0.41 per share on revenue of $10.70 billion for the second quarter.
Sales from acquisitions (within the last 12 months) increased sales by 1.1%, and the impact of changes in foreign exchange rates for the second quarter lifted sales by 0.3%. Case volume for the company's Broadline and SYGMA operations combined grew 2.8% during the quarter including acquisitions, and about 1.8% excluding acquisitions.
Operating expenses increased $116 million or 8.2%, due in part to a $45 million increase in gross business transformation expenses, and a $17 million increase in payroll expense. Excluding certain items and business transformation expenses, adjusted operating expenses increased 3.7%.
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Cash flow from operations was $387 billion for the first half of fiscal 2013, a 28% drop from the prior year period. Free cash flow in the first half increased 19.6% to $125 million.
SYY closed Friday's regular session up 1.01% at $32.09. The stock has been trading between $27.05 and $32.40 for the past 52 weeks.