Good morning. Sysco Corporation, the multinational food distribution giant, is weighing in on how consumers will continue to feel the effects of inflation at their breakfast and dinner tables.
During Sysco’s Q2 2025 earnings call on Tuesday, CEO Kevin Hourican said the company is seeing inflation mostly in the dairy and protein categories. And the Avian Bird flu is having a negative impact on supply, which is increasing costs, specifically eggs, Hourican said.
“We don’t anticipate that pressure easing in the near term,” he said. “We expect for that to continue.”
Egg prices increased 8.4% from November to December, according to the U.S. Bureau of Labor Statistics.
Hourican also weighed in on the price of proteins like beef and chicken more broadly, saying it’s about a shortfall of product availability versus true demand, which tends to drive up prices. “We would anticipate center plate inflation to be higher than normal over the next 90 days to six months,” he said.
It’s not all bad news on the price front, however, as Sysco is seeing areas of deflation when it comes to commodities on a year-over-year basis. The company has some influence in that area by lowering prices through competitive sourcing, he said.
“We are offering a normalized inflation environment, which bodes well for the industry,” Sysco CFO Kenny Cheung said on the call.
Product cost inflation for the quarter was 2.1% at the total enterprise level, Cheung said, citing a measure determined by the estimated change in Sysco’s product costs, primarily in the dairy and poultry categories. Sysco’s U.S. business product cost inflation was around 2.7% and the European business about 2.9%, he said. In the U.S., the current annual inflation rate is about 2.9%, still above the Fed’s 2% target.
However, Hourican brought up concerns about impending tariffs.
“Everything we’re talking about is excluding the potential impact of tariffs,” he said. “We can’t anticipate exactly what will occur. Nobody knows exactly what will occur. That quote that we put out for the 2% excludes any impact of tariffs.”
Sysco, No. 54 in the Fortune 500, serves restaurants, hospitals and nursing facilities, schools and colleges, hotels and motels, and other food service venues globally. The company’s sales jumped 4.5% year over year to $20.2 billion for its fiscal second quarter which ended on Dec. 28, beating estimates. Gross profit increased 3.9% to $3.7 billion, and gross margin decreased 11 basis points to 18.1%.
Sysco also announced that it’s increasing cash return to shareholders to approximately $2.25 billion in fiscal year 2025, with share repurchase now expected at $1.25 billion, along with dividends at $1 billion.
As Sysco and other global companies await a decision from the White House regarding possible tariffs on countries such as Canada, Mexico, and China, inflation rates are still an area of concern. The U.S. Federal Reserve will announce today whether it will leave interest rates where they are, or institute the first rate cut of 2025.
Sheryl Estrada
sheryl.estrada@fortune.com
Leaderboard
Kevin Jacobsen, CFO of The Clorox Company (NYSE: CLX) has decided to retire, effective April 1. Jacobsen joined Clorox in 1995 and has served as CFO since 2018. Luc Bellet, an 18-year Clorox veteran, will succeed Jacobsen. Bellet is currently Clorox’s treasurer and has worked in leadership roles in the financial organization, including financial planning and analysis, internal audit, and business development. After April 1, Jacobsen will serve in an advisory capacity until his retirement in June.
Taoufiq Boussaid was promoted to CFO of Lucid Group, Inc. (Nasdaq: LCID), a maker of electric vehicles, effective Feb. 25. Boussaid previously served as group CFO of N.V. Bekaert S.A., a Belgium-listed industrial steel and coatings technology company. Before that, he served as VP of finance for EMEA and Asia Pacific at Bombardier Transportation. Earlier in his career, Boussaid served in finance positions at United Technologies Corporation, including as CFO for their Carrier Heating Systems business in Europe. Lucid’s interim CFO Gagan Dhingra will be promoted to SVP of finance and accounting and also continue as chief accounting officer.
Big Deal
A new analysis by S&P Global Market Intelligence finds global fourth-quarter initial public offerings reached the highest level in more than a year.
In Q4, 382 IPOs were launched worldwide with an aggregate offering amount of $47.66 billion, up about 15% in volume and 97% in value on the quarter, according to the report. This was the highest number of transactions since Q3 2023 and the largest aggregate amount offered since Q1 2022, the research found.
Taking a look at the U.S., StandardAero Inc. held the largest U.S. IPO in the fourth quarter with a $1.66 billion offering.
Going deeper
“Wall Street defiant after brutal tech selloff. ‘Market reaction is overdone’” is a Fortune article by Paolo Confino. The release of the Chinese AI model DeepSeek led to a stock market rout for U.S. tech firms on Monday. However, some Wall Street analysts believe the industry will bounce back. “We view DeepSeek’s release as part of an ongoing evolution, not revolution, and think that this market reaction is largely overdone,” Jefferies wrote in a note to investors on Monday.
Overheard
“Here’s the thing no one talks about: Super Bowl ads create a moment, but that moment lasts about as long as it takes someone to refill the nachos bowl. In reality, during ads, half the viewers are in the kitchen, scrolling Instagram…or locked in a heated debate over the quarterback’s last call."
—Richard Torrenzano, chief executive of The Torrenzano Group, writes in a Fortune opinion piece titled, “Spending $10 million on a Super Bowl ad…is like buying a giant billboard that faces the wrong way.”