America's largest foodservice distributor, Sysco Corporation, warned in its latest quarterly report that coronavirus-related shutdowns of the restaurant industry are the worst it has ever seen:
"Over the last 50 years, Sysco has weathered its share of exogenous shocks and economic crises, and each time Sysco has remained a resolute foodservice industry leader. The extent of the COVID-19 crisis is more substantial than any other throughout the company’s history."
Earlier this week, the company reported a sales decline of 6.5% to $13.7 billion in its third quarter, which ended on March 28. This was one of the most significant quarterly reductions since 2009.
Sysco said sales were down 60% from a year earlier in late March. About two-thirds of the company's sales are to restaurants, with the remaining sales going to hospitals, nursing homes, and schools. Here is how it describes the last several weeks of the quarter that captured the start of the lockdowns:
"The exit rate of the third quarter saw a dramatic decline in volume, sales, and gross profit across all of the business segments as a result of the pandemic."
As the restaurant industry collapses, the company has prepared to slash nearly half-billion dollars in expenses, including furloughing and laying off 33% of its workforce.
"... difficult decision to reduce our staffing levels by approximately 33% through a combination of temporary workforce furloughs and permanent reductions in force."
While many restaurants are still closed, some may never reopen again, Sysco has reduced "miles driven" of its refrigerated truck fleet.
"In addition, we have substantially reduced miles driven by rerouting our transportation fleet and have implemented productivity improvements in our operating companies."
The company has had to quickly rework supply chains away from restaurants to a business model that works in a post-corona world, such as one that caters directly to consumers and grocery stores. The company has also secured a new contract under the USDA's Coronavirus Food Assistance Program.
Sysco President and CEO Kevin Hourican said the company's food supply network makes it an asset during the public health crisis, able to shift food where it is needed.
“Simply put, the food supply chain in this country does not work without Sysco,” Hourican said.
Sysco may have hit a low point in terms of sales and profits, as it appears there are some signs of life in the restaurant industry.
Driving seems to be picking up as well
The timing of the restaurant industry recovery could take some time. For more color on when a recovery could be seen, read "Global Economic Activity May Have 'Bottomed' But Don't Expect Any 'V-Shaped' Recovery; Fathom."