Sysco slashes staff as it plans future

Food services CEO says he’s confident despite virus impact

Sysco, the nation’s largest food service distributor, said it cut more than $500 million in expenses, including furloughing and laying off about a third of its 69,000 employees in response to the novel coronavirus pandemic, which forced restaurants, schools and office cafeterias to temporarily close.

The Houston company on Tuesday reported a loss of $3.3 million during its third quarter, which ended March 28, or a 101 percent drop from the same period a year ago. The company posted revenue of $13.7 billion, a 6.5 percent decline from a year ago.

“Soon after the onset of the crisis, Sysco took swift and decisive action to adjust to the new operating environment,” Chief Executive Kevin Hourican said in a statement. “Our strong balance sheet provides the stability to navigate the current environment, and we remain confident in our ability to achieve continued success and growth over the long term.”

While the pandemic dealt a blow to Sysco’s primary customer base — restaurants — company leaders said Tuesday that they’ve adapted their business model to accommodate recent changes in the ways people buy food.

Sysco’s model expanded to include sales to more retailers, helping to alleviate a surge in demand for groceries, Hourican said in an earnings call with shareholders. The company also shifted to sell food directly to consumers, he said, pointing to new initiatives that deliver restaurant-grade steaks to people at home.

Hourican said Sysco bid May 1 on a new contract under the U.S. Department of Agriculture’s Coronavirus Food Assistance Program, a $19 billion relief program announced last month. He said Sysco’s network and agility make it an asset during this crisis, even as food needs shift temporarily away from “food away from

home.”

“Simply put, the food supply chain in this country does not work without Sysco,” Hourican said.

Sysco leaders described the end of March as “the low point” for sales and profits. Since then, April offered “sequential weekly improvements.”

Meantime, the company has donated 21 million in meals to communities since the outbreak began in mid-March, said Shannon Mutschler, the company’s senior director for external communications.

Some 1.5 million meals went to communities in Texas, she said.

Mutschler would not say how many of the company’s employment cuts were local.

All told, Sysco is using the COVID-19 crisis to transform itself, Hourican said, citing the refrain, “Don’t let a good crisis go to waste.”

“We have taken those words to heart at Sysco,” he said. “The crisis has galvanized our team to focus on a narrow set of strategic initiatives, and we are working in an agile and collaborative manner.”

Sysco shares closed down $3.29, 3.3 percent, to end Tuesday trading at $50.54.