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Sysco Stock Falls on Soft Sales, Earnings

Food distributor Sysco said quarterly profit rose, helped by tighter cost controls, but trailed analysts' estimates, and its stock fell nearly 5% .

The company, which supplies food and other products to restaurants, cafeterias and other food sellers, reported net income increased to $217.2 million, or 35 cents a share, for the third quarter ended March 31, from $188.5 million, or 30 cents a share, a year earlier.

Analysts were expecting the company to earn 36 cents a share, excluding items, according Thomson Financial.

"Sysco's third-quarter operating results were soft, both at the top and bottom lines," wrote Goldman Sachs analyst John Heinbockel in a research note.

He expected the stock price to trade down given a sales slowdown and ongoing softness in the casual dining area.

Net Sales

Net sales for the quarter were up 5.3% at $8.6 billion, below analysts' estimate of $8.73 billion.

An accounting change reduced quarterly sales by 0.9%, or $76.7 million. Adverse weather also affected sales, company executives said in a conference call.

Food cost inflation, measured by the change in Sysco's cost of goods, was 2.9%.

During the quarter, Sysco continued to conduct business reviews of its food distribution contracts to find ways to increase sales; about 12,000 were performed during the third quarter.

These reviews are designed to improve customer service through loyalty programs, tailor-made menus for restaurants and other initiatives.

Sales to the customers who participated in the review grew in the mid-teens on a percentage basis, executives said during the call.