SYY - Earnings call 2 2024 | Sysco Corporation

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Operator

[Operator Instructions] Welcome to Sysco's Second Quarter Fiscal Year 2024 Conference Call.

As a reminder, today's call is being recorded.

We will begin with opening remarks and introductions. I would now like to turn the call over to Kevin Kim, Vice President of Investor Relations. Please go ahead.

Kevin Kim

Kevin Chung, President our have Officer; Chief we Kenny and Chief Gap], Hercon, and our Executive [Audio Financial Officer.

please the results in intentions, the Private begin, presentation could forward-looking statements of differ we note Litigation meaning made are statements Before of the during the that future state manner. expectations refer, company's a beliefs, management's Securities material within or or predictions that this and actual

can is those factors at reconciliation not in is about results copy could in release in included the and presentation the of in filings. GAAP non-GAAP the SEC that found comments the can found XXXX, section earlier statements factors limited our be presentation contained financial slides is corresponding Non-GAAP website. from morning. A of measures slides. information Additional in report to This in these these forward-looking our news of the sysco.com. end for in issued this subsequent are at the Investors our July cause XX-K year the materials contained risk to but X, be The company's filings today the SEC and our measures annual the Investors differ includes, Form of included ended section on to, and measures

like follow-up. prior we'd the question and ensure questions, we one stated, unless to time their ask all the answer time otherwise quarter to discussion limit all in year. To to today, the have During results each one are same today compared to participant sufficient to

to Conference person hope participation the New on call May to Sysco's Hourican. you aware Investor XX We like join Investor in in over turn time, or to February CAGNY these can Day we make our want this I'd Additionally, audience the on of Kevin virtually. At the XX York. events and at

Kevin Hourican

for for Thank good quarter. and Kevin, everyone. Sysco's performance today. morning, the pleased very call with joining you our Thanks, I'm

by growing a a earnings scale share volume market quarter, growth, of of expense leader margin and that This is past demonstrated company industry another through in we growth. Sysco line matter. strength and double-digit or Our control. management growth combination the delivering of quarter size bottom position delivered disciplined per important

from into the how well expected industry-leading and XXXX for EPS. second we fiscal remain balance half, Our and X% the our sales in includes of year the year guidance for as we positive as is midpoint half EPS through strategy, to first at growth of range. Sysco improved profitability our adjusted the our metrics Growth momentum industry-leading leverage confident growth our full of continue expectations This deliver to continue Recipe scale our strong has leverage we sheet. and

our the in has us allocation to shareholders year. to capital the year for confidence enabled Our increase

fiscal back announcing buyback from previously now buy year to $X.XX for are increase stock expect communicated stock billion our target approximately million. today of year of up our $XXX our We an XXXX. We this

make our these sheet to ample increased the shareholder-friendly to our With of contribute balance cash and will providing types than industry-leading we while growth yield, of Sysco's $X.XX dividend the buyback liquidity strong enable flow free billion to directly and our stock long-term business. shareholders. more decisions us fund

a of strength. as from position say, We we are, play

Slide QX, and growth of X.X%, #X. brief driven growth sequential started sales positive quarter line, volume So case let's positive get the inflation. product cost from of of highlight combination with by the top delivered a a on with we a Beginning improvement

improvement local Importantly, volume and this case quarter-over-quarter included year-over-year. a sequential in growth

that on more We later. will share

quarter and of adjusted XXth positive line, operating the in bottom Turning XX% QX topics consecutive I consecutive posted earnings his to of call: chain update strong on growth. generating EPS, case over our to and is you adjusted the Local in would fifth I as the section. Today, Kenny we details operating two financial volume EPS will provide on productivity. This leverage double-digit like priorities supply more growth leverage. quarter highlighted

late our the through grew local market margin increased from solidly of can ambition growth we this the of Edward expect you market the we During rate volume which quarter, our growth foodservice X.X%. Cisco. does segment performance, and closed case remain include of deliver profitably Don, to X.X% our our industry-leading the case track sequentially this growth improvement on share comes year. volume rates growing We U.S. efforts. Notably, The profit growth not volume benefit and versus and in November, with delivering our

to local began bear the this performance fruit case drive quarter. earlier we Importantly, past outlined this year initiatives to

We sales are improving focused execution. on

local centered are of sales efforts areas growth. our Our local local 'XX. fiscal our focus customers around sales reminder our improving properly for in serving A

started focused demonstrating settle in their to salesforce returns. The second sales higher 'XX benefits we incremental as local coming expect the second fiscal adding incremental territory quarter and move to from years. First, accrue in into time hiring the targeted actions our sizes increasing and their to over colleagues half new headcount complete the and will optimize enhanced consultant is curve the productivity deliver The continue effectiveness, and year in territories. headcount training, sales of up

As previously fiscal majority expect hires fiscal performance. 'XX to year indeed, the we of our positive see year the impact 'XX to continue vast impact from

behaviors grow motivate win, salesforce. expect we our of We impact recent recently win impact the these and sales we to changes for change, compensation our time. see model consultants our customers further and to already our of on Sysco, the can over refined the compensation win, Second,

We compensation our to our we continue optimize over and motivating team. time program rewarding to ensure will are sales properly

am tool. in Leveraging the of a our tracked quarter. efforts frequency with outcomes consultant visit of on visits with focus visit customer closely These customer continues hyper sales are a past leadership each our the our effectiveness and can of our team be top CRM quality. maximize pleased to sales technology sales improving and I performance remains on focus Third, the priority and visit impact management in

gain team selling continues total Lastly, traction. to

told, we to maximize our Italian. data are from our collaboratively allocation these and cuisine the XXX to actions Our increased All case across Specialty of ethnic sales working produce, interconnected protein QX points. time in selling Broadline specialists basis QX teams performance segments leveraging our by are more and local like and

velocity quarter the exit of the as quarter. was month performance of stronger each even the our improved Importantly,

to in displayed continue grow confident positive sales. our while are have We sales national local ability in we to maintaining the momentum

I provide Next, on update progress been the chain. would within our like to supply an making we've

operational performance improve a operating than growing excellence. by faster to of chain positive focusing at year-over-year We X gross operating continue profit Chart by improvement, profits on operating with rate supply our displays leverage, our the expenses. driven

chain, training colleague improvement productivity of levels to the across retention to significantly improved our elements with expenses, move especially improved curve of lowering to lower bottom P&L improved lower expenses, due comes metrics training the the positively levels and Our supply improved chain the product the employees levels continue retention, improved of and safety within these outputs shrink, position and improved up impact improved hiring supply drops productivity, our customers. Each to line. service straight driver

We supply improve and colleague are continuing to on our focused extremely retention chain. productivity within

colleague to flexing periods. includes our volume shipped work lower efforts. the the Lastly, cases This volume down rigor we worked of the continue to and discipline difficult and staffing of hours better staffing matching in our improve during our

our engineered to staffing volume. which with We standards we refine agility to our our drive will the and models, match staffing that we our increase labor continue will

QX in on and gains, disciplined These of XXXX benefit and we carry results 'XX continuing display into in fiscal rate the quarter-over-quarter Our productivity efforts progress beyond. that of and improvement. continuation will remain a will P&L focused and

continue to lower improving our ability to serve on We are bullish simultaneously while cost levels. to service our customer

topics, these business productivity, that transformation. for effectiveness improving communicate with from I also As supply our two our I we and improving like Growth up lift track sales on would to Recipe remain chain

efforts advance. digital to Our continue

our merchant especially improve teams Sysco in product Our brand. continue to assortment,

storage global scale pleased leverage with in sales the for excited dive warehousing supplies proud no force share both and very transportation, order distribution are start, Recipe Investor in line segment. that the growing and Sysco growth. and scale pillars. Foodservice and Don in grow about We scale a for of than that scale business. remain profitably profitably platform, grow fiscal and scale. technology a better top our are continuing business. scale, our and year-to-date track bottom to a produced We profitably At believe performance our pleased into positioned advantages we matters, each can expertise and and serve cold our one compelling 'XX the logistics to International our size is I better and the performance international our We is delivering record I compelling to am market as off very is and we business of for customers Italian will Growth strong deeper from integration how we our of am space Edward Day with of May, leaders Greco equipment

elements the as 'XX, For of remainder the execution strategy. our advancing I on we highlighted hyper fiscal today well for remain Growth Recipe as focused

We financial will our who you. Kenny, to performance. provide will a to of turn that I'll our are deliver detailed these over enable more Kenny, plan. efforts financial Sysco confident it over now to review

Kenny Cheung

of and Thank good build to upon Kevin's you, with a commentary Kevin, everyone. points. couple morning, I'm going

another cost positive faster QX gross also rate driven operating performance, by of and in Future volume adjusted performance. profit operating XX%. expenses, have of than as disciplined line along dollar sold top management, demonstrating with growth a gross with included and marked goods we and profit results over margin adjusted strong milestone Positive which bottom momentum margin at was our growing EPS growth, record sales First, growth resulting expansion. rendered leverage line

the Capital and Second, the share addition for remainder into reward share and we our million expected flow including the half M&A, shareholder and we earlier versus to as year. positive allocation returns, total performance guidance. billion momentum of year. including Don free for FY'XX $X.XX and to Therefore, prior dividends time. Cisco our about This expectations and cash addition billion our the repurchases sheet approximately our for $X.XX of growth generation in BIX FY'XX. This advantage our same the increasing is are shareholders Edward such from to a at our $XXX this continued to invest as balance for the the competitive are increase confidence reinvestment in us repurchases strength is excited first will for allows business, of

the XX. a Slide to summary reported quarter, on for turning of starting results Now our

grew our not sales productivity This our growing enterprise focus along quarter, For growing exit chain meet with of was supply helped thresholds. exit of with our SYGMA International double than planned this example customers quarter, more in that X.X%, ROIC X.X%. our driven X% by the decreasing profit planned U.S. and profits strong prime another X.X%, improvement, X.X% inflation second action. Enterprise SYGMA disciplined foodservice did

and X.X% slightly inflation all Broadline volume sequential X.X%, our foodservice acquisition increased of International from bps was and from segment was with U.S. up U.S. our slight Please positive XXX benefits X.X%, Total aligned Produce. includes reporting BIX improvement note, was local a Additionally, expectations. QX. volume the up volume

business improved not on Edward of increase product $X.X gross gross does to or XX reporting billion based Don include volume Our specialty an attributes. We profit, our their produced bps. up Adjusted X.X%. meats in XX.X%, unique margin

the Our U.S. Penetration was rates products of ability at Broadline. Overall, the $X.X gross quarter improvement from essentially driven million variable strategic of to profit The dollar as operating to Kevin announced we of of billion product and local cost planning and XX.X% margin efficiencies bps leverage. and manage previously for were positive our commitments. achieved strong to expense $XXX during operating the Sysco effectively that and incremental brand progress U.S. of and XX our benefits pricing. sourcing chain another sales fluctuations efforts in the increased labor in percentage XX.X% XX.X% adjusted by cost-out flat reflected disciplined our tool quarter supply impact of management mentioned, was positive due quarter expenses from or

costs commitment has the periods track We planning begun. already are incremental for for delivering achieve on FY'XX to for this process future and

operating of Additionally, and successful Edward in BIX quarter. our International operating contributions to to the our realize line our we pace Positive of income on from with momentum SYGMA and both growing adjusted continued closure outsized with acquisition, during XX.X% income USFS, bottom segment X.X% the profit in performance. contributed segments, line growth with international Don and Adjusted coupled top are synergies. bottom

momentum adjusted is was dividends the positive years. results was $XXX international over and up the QX past and playbook Recipe up this X and are EBITDA of growth Growth U.S. segment internationally. income Our million, adjusted a continuation in robust In total, X.X% yielding million, operating the The for $XXX in XX.X%.

X.XXx which X.X balance the ratio. to at to with sheet, strong. leverage net ended is debt range of We remains in This the our X.XXx target Turning leverage quarter debt net line ratio.

repurchase share We laddered with XX% program early that fixed debt reserves. repurchase January. the billion of an component the executed net ended the and billion by $XX.X is debt is Our offset was our in share planned increase program floating $X.X cash to in quarter accelerated already in liquidity. Approximately action in with our over that with is total well

Our competitive $X approximately strong evidenced by advantage November. investment-grade debt of in billion as credit new our is successfully a issuing rating team

allocation Slide to which elements: approach in shareholders, for are committed third, XX, capital and X includes as credit We business our with repurchases. to seen our and share First, second, maintaining growth; dividends investment-grade cash returning a consistent balanced the and profitable on strategy investing rating;

and conversion flow, flow for cash XX% grow from in on track our growing $XXX and year cash to FY'XX. generated half first and growth flow continued remain to free This strong cash EBITDA cash $XXX operating cash million free operating respectively. full we Turning in flow. XXX%, cash to flow, free We rates and million includes

Our strong dividends shareholders to $XXX financial share return repurchases enabled via quarter. this position us to million and

$X.XX Looking $X.XX. we $XX X% at guidance, EPS grow expected billion. year fiscal sales Adjusted midpoint. to to This to to is forward digits a are represents of to growth the approximately mid-single growth XXXX net reiterating

leverage operating for a gross positive growing at expect year. OpEx faster than we profit with Additionally, rate the

We year. positive expect volume Sysco's of the second remaining U.S. to in includes fiscal Broadline and growth rates inflation. continue industry This inflationary half the slightly of

growth. of includes XXX top with of M&A for to planned consistent annual average an previous activity Our disclosures also points line from benefits basis contribution XX

but acquisitions, cash to We synergies will through efforts accretive focus accretive share back and and capturing evaluate dividends. Don of like remainder will FY'XX acquisitions opportunistically integration the on to returning continue repurchases for excess shareholders

win long profitably term, For the and the expect market we second to half over and consistently. share,

reward Our that, rates, are also grow for With with generation plans on you Thank your efforts for today. our ultimately will operator, feeding and shareholders. focus strong our now conversion ready time to questions. we cash

Operator

comes first question [Operator Jeff from Barclays. Bernstein with Instructions] Our

Jeffrey Bernstein

one one growth The to on X.X%. X-year you local had acceleration follow-up. said, a like X-year the on I and the on U.S. basis. It's Great. question question a return the and case sequential volume, a then nice basis

you accelerating important in growth, that Just most of that level prioritize could your talk wondering confidence of sustaining maybe momentum. about drivers if the

strong I the exit momentum think built of second actually each therefore, you rate. mentioned that fiscal month and quarter a

has about across someone great. in could context, seen industry a provide much would thoughts maybe especially of I'm wondering just you So if January. some Any the as was there talking that slowdown been be

Kevin Hourican

the local Thank in in you ability for question. confident improve This our to to is Kevin. sales. We're continue

As you the quarter is And months. the those sequentially, average an every months. each obviously, ones X.X -- and weighted average, X just improved of the said, across

profitability to our industry-leading local in at progress in case confident are we ability So growth. historic Sysco to the to will continue And volume that produce. continue metrics make

be the on The would and the most be second followed growth. third The immediate fourth I'd selling four ranked of change the it's SC performance on things management most side the the measure increased would is the impact I I and So an lever. from perspective. team case up call, profitable headcount local the sales biggest the by if said compensation say drivers, them consultant the total impactful

in you'd it down made or United if it a overly of As There's concerned in to been X swaths a the but a word. there's to blip, some extraordinary factors month a historically in would never weather. more food-away-from-home lowest in about that. of year the the January, customers of it hate That's where the credit difficult bump there slowdown the to blip the half awfully to had was I driving January I in month. unfavorability Jeff, your fell consumption the large tied as road, deliveries I'm was make banks Week by the be second which January. be calendar that W the major of that it and question up It's that the it you there holiday States. volume to bump of backed word, January. card weather I to used cold a going a W couple from want relates a in describe a on January. that not has January, data will.

So to can that goes year levers March, so toss got on And additional and Kenny we've for to in we quarter. comment the the goes I pull go, any regard. that

Kenny Cheung

On January, I Kevin, seeing with what agree now. right we're

volume While has been impacted. slightly

of ability tool labor standards we lower Libra volume our the [ the have We planning that the disciplined ] impact and flex labor conjunction mitigate is about, talked and we've that engineering implemented. to in that with with

delivery over full costs, levers our year time, mitigate customer also P&L. we the throughout productivity, in impacts intact. which year fiscal the returns, remains with However, Therefore, weather will guidance

terms talked bit In a local local Kevin comment international. -- U.S., one is the about in

business. international roughly And XX% playbook Recipe Canadian retention. seeing is it's and some business, by RFG, penetration As and XX%, growth we've which and of know, there. of we our our is replicated And roughly our nice we customers, European driven really the up customer business from both for are new Growth

continue are excited discipline. pace invest capture we we to So and growth and with and

Jeffrey Bernstein

you anything negative half side midpoint. the that positive Got I'm the said mid-single-digit level, because from a in to the at I called just think X% midpoint. reiterated X% at fiscal if share especially you follow-up 'XX XX% the very wondering I the year, might think you first have EPS the it. top high line my on of And the growth, you could out surprised the guidance. and or X% I you on know

in year, and first quarters about consecutive XX double digit growth. of double-digit the talked also EPS half You've of the

you seeing repurchase share to an are you've $XXX come. million the got in especially challenges incremental as in incremental what So half, bump potential second

the you've momentum wondering recent growth your half relative EPS the thoughts to So had. of back on just year the

Kevin Hourican

Okay.

let unpack the and So what half surprised first questions, are what in some year. me to takeaways me of the

I can different business proven under environments. various think is the the manage has biggest Sysco thing we

If we QX the delivered GP margin expansion bps. operating remember, the was And quarters you deflationary half, QX dollar and margin in first in of -- both roughly margin and in U.S. expansion was for U.S. expansion bps also slightly GP positive slightly in of XX the XX

and drive that I positive really the Sysco cash being proof think has on P&L side. point able the half to the consistent to levers circumstance, any good drive a again, earnings first So growth was under flow on quality of and

more the half. about that's first in So

of year just let In color. full bit the me terms a guidance, provide more

do overall lower we this So overall year, expect XXXX. volume market versus growth

share in are what the had XX we continued However, days end profitable earnings gains at we from last -- both mentioned QX I company, half, call first year growth ago. came the slightly with that the our earnings Inflation, consistent market on of positive the we aligned our last with the back In remain still previous Sysco. expectation. at and on as [ said ] call,

We to on expect our back We that original I believe around but quarters the QX positive inflation ago, still slight assumptions. half have comfort us provides inflation. be positive X slightly

the terms by expense reduce of on expense effort the our to In side an already -- expense team $XXX of the million. directed has house, disciplined management, structural

additional [indiscernible] we've are pipeline on begun future We a and building periods. for

rate roughly down to $XX of the expense of way There's change. P&L your a working additional slight XX.X%, the no tax million share step $XXX million attached of on side, terms interest up it's to In on the repurchase.

increase think accretion interest is the question Jeff, the net what the There so $X.XX of net accretion I the of is it shares. net retirement impact a is roughly or expense together, with so coupled to your on of you EPS? If

with to year. guide expect of So reconfirming With the year. year variables, can the and $X.XX full we X% that that reiterating for $X.XX last our the with are growth midpoint of said, $X.XX is intra-working all the fiscal you that impact versus

Operator

next from Mark UBS. with Carden The question comes

Mark Carden

much to to of how to they So the you of I salespeople? competitor going hires expectations? high-quality on a a wanted impact how having really to an enough but going date. initial then relative your progress dig are said to is force know bit ramp, having? Are into your additions find sales ability it's And be your I

Kevin Hourican

really We're I efforts progress pleased And this. in want we're making. the clear QX, about that those to with began be

the haven't we hiring, So early in the number. of it's publicly quoted people but significant number exact a innings, we're

and challenge hiring a classes through program. training We very filling are not very, we robust them are industry-leading They put having we a and our classes. with that fill, roster

That's to and As go the don't challenges it on hire, competitor, talent. my We not source relates positions. competitive if forces our to we're impact to you of having is ability filling a That will. a answer. the just

go train that for people selling have process, can restaurants. what them to culinary from Net are We We train We We're at and our food selling also to looking in on can are, is are them passion them industry, schools. we industry. train our on up can a be the that's which go eccentric We to this that for good tools. our and scale Promoter they the to systems best and them Score.

the first not we're pleased We're difficult with So really our time filling a cohorts. classes. having

We hiring have to to I And if the positively XXXX growth back are any that be you on said to impacts targeted hit a follow-up. Mark, as you from track perspective. before, rate. able

Mark Carden

M&A. Great. be to follow-up going And then to is my related

that where Ready that integration just be guys And larger in your expectations? you early bolt-on even small announced Don about to M&A You to How a guys relative one simply signal strategy it or months open acquisition were ago. in on pass good X then does a there? economics too to gone more with shift Was a is situation December, Ireland. guys the you Or Chef closed that up? might Edward scale international in

Kevin Hourican

question. Mark, I appreciate the

we've done the that on really I fiscal quoted Edward to Let significant is me this just clear start that numbers want which the we with be Don, year. transaction today.

case at time. not the a perspective this that included and of So from volume I are a in Edward growth we one Don but volume know that's in described, profit numbers figures sales we some have, have our because question month may

and local growth pure X is want cases Don. in I X [ just about clear to that. total ] in including Sysco, really not the in be So X.X% of

day early at We can As Steve a between companies, about the in better customers team Chicago it more affordable and can more our just the two product a had leadership up innings, to was capabilities better cost. I leaders together, and with synergy great and relates the his purchase We last Don target week. we talking buying effectively. joint

we as service really platforms, small sell national on Steve to truck. that or customers of not know local distributor, sales we on versa. the a category $X.X together currently a term a customer top or sales, a joint Don day that and longer this his about either and opportunity take big for so mom-and-pop have meaningfully And some equipment customers really that some years in can billion Sysco's excited, we Don So deliverable huge through large hospitality in to on are truck line customers Don perhaps then Sysco grow we just very and digital that shoppable has restaurant to equally We're acquired about Sysco how can I customers Don, business there's come. product it vice excited aren't excited. have Don team proposition. not we're the And Sysco's and have food profitable

in Ready smaller context, Ireland, much just it it's As relates to Chef countries. in a keep

compelling in. actually was, for a that of size is fresh acquisition And it was country that what it's like point the the entity. So

not I'll a We're That's U.S. gives Ready we our the what play. Sysco cut and Ireland, bespoke produce a change headline. not the did running call from in in fresh that us be Chef perspective, to FreshPoint crystal have strategy. It's business capability. So purchasing clear,

countries bolt-on specialty so leader which Cisco we the and profitably. into that around Our over can run we we for capabilities within, serve room we strategy to of is in sell be Broadline the is compete customers major each do play, that so will the in time the the

we're acquisition So Ireland. in that about excited

in is profitably very their and confident within existing I business, leadership Ireland. to ability Our am customers penetration with increase the team better in serve Ireland grow customers and top-notch,

Operator

Heinbockel with from comes John Guggenheim question next The Securities.

John Heinbockel

Kevin, move about about each of how quality And you of think are on do that needle, how sales those? quantify So for year-over-year when two growth talk frequency what can in looking? Those and will a visit, certain frequency you visit you think you how right? you -- KPIs amount about of quality? You're looking the

Kevin Hourican

that's year for visit. John, quarter have the the flat per early We track in in this two, of one in them not needle QX call that of side that off end. it to number that year impact of every a is the with impact incremental up just comp performance reason We management, X.X have meaningfully be to That's is kind and it's quarter were will targets, only we We're go week was it. being change from And our will expectations on what a our Point QX and work not of in and it in the quality. we COVID poorly office for and wheel have the life, in though, happen I needed things and customer really home to the from great SEs is is number on a business. biggest need job. we a pound out SEs. in can question. up We've But that we helped, XXXX. moved a through disruption where from SE's of are more street visit doing that our the ripped of than this relationship matters, have of for And we very made bigger John. to had per would being innings target front what customers. frequency. and quality was track numbers, in was brought week gone of front week our the public the last visits lot visit the improvement specific there, the liked. [indiscernible] what that the a completed the be. a of SE, which if completed, The a you per can it This worthwhile of is frequency but band-aid we of clear Get visits we

we do how measure quality. So

The our We be done period the brand a Those a quality do to are in be over And that things done. of the examples rich essentially close Sell how you've just with last we lost should be category have of done visited to day, track jobs will by sell. measure SEs prompt I purpose. the jobs to introduce that And be it it purchased, it. being our data three against Sysco measure And was those CRM rate prompts with jobs tool, to sold x understands time. before. what's what and back purchased. I win not can the case CRM quality? SEs case,

have the a coach that our back then done follow-up. move any getting the for aren't people of do the performers, managing the and to middle that we every one you from quality bottom, performance and to everything side the accountable against in hold John, visit. the ranks of sales those scorecard top between. We top Recognize job and

John Heinbockel

right, would growing so about talked above you GP dollars follow-up be, The SG&A.

shifted was to where the the mean profit than right, as quarter. this your gross SG&A-driven take to right, to was delta as opposed gross back, what's if And right So the thought general environment now gross right, level? We profit. more I lately, U.S., SG&A. it you driven points XXX it's margin-driven, an basis

Kevin Hourican

and how operating the gross it. we right? income line. It think is So profit about here's It's line both, the my --

line see was If our you you top can X%. growth look at QX, that

and goods, the just profit the you you between of sales math, was do if X%. cost up gross If will,

GP a mix specialty, as with brand nice by you partnership by of leverage driven had strategic business, actually sourcing, penetration. suppliers in And So a result, growth grew our X%. local driven

we sales between had nice a and leverage So GP.

year. pipeline that can outer growing earnings And it, to that's for we're is working -- call going render through X%, close digit us extremely news double good on net to P&L a The then you out. about Europe driving the that SG&A, through is we hard, we're of to working $XXX that and Now cost is of beginning million at productivity out and GP the see for the period. seen year, the being is, in the talked and success prior growing,

So OpEx initiatives sides and of leverage, have to you're And the line. getting good on John, line the back of the the house. we both both cost

Operator

comes Edward The Fargo. Wells next from question with Kelly

Edward Kelly

and it wanted help follow an of make you start. around line half of how what's it's industry January in mean we're a mean I that Don, sure think talked result last from as off I you how that the case about is clearly expectation Does quarter spectacular here? I the So thinking know about the we be up back just clarification case strong last to the to year I'm on a not from quarter. going the moment. Can growth on slower the be the all And QX don't an that Nice currently. the in just inflection trying should not quarters. maybe just standpoint, given will then place Edward well? at volume right I was? understand numbers growth. just couple forward was the just to QX us

Kevin Hourican

case a other speed for X-year I strong hate the the for thing volume mid-February. about. kind growth in Omicron. of as you guidance from seeing we midpoint W I grow very today's ability vis-a-vis the [indiscernible] our where Unfortunately, the strong. local we There's regress the We're confident March than There's where year, Exit ago. predict not the as on is -- to to performance, out were stack phenomenon one to January going we're also did on the should we call we which what and local business are quote growth was profitably local expect the any what messages on to to today's you -- in in and confident the normalizes X-year the in guidance by from a important our of word, built number not about We've know, very, talked Kenny, into And additional I most comments. point because year today. through. that month. QX. velocity That's that the deliver is and year a a we'll what We're ability main built get being momentum itself of which a call. mean on talking January tied prior strong. stack back very bump, a industry of going

Kenny Cheung

assumptions baked our Yes. growth, On are into Kevin guidance. as local said, the

the can that so focused are see and company. you that's really in on We conversion for our always was profitable QX. leverage why important cash growth. reason And not the That's strong

of not so is different Don number it a volume the our volume in From terms product in is our total our the clarify, in in Edward Don, In given number, BIX number, just to just attributes. year-over-year, immaterial. volume side, it's

Edward Kelly

to Edward going forward. to included just as be curious case the And going does not Don volume? in that's why I'm And

Kevin Hourican

we Kevin. our business metrics, a pallets Don volumes include difficult. is that the versus way and include sure working this we we're right in today The something eaches. that part is business not cases of get before -- want we how as pounds. just the make through getting measure don't our that's measured to to on because denominator their is the a measures versus we as it We same is planning. mean business our common And And SSMG that integration I in

Operator

question with comes Long next from Joshua Stephens. The

Joshua Long

Was curious a new also over you to existing about. local of further further of the and and the wins, contextualize know penetrate against the of talked growth goal we've execute consumers opportunity could of that if been the has which then target strength last a terms calls couple I customer in kind case

Kevin Hourican

and on really penetration over-index strategy programs today plans Recipe Sysco selling Growth point trying with in total supply prepared third very then programs. our effort, with on chain. And to was and as I'd those on We're back. in programs team Day our selling Recipe is existing the going two focused for We're really important Growth. of business. to our that growth for well the for Your increasing didn't I And about Investor through narrow it I do very, May. are our the pleased and On talk a effectiveness Broadline. lot growth to bridge They're you Way I'll the our longer-term at two to our continuing Perks about customers. talk impact we existing and which is local drive the remarks performance customers, keep

cuisines the Broadline, share That's moving as protein specialty. We why needle below in produce are our have customers ethnic industry selling. and we meaningful on and team average existing share total with on is and we're we are, as in focused the

generalist, a customers. is of call together As moving way penetration. specialty an constantly sales are [indiscernible] doing then expert a the I've in the truck truck such to mentioned customers point before, joint when And what of has those be not the that categories, oxygen added every but a generalist program example. we're manager, job performance it organic that to the as going our that's regardless with bringing visit to with consultant them new produce, in is, cases protein. are account is But a They're And not we're in doing Sysco have compensating We're customers business as truck. to expert who there existing they an and a that Sysco a relationship regard. an consultant going in in that we specialty needle sales be buy the win identifying or with who's measured Broadline is they week, a specialist propensity in pleased those lifeblood, the which better each if up fresh the by linking

to We rewarded those of very that be and compensation minimum with manage that embedded focused it, the to model We large while that's I'm updated business get oxygen sales within and a We're need profitable business, to been the portion to pleased made sufficiently progress You on threshold That priority. focused works win new. force. on work. that's this a is making that make Prospecting that's priority. need make new If our to to one. as business quarter of as it they breathe. priority worth need going a new increasing force. sales There's our hard on the customers. our a It's We're they really hard. last it a very

Joshua Long

like Great. your mentioned continuing the And get back are improvement in then things chain. seems overall you It comments, normal. perhaps in just prepared supply to Kevin, to

supply the the as couple Your now where about the broadly and industry results the of occurred highlight some bit of overall years? health last that. are just you little pushes of from over further some kind disruptions of removed Could the chain we're a and talk an that that pulls of

Kevin Hourican

leaving Retention indicated, that supply There open. you are jobs. We're is really up overall their in fewer pleased with our market, progress of as chain. are improvement people just are fewer jobs

in X improved, doesn't get focused hiring improve, have then population. introduced beyond, new better we're can to is room the in cetera. in productivity to to into want accidents right when in Everything road I with we happens that we improves, then a Oftentimes, network, And don't we industry costs, staffed mean opening But chain health which staffing now in delivering. across tank. X, today. than levels still X gas job site specifically what the that the But a question, our we're general improves I the fully kind technology, we have fully levers that. We're think and more we at on moving introduce training are shrink costs, aggregate inning in? not result programs, is have X, I we are of inning say et we have The the pre-COVID, It get we're up inning just supply specific damages on Sysco, improved. staffed. up productivity XXXX productivity. asked still pleased tenured that. the bring some recovering of as means Kenny our when down, better. a over. get clear, we we What meaning said, be the on to have I'd inning our ecosystem about therefore, really we game we're So improvement inning to in And of is We as are a

Kenny Cheung

academy, agile the I that The driver I planning to talked for is work we're the standards stronger. standards labor engineering of we're sure is, Sysco -- our programs, the technology. of as here making Kevin better really earlier, doing. labor Yes. work have the backdrop the leveraging, mentioned getting improve we tool, in being standard wave have with that the our next improvement me keep and matching and question productivity on January, processes my in the discipline One about through volume as matching very expense labor training earlier and We better side, said that's point with

So we still the pleased the into the but with factored that's for are supply room and made guidance. in improvement, 'XX chain, improvement we

Operator

Toscano Kendall of Bank next comes with The from America. question

Kendall Toscano

customer guess, business implications I So your on performance a pretty second gross as are the rebound in in the significant you that the wondering given local of if, was margin kind saw just what segment? quarter, customer back total local customers I customer as expect And local you the would to higher-margin then, how growth half, enter follow-up, the my versus you as are the company? a look

Kenny Cheung

Yes.

So I can start.

the CMU and does P&L, you are come GP was an are attachment accretion GP in we we that business. had case, leverage think rate our a as success seeing margin you're that flow the with of well per though, the local and With well and between customer down reasons seeing why with with said, correct. there dollars shouldn't overlook that's mix The your a we've X EBITDA as higher I So net and earnings. through to local that as customer, a nice leverage on the the

We also are seeing margin expansion.

local our When talk for growth of a seeing customer. we're it portfolio side. both CMU is is margin may of and benefit and Again, the sourcing, CMU. customers There's it's the marketplace, on driving and segments it's across also It of that accretion cost not. size that the we about across think skills winning local our strategic not the restaurant, Sysco, just in scale just that's other are but We goods leverage one business. specialty

the are current at renewing, margin at a clip businesses are winning moment. higher We we

Kevin Hourican

we we business, new about I've the nothing growing and Kenny Just to over to our There's local. growth in We made, I constraints. we and wins hiring that sales, local. in in is supply chain progress to want do national said. this very XXX displayed do intention this to is in clearly point customer want to tried improvement in have profitability basis be meaningful national, just quarters. to keep and and grow past our Kenny last our national about of succeeding point to and ability point hinders several that plus not and the national that capacity as not up quarter have call improvement we we with a last play said local, in What sales, make are running make the that continue constraints, working clear the on last the success the

Operator

John question from comes JPMorgan. Ivankoe next The with

John Ivankoe

you I bit pricing some I that kind time? I'm half of -- And little have wondering what talking case customers you're seen some maybe more some might The nationals, indicators in their mean commodity through the lowering you on grocery a influencing easing. metrics local of the deflation be have could to sustain on chatter the own their question marketplace anywhere of over but on different the inflation. your of is or to market operators their at back PPI mean regionals the least been at suggest price terms 'XX. there's costs what were of potentially competitors, lowering And kind sequentially per of food, that inflation you actually something looking stores example, as been first about the are in is their than for secondly, question.

Kenny Cheung

it's start. John, I'll Kenny.

So on the topic of inflation, you are correct.

third-party partnered We actually data. by [indiscernible] directly have and like. institutions informed data. partners, are We strategic suppliers, We a the with

much industries. data how goes well, rich have And supply volume so and each given our segments day our through set across we every and as various chain of own a

all we're closely. two, watch we now. Number basket modeling very in our that right So

in basket, No the And XX%. our But out commodities. don't about if Now one really anyone I've XX particular. over talked we than more we commodity come main think in index about past. you this have on

growing inflation commodity have managing each and but you to space. So different is could have example, and a we're every you For beef, example, digit, another can day, in for double deflation, which that's close right?

to leverage in the day our deflation effectively quarters, inflation. as and both in On slightly historically has we today operating positive, Sysco and QX deflation, P&L. consistent out. So positive managed able I were point, day mentioned to inflation earlier, third and And QX, the U.S.; drive

Kevin Hourican

I'll just Kevin, It's add.

the You efficient John. in the business, It's particular. market, asked to local very prices a in about consumer

So as we through value our are able our COGS to customers. it come down, yes, pass way works the to is then

publishing we're a on store, retail and a shelf. prices circular putting a unlike signs in So

it's passed customers. our book efficient business. a through an priced The gets as that market. competitors. And down, And do us, come gets to prices For dynamic it's weekly, as

tool down. ratios though, we said, need make sure maintain extensively we maintain ratios are way we That's that value are way that the up. where on the can profitability to Kenny profitability we pricing our the didn't of leveraging We to As on be.

just lot the data to got figures, relates of at a it in As confidence inflation year-to-go Sysco. we've general

We have data. global

said, Kenny XX-plus We access a categories. the have to amount, across as large

return up, down. Some that's to be moving the because is in down go wild markets normal, in year substantially The in are are deflationary going more to moving inflation, QX. the one biggest the of year to low is before due to major in flooding levels substantially California. versus to some was of Produce like Produce. tailwind going Produce QX X% to X%

in were we to So one the in from year. inflation where but bigger muted the of up confidence of we go. certainly first is inflation, the the giving half said And year muted of drivers that's

Operator

Slagle The next with Jefferies. Alex question comes from

Alexander Slagle

are the if growing provide certain well specialty There participate could either the the health and color you in rates [indiscernible] growth has categories customer if various types see accelerated lately? growth broader are in. that or to or want you particularly the off certain just any industry I on of categories

Kevin Hourican

add, it's to jump I'll has then can in. and he anything if Alex, start Kenny Kevin.

about what growing, I'm Let business Right going it is I'll the And to back that But like customer. Broadline flip I answer okay, me to by then and distributors. is is is now, winning. where first just where it's talk the reverse. success mean in happening, actually

are it the share? of our this saying X faster are Broadline And growing scale. other scale plus our matters taking how purchasing industry. winning. the X frankly, than market. big all ask matter, Answer People be that scale and X So Kevin, Size you in technology our distributors big scale, true the time, delivery scale, you're all the us all can are is

and was the very Our plus nominal the growth X.X quarter growth. overall for was market

other So we the the the meaningfully versus outgrew well in players and big space. be my as market suspicion will

and So two the what growth specialty Sysco regional that does is performing. smaller for the business distributors. distributors our It meaningfully is specific from specialty mean? thesis means Point is coming

So winning Broadline be the is the very versus versus the within versus XX% outperforming XX-plus Sysco's we're total should the business then done through point XX%. specialty that are the where in that X, understood. Big that's not percent And meaningfully that's happen big of of the Big in not a in winning specialty. business Broadline specialty, players clear X, does from

So we're the that's the story kind market. versus thesis the why of of outperforming or

The interesting relates market trade a was to mentioned, food-away-from-home the operators it are customer or no trade then right. robust we're seeing up trade QX. winning. have trade moves winning, concepts were up, or down. consumers discernible left, frequenting As in blip best month culinary trade establishments. food-away-from-home who it trends robust And are side, trade a down, People interesting seeing but was as the January specifically, not I that Since we're December

Operator

Bartlett with next Truist from comes Jake The question Securities.

Jake Bartlett

give kind been confirm between quarter, that chain can in gap chains business And acceleration? has the case on the a can you're was how narrowed provide that's of strong. to much profitability. maybe accelerated chain Mine drive if point? math the if know update growth on maybe you the there independents maybe this doing growth and what to relative as among narrowed, I And has then an us business if just second sense and just but maybe the you you the that at can on my better

Kevin Hourican

Okay.

want comment our very for additional I national that Healthcare did sectors. we had start, be yes, business. our winning and have. just in each to QX in that in and and we've is versus and be And to I'll business, QX, of in to restaurant toss I'll meaningfully any very that may -- And that space. Travel CMU. meaningful wins accelerate It's hear portion hospitality we he to is We're successful in that So in our one space, is they CMU Kenny clear space. have that ability continue education those in of business. confidence When in nonnational notable of it half it's is people think restaurants. space. chain,

XX% reasons on that brand. And their they're profit types meets national in example, are space. is in the restaurant objectives. That's lower local nonnational business. In low really profitable Sysco lowest our more are and one on focus mostly profit of space, of Sysco than willing QSR profit brand. a why is restaurant And Like, focused sectors. CMU portion of our fact, is is the The lower that chain We're the contract of customers, cases things national the can where we cost partner penetration. Sysco customer we the in on penetration help Sysco serve helpful within customers it national their with With do sales, We create have to relationship which at and profile them that Sysco. with a can achieve that to a for we truck for brand objectives. win-win our want

and been win like want grow really national looking additional comments any we're Kenny you'd for our in And job regard, together, who to team expect who together. good that to we make? continue. has So partners sales momentum to that to want doing a

Kenny Cheung

a Yes, few I'll things say here.

is all right, business, say look we about think lens, So I'll ROIC how including businesses, at you if any a chain.

mentioned, we On side, as the did Kevin accelerate. CMU

our the but The across that sourcing, of we're a initiatives local accelerated and important impact That's here. Many side. is CMU correct. are profitably. strategic of math the correct, does all You we the doing technology, really things both point

So really say a size time the this it matters is scale I industry. and scaling we in know and

that's important. So really

local. Sometimes, we'll the think only -- this plan say compensation all we ties

many that sides the scales for both many, house. local have my That's things both and possibility We point. first across driving of

mostly point bigger -- the is, on both ways. customers, we SYGMA, they ROIC again, which year-on-year. cuts second down volume The In were is

house, of increase supply pruning we However, give able driving more and that the the double there. and efficiencies side -- were we're business chain customers than on the XXX% the productivity double profit, to

productivity bit how we of as think color of about So that of gives you the other some well as on ROIC. side little a

Jake Bartlett

the the independent you traffic customers? Great. I improved side. latest on on your the at follow-up in the business your prior generally just robust. versus this on has whether quarters? the mentioned just -- that you had industry positive And was traffic quarter a comments Kevin, quick seeing local Are local I'm local in wondering

Kevin Hourican

most especially very we're you Really in in of independents, was way particular, food robust. traffic, in I'd across home, concise December, That's Yes. healthy, describing away strong it. December. Independent strong strong but my tell from

Operator

comes Stanley. question Brian from next The with Morgan Harbour

Brian Harbour

different sort as of up hiring? ramping You've in the offset some less to are year. it On but a about that the half, a half Or discussed an think ask the in it that? consequence little leverage, of half? How second out do this, way. Do in of cost you the versus full first for second maybe expect the I'll a slightly you maybe operating expect you bit

Kenny Cheung

Yes.

what terms means. in and let correct are me that of explain half dynamic you the second So

became subsided, really things half. back we're half seeing of that first throughout towards [indiscernible] the X half back those Also the it last half if productivity, recall, the in of the that retention, year. also the value back recall, of fiscal the we had of all So and costs chain, XXXX, towards last half that supply turnover, those we're first year last standards, fiscal you of year, in year. year labor today, time snapback driving started 'XX, But

operating full are So here a comparison comp year. challenging we said, investing our more is said we also in leverage the standpoint. that for stride a and from Brian, differently, our business are lapping With

Brian Harbour

as big I that's pretty Maybe makes you, [indiscernible]. That but just not international. Okay. it sense. is know on for

performance sort we've companies some how the trend next that Could you second just see over couple in the of quarters comment international you have said. restaurant varying think of inflationary see of kind seen you markets business? on I half in how that in also the

Kevin Hourican

were talk the seeing about the is part headline Kenny Yes, with this of at I'll performance. we're on international. end. the in I question appreciate just Yes, is the international, here that the been Brian. were longer. in out was Europe. a They of They on deeper, years can Kevin. question tape, COVID and start, very here international. what Rewind I've X The impact they We're had international inflation especially we're pleased address rough I'll it earlier. were and plus a now. shutdowns very negative were go, now. punitive, more

a greater Local growth. growth, Local clear border. an just performance tools with greater that Canada, deploying commentary Growth performance from that's case our a some happening? doing the digital are the in our way, is in north team is X% play talented examples and international We're advanced that, Canada, bringing We X% of and I'll country growth the country, Canada are extremely we largest perspective to for even a Recipe for to and well. case of improvement pleased Why from and contribution business. than than out bringing the three Sysco the perspective. greater an from color performance. to Sysco call is it incredibly give a very tailwind texture. International profitability leveraging

underpenetrated our second robust We've Canada So we doing a local. and in always mature Britain, good were Great well. business, country. international and CMU extremely very largest is had

on winning result be a that curve better in we chain in supply capabilities leadership and local and increasing serve local. systems We up not half country, been Great good in least, and transparent Britain me them revamping the profitability able off self-inflicted. France. first let our with in very has a And are to country, are from customers of France that the meaningfully last And we our in perspective penetration over moving we're France, local have to focused upward, as time. the We're and really mostly tenure problem start onward year in a the of I have France. corner been my at a for to better. talk turned about Sysco, child about but

France on deployed -- leadership strategic this Sysco beneficial place second contributing a each run capability. introducing strong team beginning we're product a the working PJM, France, working and I've positively company. in range brand year to is France, ago, AKA like have and to in is really sourcing of those P&L to a is said increase Sysco is way the the We our our in available which play. overall strategic things product that they're We've and We're and working in to sourcing,

those commentary inflation. to are and comments color toss Kenny points just for So any I some on

Kenny Cheung

Brian. Yes.

-- think we earlier you and roughly inflation if very for international year, X.X%. had the over about this XX% was quarter the roughly was in just that the So

quarter. practices. given inflation our extends and capabilities, seeing dividends. driving are model that we is subsiding scale, operating we're global in that tools excited size, that are leverage now, It though, throughout So and With we right bit the our the a said best extends One

Kevin as about, one So dividend. global of lot model operating umbrella talked of is under a the really creating playbook that

So one pressured, are yes, while inflation model. global we operating overall, the seeing is [indiscernible]

yes, So international optimistic a as market bullish for are the we still growth about very and us. engine

As you on in can XX% XX% operating see and were on upline QX, income. up we

Operator

program. session for Thank today's your today's conclude and question-and-answer does you participation. This

disconnect time. may You at any

Sysco (SYY) 30 Jan 242024 Q2 Earnings call transcript