Sysco(SYY) - 2026 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Sysco reported sales growth of 3.2% on a reported basis and 3.8% excluding the divestiture of Mexico, with gross profit growing by 3.9% and adjusted EPS increasing by 5.5% [5][18][19] - The company achieved gross margin expansion of 13 basis points year over year, reflecting structural improvements and effective management of product cost inflation [19][26] Business Line Data and Key Metrics Changes - The U.S. Broadline local business showed a positive inflection with volume growth of 0.4%, significantly outpacing the overall industry traffic improvement [6][22] - International segments delivered sales growth of 4.5% on a reported basis and 7.9% excluding the divestiture of Mexico, with local case volume growth of approximately 5% [8][21] Market Data and Key Metrics Changes - Restaurant traffic in Q1 improved by 60 basis points, with Sysco's local volume improvement being more than two times the overall industry rate [7][18] - The company anticipates an additional 100 basis points improvement in total U.S. local volume in Q2 compared to Q1, continuing the positive momentum [6][31] Company Strategy and Development Direction - Sysco aims to deliver profitable growth across its U.S. Food Service, international, and Sigma segments, focusing on local business momentum and strategic sourcing [4][19] - The company is leveraging technology initiatives like AI 360 and customer loyalty programs such as Perks 2.0 to enhance sales productivity and customer retention [12][15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in delivering full-year financial guidance despite a challenging macro backdrop, citing strong operational execution and momentum in local business [4][18] - The company expects to continue improving its local business performance, driven by stabilized sales force retention and effective growth initiatives [20][36] Other Important Information - Sysco's adjusted operating income grew to $898 million for the quarter, reflecting strong growth in international and Sigma segments [27] - The company generated approximately $86 million in operating cash flow, up 62% year-over-year, indicating effective working capital optimization [28] Q&A Session Summary Question: Local Salesforce productivity and metrics - Management highlighted a positive inflection in local volume growth, with retention of sales colleagues exceeding targets, contributing to improved productivity [40][41] Question: Guidance on earnings and confidence - Management expressed strong confidence in guidance, citing momentum in local case growth and successful initiatives within their control [46][47] Question: Total case volumes and customer type performance - Management noted that while local volumes improved significantly, total case volumes showed more modest growth, with national accounts expected to pick up due to strong retention and new customer onboarding [51][56] Question: Food cost and inflation trends - Management clarified that while inflation in Q1 was higher than the targeted 2%, it is expected to normalize, with some categories experiencing deflation [70][74] Question: Broader restaurant industry trends - Management observed that independents are performing better than larger national chains, indicating a shift in market dynamics [79]