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Sysco Whisper

Research Question: Will ERP rollout delays and rising food costs hurt Sysco’s margins?

Company: Sysco Corp. (SYY)

 

Blueshift’s initial research on Sysco indicates conflicting data for the company’s margins.

 

Observations
  1. Sysco is in the process of a $1.4 billion enterprise resource planning (ERP)/business transformation that is not expected to provide a net income benefit until 2014. Sysco’s new technology platform at two pilot facilities in Oklahoma and Arkansas, implemented during the first half of 2012, indicate that the system needs additional enhancements. Despite these implementation delays, management recently stated that it remains 100% committed to the program.
  2. In the short term, Sysco could be susceptible to margin pressure due to higher food costs and volatile restaurant traffic. Chicken prices are 23% higher year to year and cattle prices have also increased since last summer, a problem for Sysco because protein (beef, poultry, dairy, seafood) comprises 44% of sales. Sysco has fixed-priced contracts with schools and hospitals, comprising nearly 15% of its revenue, where it is difficult to pass on rising costs. Additionally, 57% of Sysco’s customers are restaurants, who will fight against heavy price increases from Sysco because of the challenge in passing on cost increases to consumers.

 

To determine if Sysco’s margins are deteriorating and gain insight into the company’s business transformation, Blueshift will gather data and issue a market research report from sources in the following areas: Sysco customers (restaurants, hospitals, schools, etc), food suppliers, food industry specialists, software developers and system integrators and Software/ERP industry specialists.