Sysco Stock Falls After Report Of Temporary Halt In Fresh Food Sales

Shares of Sysco Corporation (NYSE: SYY) were lower by around 13% Wednesday afternoon following a Tuesday New York Post report which suggested the food distributor giant temporarily stopped selling fresh meat and produce.

Sysco's Memo To Customers 

Food wholesalers and distributors are scrambling to alter their business model to account for major losses at restaurants, hotels, schools and other large institutions, according to the Post.

Sysco, the country's largest food distributor, told its non-supermarket customers in a memo that it will focus on frozen chicken, beef, seafood and vegetables "for the interim period."

Sysco also said in its memo that it will no longer deliver products on Saturdays and no longer accept returns, the Post said.

The company can no longer guarantee shipping dates, as it is looking to save on transportation costs by consolidating shipping routes, the report said. 

In addition, a company filing confirmed it fired and furloughed workers across sales, warehouse, transportation and functional support teams.

'Less Pressure To Sell It Quickly'

A Sysco customer told the Post it believes the food distributor is "afraid to bring in too much fresh food, because they don't know what the need will be."

On the other hand, distributing frozen meats has its advantages, including cheaper costs compared to fresh, David Bishop, a partner at supermarket consultant Brick Meets Click, told the Post.

"There is also less pressure to sell it quickly and it protects Sysco and the customer from the product going bad." 

What's Next For Sysco 

Sysco could also be looking to take market share from much smaller wholesale suppliers, especially those with high-end beef.

Master Purveyors, a Bronx-based meat wholesaler with a client list including Peter Luger, told the Post that Sysco could "undercut me and others on price," especially if Sysco is "trying to get rid of prime meats and they have those meats in the freezer."

The stock was down 10.73% at $40.74 at the time of publication. 

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