Sysco’s Stock Has Soared Amid Seafood Import Tax

While consumers appear to be spending less on seafood amid the U.S.-imposed tariffs on imported Chinese fish products, certain domestic food distributors have been seeing benefits.

Among other actions, the Office of the U.S. Trade Representative (USTR) had slapped levies on US$200bn worth of imports from China (‘List 3’), much of which was comprised of various seafood items.

The USTR said in May 2019 that in light of the “lack of progress in discussions with China,” centering on its ongoing Section 301 investigation, U.S. President Donald Trump had instructed that the duty on the items in List 3 be increased to 25% from 10% previously.

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The grocery list includes several different varieties and forms of tilapia, seabass, catfish, swordfish, mackerel, sardines, anchovies, salmon and trout, among several others.

According to NOAA Fisheries, the U.S. imports more than 80% of its seafood products mainly from China, Thailand, Canada, Indonesia, Vietnam, and Ecuador. They note that a “significant portion” of imported seafood is caught by American fishermen, exported overseas for processing, and then reimported to the U.S.

Against this backdrop, domestic food distributor Sysco Corp (NYSE: SYY), which carries Portico Seafood among its brands, has seen a recent lift in its stock, amid a drop in the amount of fish being shipped to the U.S. from China.

The National Marine Fisheries Service’s Fisheries Statistics and Economics Division, for example, observed that fewer kilos in July 2019 were imported into the U.S. from China compared to the prior year.

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Shares of Sysco have soared nearly 32.5% from its latest 52-week low set in late December 2018, according to the IBKR Trader Workstation. The stock was last down over 1% to US$78.53, with the broader S&P 500 lower by more than 2.1% to 2877.75.

Included in its fiscal fourth quarter of 2019 results, Sysco posted a 2.8% year-on-year rise in sales in its U.S. foodservice operations to US$10.7bn, with gross profit up 2.9% to US$2.1bn. The company also increased its gross margin by 3 basis points to 20.1 over the same period.

Sysco added that food cost inflation was 2.5% in U.S. Broadline, as measured by the estimated change in Sysco’s product costs, primarily in the poultry, meat, and produce categories.

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Overall, the nation’s cost of seafood seems to have fallen recently.

The Bureau of Labor Statistics noted that the index for food at home declined for the third month in a row in August, falling 0.2%, with the index for meats, poultry, fish, and eggs down 0.7%.

Investors will likely be watching for the BLS’s release of the Consumer Price Index (CPI) for September on Thursday, October 10.

In the meantime, select the Event Calendar option in the IBKR Trader Workstation for a full list of the U.S. and global corporate events and earnings, dividend schedules, economic data, IPOs and more.