Sector News

US Foods to cut jobs amid corporate restructuring

October 24, 2016
Food & Drink

Food distributor US Foods Holding Corp. plans to eliminate hundreds of jobs as part of a restructuring of its corporate headquarters near Chicago, according to people familiar with the company’s plans.

The nation’s second largest provider of food and other supplies to restaurants and cafeterias has been looking for ways to reduce costs after its plan to merge with rival Sysco Corp. was foiled by antitrust regulators last year.

US Foods, which logs about $23 billion in annual sales and employs nearly 25,000 people nationally, had expected to reap the benefits of greater scale and efficiency by combining with Sysco. Instead, it launched an initial public offering in May, which earned $1 billion, helping it pay off debt and fund small acquisitions.

US Foods told employees on Thursday that it plans to cut jobs in corporate roles like accounting, IT services and human relations over the next 12 to 18 months.

“This is a continuation of work we did before our IPO…and something we believe will further support our long-term growth,” a US Foods spokeswoman said.

Over the past year, US Foods has been working to consolidate back-office jobs that support its 62 distribution centers.

US Foods also this year hired a “vice president of continuing improvement” whose mandate is to make its distribution facilities leaner and more efficient.

Sysco, US Foods’ larger competitor, announced 1,200 job cuts at the beginning of the year.

Profit margins in the industry are historically thin, and aside from Sysco and US Foods, there are hundreds of regional distributors and specialty, high-end suppliers vying for the business of independent restaurants.

For the first half of the year, US Foods had an operating profit margin of 4%, when adjusted to exclude interest, taxes and other one-time expenses.

Meanwhile, falling food costs are taking a toll on sales at US Foods and its peers by reducing the value of their inventory, especially for beef and dairy products.

By Annie Gasparro

Source: Wall Street Journal

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