Sysco Q1 Net Jumps 18% on Gains; Sales Fall 8.1%

(Update adds analyst comment.)

NEW YORK -(Dow Jones)- Sysco Corp.'s (SYY) fiscal first-quarter profit rose 18% on tax related and other gains, with sales falling 8.1% amid continuing declines in restaurant sales and food deflation.

Sysco is heavily exposed to the slump in eating out, as it provides food and other items to thousands of restaurants. But Chief Executive Bill DeLaney said the company is "encouraged by the stabilization of our volume trends in recent weeks."

Sysco, North America's largest food-service distributor, continued to cut costs by eliminating jobs and trimming other payroll expenses to keep up with the sales decline, helping to turn in results generally in line with expectations.

"The end market's not doing great, but the company's finding opportunities to cut costs," said Pali Capital analyst Robert Summers, who rates the stock buy.

For the quarter ended Sept. 26, Sysco reported earnings of $326 million, or 55 cents a share, up from $276.8 million, or 46 cents, a year earlier. The latest results included gains of 11 cents related to items such as the company's IRS settlement and impact from the change in the value of corporate-owned life insurance.

Revenue fell to $9.1 billion.

Analysts polled by Thomson Reuters had most recently forecast earnings of 45 cents on $9.16 billion in sales.

Gross margin rose to 19.2% from 19.1%.

In August, Sysco reached a $952 million settlement with the Internal Revenue Service, clearing up a large tax overhang and giving the company the flexibility to pursue acquisitions.

Shares closed at $26.45 Friday and were inactive premarket Monday.

-By Paul Ziobro, Dow Jones Newswires; 212-416-2194; paul.ziobro@dowjones.com

(Nathan Becker contributed to this article.)

(END) Dow Jones Newswires

11-02-09 0912ET