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Sysco Corp SYY

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Morningstar’s Analysis

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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

Narrow-Moat Sysco Leverages Its Cost Edge to Gain Market Share, but Shares Appear Fully Valued

Analyst Note

| Rebecca Scheuneman, CFA |

In its fiscal fourth quarter, Sysco reported sales of $16.1 billion, a 4% increase over the same period in 2019, besting our expectations of a 16% drop. Sysco continues to gain share, having reported an additional $200 million in net new national account business, taking the total to $2 billion since the onset of the pandemic, in addition to previously disclosed share gains with independent restaurants. We think Sysco is leveraging its scale-based cost advantage, which underpins its narrow moat rating, to secure product and labor, which is short across the industry, helping it to win new business. This momentum seems to have carried into the current quarter, as Sysco said trends accelerated in July, in contrast to US Foods’ comments that it experienced a 100-basis-point deceleration in sales the last two weeks of July, likely due to the Delta variant.

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Company Profile

Business Description

Sysco is the largest U.S. food-service distributor, boasting 16% market share of the highly fragmented food-service distribution industry. Sysco distributes over 400,000 food and nonfood products to restaurants (62% of revenue), healthcare facilities (9%), travel and leisure (7%), retail (5%), education and government buildings (8%), and other locations (9%) where individuals consume away-from-home meals. In fiscal 2020, 81% of the firm’s revenue was U.S.-based, with 8% from Canada, 5% from the U.K., 2% from France, and 4% other.

Contact
1390 Enclave Parkway
Houston, TX, 77077-2099
T +1 281 584-1390
Sector Consumer Defensive
Industry Food Distribution
Most Recent Earnings Jun 30, 2021
Fiscal Year End Jul 3, 2022
Stock Type Slow Growth
Employees 58,000

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