You were right. SYY has consistently made difficult decisions to shore-up profit. This is not the first time fuel costs have been an issue. While food inflation is an on-going concern, the cost of transportation (both to and from OPCO's) causes the biggest increases, however, once these costs are negated or softened by efficiencies, SYY will be a much better i.e. more profitable company in the future. $36/share within 3 months - Q4 is the busiest Q in their fiscal year.
Yes the can pass on their costs but these same costs are hitting the diners (former?)of Sysco's customers and they are ordering less so SSY may be able to keep its margins but not its gross sales volume. I think, however, that it is a good investment for the future (1-2 years out) so I have purchased some in-the-money call options for 2009. I got them today. Buy low sell high???
True, but eating out in a restaurant is not a necessity. SYY services the food away from home segment. Short-term rising fuel costs and credit concerns isn't a good investment stategy for this type of company.
You want to be cautious with the food companies that cannot pass on cost increases and are seeing their margins squeezed,'' said Hudson. ``There is great political pressure not to pass on cost increases.''
For All Its Grain, ADM Shares Fail to Benefit From Food Frenzy
If the guy that posted is a "moron" as you say, you must be a total idiot.
Regardless of the cost of fuel, Sysco can keep the same % mark up and just pass on this cost to its customers. Mickey Mouse Example: If the cost of the food, fuel etc for Sysco was $50 for a 10% profit they would charge $55. If their costs rise to $100 they would keep their 10% mark up and charge $110 dollars. In other words, the rise in fuel prices are used to increase sales for a company like Sysco and profits can be kept the same as they can easily pass on costs to their customers.