SYY - Earnings call transcript Q1 2025

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Operator

Welcome to Sysco's First Quarter Fiscal Year 2025 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

Good morning, everyone, and welcome to Sysco's First Quarter Fiscal Year 2025 Earnings Call. have Executive our our Officer; Officer. we Board of Chief call, Chief and and today's Kevin Chair Hourican, the Financial On Kenny Cheung,

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

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

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

-- Hourican. time, queue. At that ask over you to we'd Kevin question, the you If follow-up call have like call to the a this turn we re-enter

Kevin Hourican

for morning, joining you us thank Good and today. everyone,

color marketplace guidance. provide issued select morning, an year on full previously results, this conditions, priority some provide I general call our Sysco's and initiatives, Sysco's specific During reconfirms performance highlight on update will

said, throughout and first September, to for was down significant get July and Let's impact food-away-from-home the down marketplace. brief traffic overall X%, occurred includes the update the trends quarter, data August XXX fourth quarter. erosion the quarter, basis with the point a down from With Food of restaurants improved ending from a traffic with that beginning started roughly X.X% on the the X%. in traffic referenced just hurricanes The down that X%, quarter.

recent restaurant help a the and that pricing FreshPoint help the business for that their restaurants that value products overall. Sysco operators prices of assortment We from is improvement the on half and gas optimistic election see are in types. traffic Reserve, positively food-away-from-home prep evident cautiously traffic can lower and work general taking menu that of was Notably, brand year. precut is money. health impact the by proposition. fiscal through provides getting In help remove improve owners matters, menu the value-added all prices data actions past QX to across example An through positive lower the restaurant Sysco our will we in Federal second products This actions industry our food time restaurant kitchen. this achieve save our

Turning to the non-restaurant sectors.

from strong from strength seeing are the encouraging are the particular We the performance companies work office. industry with board, more and as coming sector across business

overall many economic resilient results. to these more sectors said in are be times, current seeing has noncommercial our Kenny As and tend to that conditions, we

quarter. of we volume plus from growth the U.S. was growth of delivered The our to results revenue of X.X%. macro $XX.X service billion, trends Turning performance, fueled Total food inflation. X.X% a first moderate following industry within revenue by growth Sysco's specific

for by our guidance first our of our for operating prior on and track disciplined are to adjusted share period, full Our volume year X.X% we delivered quarter on earnings supported the income grew call. have of We volume by national full control. was per guidance local $X.XX, growth and importantly, generated growth today's expense X.X% an year year. Most Adjusted growth X.X% Sysco X.X% a volume reconfirming results growth.

opportunities pleased line within improvement points with our I operating international performance. I'll strength impressive first business While quarter, quarter the we our for are aspects quarter. the with pleased grew income of of with We our the start we am for many segment. grew the see particularly an international adjusted X% XX%. top and

Sysco into Adding our generated the profit strategic sourcing select this program. the operational being success in sales to running are Cisco local is globally improvements of higher-margin that of international and and introduction growth programs expanding expansion business strong the is presence, geographies. [indiscernible] brand Our strong by categories now

international, the In is high in level. very a at addition performing to business success our sales national

We continue across restaurants national These and margin sector. our customer business new strong to record in profiles business of onboard wins sectors. noncommercial will the performance with strong track the continue national high-quality new net

our national many deliveries. us increase customers suppliers improve with As fixed times, sales help [indiscernible] our delivery deliveries are as we density our with route have said these and leverage purchasing scale local our costs,

Our our return customer to and after business SYGMA is resetting base a mix. to to segment more strong quarter, see SYGMA XX.X%. great an and growing sales had X.X% It our income, sales appropriate extremely growth business operating volume

the will are We that strong results year. to over confident SYGMA the deliver of continue remainder

pace team marketplace momentum. program total platform the and to selling Our specialty continues picking up with win our in

serve Sysco businesses We are our protein introducing more our their grow to contribution. ability to Broadline our needs, retain increasing and customer customers, profit specialty producing business

accelerate and goal expect our portfolio. specialty Sysco total move billion of longer-term to help towards selling team $XX a We

We our customer one this than only Day to thousands are for Broadline Today, Broadline. and they Xx the just May, intend buy purchases business, our Sysco sales we have higher buy Sysco customers from from specialty As business. in we buying discussed total their our comes equation. time of work that if from from simple priority that at growth top Sysco change Broadline over a have a organization. a Investor buys When made

are efforts. team we mix total Edward very Don with integration our to Don business. pleased business of the the as status we be adding selling advance will We end, that our Edward To

time, have with our believe business we elements to are and there in equipment compelling opportunities We business have this growth. case small. wins those context, a international of strengthen. I'd Sysco to as like to and we that offering With start opportunity to platform our Over customers, introduce well. supplies local need with large

As for I stated in my local introduction, our quarter. was the up business X.X%

growing negative are our We local business X.X% traffic. foot despite

sales make this the compensation colleague but $X more we by We can to in opportunity mentioned to focused we pay more know a I consultant and model. their approximately growth. I'd needed live profitably. we remixed grow drive change sales a every adding quarterly business of volume in on Xst provide reducing plan increased pay have this To importantly, like money $X.XX has as what book those their by in local performance. Notably, earnings money indeed However, they to of profitably. a take that our drive was higher share incentives. change. Most are in call, are last to case continue base new our brief July. have last higher introduced Sysco consultant quarter, sales This the reiterate our a will went to colleagues compensation making correlation update single the Net-net, and our we top-performing efforts. status a on new excited to their of program,

customers and Sysco structure confident possesses activities. and We selling colleagues to motivate are engage all our actively very the the the right is in to that right new constructs support model

some our the through During issues the as QX we change we of program. transitional short-term experienced management work new

this half sales we We of into our felt be expect fiscal positive is year. Topic local of sales incremental comp headcount. as of the the transition the the impact second regarding change X will status

are on We upscaling our very enable colleagues XXXX cohort to success. of their focused new

to their business. XXXX book to Our hiring product training help advance them receive of continues selling skills court and training

cohorts across with be the and balance the the hiring the will health XXXX metered Our to P&L. the pace of year hiring

too go too will or We fast not slow.

at competition industry firmly And with the from in the candidates from wheel have and the filling requisitions continue We overall. job throughout we will with year. the high-quality success pace hiring strong to our be

was our point. than with for [indiscernible] business are stronger seeing progress entry as our We initial results, velocity U.S. the our exit quarter local

the in will We points hitting that program. company They selling today outcomes I'd margin delivered of thing end, XX.X% we We that regions These select of relative like have with points trajectory proof implementing our mix, quarter, for outcomes quarter. full to on our and percentage. remainder ahead year regarding basis proof the and give our b, mix; expect. The the customer improvement that the and a our penetration. Starting margin for to a, deliver confidence modeled performance; the our There already our last to go-to-market and can our the expectations. is growth have curve we growth P&L. To XXXX. support year-on-year change total XX the of below gross sales the year regards that profit performance geographies Sysco discuss customer improvement us a points sourcing of margin has will causes strong for c, in have with rotation that and are downward ability achieve brand primary our X the are running national are strategic succeeding timing; our confidence and business

as the year decrease local progresses, between volume impact. expect to will compress which gap this sales the national mix We and

very efforts, the on timing-only vendor Secondly, that from as clear basis. a half first I of a a in our unique quarter topic it to is we this relates year-on-year the sourcing saw be first to strategic to contribution is negotiations lower that XXXX. want

strategic for We our to have enable have our year. targets that confidence contribution program sourcing a strategic delivery efforts will strong the full XXXX year full margin of go. sourcing will in The

In the due year-over-year. from from Lastly, small brand shift with for have mostly improved street with compelling nominally This sold have a point margin a our company that be to Sysco to brand therefore, approximately brand penetration rates Sysco local reiterating fill in confidence will down suppliers. remains Sysco strength profit product. is of our point customer brand year the percentage customers national year, and is impact full XX% a mix strength full cases management full we total, full a guidance. we being confidence our for

our that bottom we in today. technology market human the Mexico capital to transition the the priorities to to we business September, focusing I of Exiting our and in to announced of capital globe. sell investor exiting cover I miscellaneous investments our I'd a decision-making few across By the our framework share partnership. action. an is results, Mexico, As of conference At Mexico The are top material or out like intention JV ROIC leadership line. is business higher-yield have not our display topics

in The and buy a within sell we the specialty is business to our acquired Campbells will selling the meat By business Broadline We with assets end, U.K. team offerings, business business, Great that recently and custom maximize the value meat creation. To integrating appropriate will product #X Scotland-based specialty compelling geographies. Britain Campbell's Prime as Meat , company Sysco the region. enable we capabilities in our total

We will look assets to high-quality offerings. continue for business complement our that

the International up wrap segment. business remarks strong delivered has will in morning, national our our summarize I segment, sales my with business following. SYGMA this As and outcomes Sysco our I

expect that to momentum. further We businesses up pick in not the these success go, continue year their will if

in We our have the the Broadline be being for our confidence improvement beginning management efforts, a year. delivered ahead in to we full the the our with will strong and than to of business, velocity of local that stronger point results same drive we a by entry change point, and regions progress the with are due plan improvement place have quarter to actions our being are strong initial in see exit the curve. Margin

line deliver the combination to go of the quarters direct to gives team the year actions for sight performance. the our focused on full year. and leadership a me The margin in have Kenny our reiterate factors guidance to We X With confidence top year, full priorities. these have will of that extremely we our full the

focus. of all every serving best the XXX,XXX-plus entire proud XX,XXX the and industry, day, work colleagues I'm thank plus leaders for to those work team global I in Sysco's our are their them and with They customers.

ahead. Our future excited I'm is and for what lies bright,

over Kenny, it a detailed over and to QX you. I'll Kenny, provide of year performance will XXXX fiscal guidance now select to review commentary. who turn

Kenny Cheung

good everyone. Thank morning, you, Kevin, and

in meaningful returning back to Our and performance shareholders. to sales this improved included addition profitability quarter growth cash

As an Kevin X% was mentioned QX. signal down the earlier, positive industry. Traffic traffic quarter, levels during for restaurant throughout the also important foot improved

volume year the to we control This guidance. align acting Sysco, continued we includes that as productivity delivering growing expenses, at our with business chain profitably. growth, by top in stronger things full confidence customer focused the core to leader and to Here world-class added supply can improvements are on and the line during share the month our exited improving better service. growth We expenses corporate quarter market all year-over-year [indiscernible] bottom the rates while of with on

our any for to an traffic Sysco industry in health, important grow proxy ability is has While proven environment.

spread the average, we volumes growth size and past advantages. industry believe P&L. our at our leverage And macro are leverage to back XX basis scale we've current as We on seen, positioned to positive Looking XXX fully traffic between points and well on [indiscernible] transitory. improve, months, accrete industry we our believe are the

investment-grade balance robust operating back fiscal share repurchase and invest cash $X strong dividends. with flow target through us on remain and allows business our Additionally, return our year shareholders. sheet, in reward coupled this billion our We to to shareholders to

more to particular to we growth, from year, ahead the normal half in the of second year. Looking in expect local continue the a rate line remainder top of the of

will coupled supply This and which benefits expect our benefits well deliver expense to margins which strategic escalate positively we across to rigor, expected sourcing actions as efforts half. year. progress plan of P&L will from expect continued in to our we the includes other second with course is the half dollars this second gross mix the year, profit impact The This chain operations. as be over

us Additionally, lens margin, of divestment an enable growth with planned we by the to markets. are our Mexico, international which JV higher announcing optimizing on portfolio in higher redeploy ROIC resources our will

incremental deliver leverage positive We are our will FY progress beyond. that 'XX as actions and we confident into operating

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

growing with in growing sales volume, positively and U.S. quarter, total also increased expansion is volume respect margin X.X%. shared growth to and we U.S. X.X% X.X%, Foodservice produced up increase gross XX renewals step X.X%. by start impacted to driven model in and the volume The wins. and at to sequential down We share timing wallet. $X.X brand billion local by X.X%. strategic the rollout of the volume by XX.X% profit, margin customers in national to increased drive our compensation sales in updated gross and international future [indiscernible] within improvement was new enterprise due X.X%, increase. in by points logo the QX, DON For guidance This during customer National new of grew X.X% Sysco of and contract penetration growing a SYGMA important Foodservice first algorithm, acquisition basis U.S. which and penetration spoke from X% our Investor sales driven Day. With growing resulting of sourcing. Kevin related to customer the mix volumes included growth volumes an existing Foodservice quarter

expand penetration margins Second line. half growing local, expected Sysco the bottom to to strategic improving gross driving are in benefits from brand sourcing

in decreased dollar X.X% brand, basis results. profit which rates to total Specific XX% XX.X% XX U.S. Sysco and reflected continue inflation, gross the enterprise, to in in to our manage consistent ability points basis effectively improvement our penetration with Our came at local by to Broadline to points XX U.S. product expectations. for

units single with units, pressure utilize to multiple more products. local tend we national with with from We improve customers brand continued despite businesses to local

national have as late. improved rates suppliers of our brand mentioned, Kevin fill As

growing and over we We strong the of penetration, mix the year. history of Sysco management and have the have actions trade to a course brand penetration improve

from the for quarter or continued actions improve down by basis, on corporate were supply sales XX.X% adjusted we the incremental prior expenses, corporate points We billion 'XX were FY the prior and and efficiency $X.X an reflecting in expenses expense to which during work chain and the deployed quarter. Overall, the adjusted that efficiencies. of XX from year driven basis operating improvement year XX.X%

Our supply remains staffed. chain fully

productivity mid-single than year-over-year. building digits to improve up we more year-over-year on labor and doubling pieces to hour with with gains retention low per are colleague We continue retention

around expenses. and we'll of hires. remain pacing to and our hires disciplined new Turning sales on the the focus on professional the field of quality We return investments

we is are We contributions well where year's add. investments thereafter. delivering discipline are starting and drive hires on this next and laddered These with year to when financial

of hires be income quarter. the of fold would in [indiscernible] samples our different million bring approximately distribution Los be was new professional which of a operating these to investments and related Broadline for from Allentown, the Angeles the adjusted expenses angle, new customers increase business. and later these quarters will for expenses, Pennsylvania, not our it new adjusted the as in we depreciation new available to actions includes centers return higher by the selling in facilities. Two was investments driven in Francisco driven the at The in leverage capacity buildings. These XX% several contribute into period help net by Looking expenses operating year-over-year Overall, sales positive operating $XXX will year. for our

XX.X% continued operating Europe. teams margin benefited included to a segment successfully profit positive profit profit customers SYGMA income adjusted and addition demonstrating that healthier and growth prune We new growing across with our substantial This customers. year a portfolio operating income international of from substantially playbook XX.X% on Canada did deliver were also Our margin exiting focus executing contributing to thresholds operating profile. Sysco new to last the Adjusted not our in growth as expansion. increase we by growth enhancement and the bringing able growth continue in leverage and customers our in from meet

$XX.X total our debt net ended quarter liquidity, leverage increased $X.X in We the a remains X.X%. advantage and and of in EBITDA source ratio, balance of threshold. the We is or health our quarter, $X.X billion competitive For at billion minimum which is industry-leading. it's sheet a debt The substantially ended net approximately target. above quarter which within up with the X.Xx adjusted to billion our

without well billion $X FY until maturities Our debt is over any laddered 'XX.

operating in the cash generated Turning quarter by for flow. our approximately cash and free to flow million. flow million cash increased $XX $XX our We

to seasonality, quarter typically quarter is capital. earnings due cash quarter this the showing and quality prudent strong the of working our improvement with lowest management of first of year flow Our

remain Our bottom in top line us results strong than financial and shareholders $XXX this algorithm with to growing million position range. enabled 'XX, We line FY more quarter. both in return to our confident financial in

achievable We this a deliver continue on algorithm as is believe be we we consistent one can confident to and basis.

we are Importantly, XXXX our seen reiterating XX. Slide as on guidance metrics

inflation positive During FY digits X%, growth sales expect X%. which single low net now X% Net year. sales seeing we of of approximately and the includes growth to growth 'XX, for volume are we of

we EPS in, range. algorithm adjusted benefits year. also M&A to in of guiding from our anticipate line X%, X% We with financial All the during are to growth

the in the will from for QX. include QX relative year, the quarter traffic the second of growth. positive phasing in a benefits rate Regarding comparisons the adjusted improved include XXXX level environment will and lapping we adjusted XX% QX, All growth over highest currently the an to in growth expect EPS growth significant year-over-year of case to local quarter, sequential also with for second of turning EPS improvement slight rate half. more the relative

We other second our stronger traffic continue half to growth initiatives. industry believe macro, and will improvements from a investments and sales modest the in professionals benefit from benefits

expected ROIC and international from sales in, we the margins expansion to touch approximately divest be impact sourcing optimize year. Consistent an second our expect leveraging benefit an buying immaterial plan scale as the This geographic minimizing Additionally, strategic of EPS leveraging power is rate freight profit JV half of our All half improving of our in essentially a network. to well we advantages. This focus, annualized million as categories to our on across in further is expect and unique a of efforts, we inbound COGS by Mexico. standpoint. points basis will to wider include growth $XXX further a our from to sourcing benefits with second basket stronger adjusted our

continuation our the remain operating on a corporate professionals We process across on positive curve to expenses. deliver expenses. and FY moving chain sales leverage up productivity based 'XX to supply target from of Turning improvements and our

line. For critically flow chain to in improvements example, supply essentially September, the productivity expense the was through as bottom strongest important

stronger across our and before, grow share organization to operating I that us will a model muscle is there mentioned the help memory develop year-to-go As profitably. positions actions

M&A and 'XX, EBITDA flex to annual by all and conversion in continue shareholders from share flow billion flow free we to We up our operating repurchases, strong billion our expect cash which $X cash rates depending plan reward in can dividends adjusted and for activity. free $X on essentially distributing to with FY over

tax. for FY stated We expect also of XX% our at is target approximately rate the The the X.X driven X.XXx year. expected for adjusted the by implementation to minimum operate to within leverage tax 'XX of to remain net global

We continue offset to this to additional actions impact. evaluate

rate and I to long-term steps closing, We QX adjusted tax in 'XX our taking our and and business believe for benefit FY financial progress long-term deliver algorithm. value look initiatives. In reward our on Our guidance that planning the I'm benefits right timing ability of forward the included we are our our the we ahead. to shareholders. confident unlocking

positioned to you time the Thank call We are now your for to today. I'll back win. pass Kevin.

Kevin Hourican

Kenny. you, Thank

over it acknowledge want Board. the and will impact questions, wisdom, dedicated Ed to for turning I X to service. life had Shirley, Ed of Before his years missed. mentorship, Sysco the experience of of Chairman over former His on be our passing a joy recent tremendous

Our with Ed's are thoughts family.

we're operator, now for that, questions. ready With

Operator

Kelly [Operator will first go Capital. BMO Instructions] Bania We with to

Kelly Bania

maybe driving elaborate September. picture that? comment on And low can quarter? change the you And just just you in the confidence, then help where bigger in compensation And quite start on about into drill positive local and what quantify target off terms growth understand tracking effect the you for if question, that on about change single is of remain impact had half? just second down us exit still the willing fiscal what 'XX? case October? And to digit gives you're the stronger the from that trends to wanted in maybe in that, is are Can a quick the you with one you Just

Kenny Cheung

Kenny. is this Kelly,

start and your to around talk address me and then September about October. let I'll question off So QX

growth growth confident guidance. rate year of Again, QX, rate for EPS will in QX, the be the the the and we're half full step in we slightly expect So year. to that back higher up than

and October, by seeing industry traffic As we're seeing following. to the is October we're well. But at here it Sysco month-to-date September, we're compared encouraged same to similar as the relates the

X First is than is weeks, the stronger weather-related first given events. last X the weeks of October

second the The [indiscernible] the we're model. new geographies growth hitting already charged driven compensation is additions local well as by thing expectations are by select a as

As tougher year-on-year. to do a comp we have QX, it relates mind, in QX, in keep

are local lapping currently QX time half the with and on in year highest the we fiscal of this of positive rate uptick for built XX%. growth EPS in case We XXXX growth turning a for an more year. Kevin? second All expect slight the EPS in of last quarter, the growth rate the

Kevin Hourican

Kelly, the half tied it's the Kevin. the second to I'll take of question comp. [indiscernible]

X. For the the those live we comp June on went call, change announced in July

a people As to with select prepared was leaving That's now I relates comp new our model transitory of there QX change. the in behind as mentioned that impact us. in my remarks, organization it that

We of have our the stabilized retention fully sales colleagues.

that see paper bonus, can your our Specifically of focusing elements emphasis more colleagues and on beginning bear remixed about comp to to us to program question confidence. fruit. We've base we what putting performance the we're the the gives on

what are comp component a that of Increasing things? important count is the So customer very new model. those

count We up each made QX that for quarter, month are expect is of we progress that that and increasing our to continue. the stepping throughout we customer and

in expect half. to proof that's the into that and be increased tailwind second count to point continue we So a we've number customer one, our

Broadline current team is into our which total businesses account. selling, bringing is Second the a of specialty

a our that for colleagues. rewarded for element Broadline They activity. are We that have sales made comp

overall that now it team selling we taking of place. And we seeing the colleagues, is call are of more our grow on grid. the performance therefore, So just third

are grow the as comp into what the moving model, XX their they now plus their our And making our year. more we're growth equals month-over-month, improves. they that and colleagues sales with gives grid, business that's As we're progress up confidence us on and profitably, full and new for earn benefits leaders days the our success, Sysco and success helping

Operator

to We'll Slagle Jefferies. go next Alex with

Alexander Slagle

mix the degree And have wanted the But any lot down U.S. the place are the back in or related and dynamics which initiatives self-help it margins the have I half. just headwinds customer momentum or product, external with dig kind is to and I together to of toward dynamics. a impacts industry I to coming you your seemingly outlook? there's gross here evidence pieces there into the know it's the within redirect of [indiscernible] dynamics alternative opportunity gotten guess, the that being of several in customers gross competitive elsewhere? any tougher, in the Anything if whether here product that proteins trade to margin,

Kevin Hourican

Alex, just go some start, the like gross drivers are remarks. it's margin would decline year-over-year. Kevin. a anything I'll back my percent add. I basis question. I'll nominal add and then of can the of he to to Kenny prepared appreciate There X from

our business The national We're growing faster our first is time. than customer business mix. local at present

local We expect that to our case decline improve as an impact over we the year performance. as

on. or compresses headwind decreases as year the particular goes So

the the is our it's sourcing biggest strategic efforts. of and point, point, Second

prepared a As is I my this issue. said in timing-only remarks,

that full confident QX last this basis, margin contribution versus and that a the value to issue work of fully year our It's from the gross are the deliver rates have unpack the strategic to deliver was our full from percent. year-over-year. And the we that strategic in confidence we as the come to GP [indiscernible] last X the that we do and Sysco interesting the from We slightly that on relative year-over-year penetration us program, year value brand on year. come down creation sourcing just a year lower. full goes year will It's full one. will QX It's enable is in timing requirements. The program year, sourcing will that it's for the

to the call that street mom-and-pop XXX -- customers, decrease what penetration brand we're in our mostly that is Sysco we year-over-year. With in It's local net-net purchases thing our tied doors national For to suppliers customer, good size a your rate. up chains, our which on small is XX actually fill year-over-year. To the LCC, seeing for macro, a improving brand question industries. is range, that's

than suppliers better of Sysco in substitutions brand of over that And don't while like resulted brand products. Sysco national rate national those fill past challenges penetration. types for brand But customers some having be years to the brand couple were Our fill rate. tends higher

that brand, With we trade what chain can on deals brand in Sysco call to We're that? of front what small customers, them division. Kenny, within putting about that specific we of confident and improve the can we add anything are in penetration that value putting margin? to said, management of do concept those we Sysco front

Kenny Cheung

dollars of points we we you for have grew from Sure. that we with I things a agree in It's GP have GP on A back Kevin. GP. step place, overall, around our Alex. QX. couple Kevin's I quarter, pressure is those and the other per put take drivers also things that that actions in acted If X% case would say X in the by X%. GP just other not as heard company. And drive expanded

have We drive other can well. our GP that company levers as in

me margin has you both attachment couple which calories. line team that a examples, top Let us rate. higher a and gives give right, -- specialty selling, growing specialty, of margin Total

particular, in local optimization, international, logistics and supply terms of customers, chain points on minimize inbound where As we go we on. in touch and

well to as that would things other working drive accretion that our our on company are there P&L. So is

Kevin as back benefit, the of half majority in the be the said, of the And year. will

phasing, well, with in the fiscal elevated you And why half in back we rate the back to the the case run around in EPS half question grow that's growth. the and as on half, coupled total big GP, local GP per year. your to summarize see the So case second of reason growth margins dollars expect

and the your the it to half versus in controllable would lift. lift margins back growth itself, I question market actions from our about So say most the own is this way, of market or on

definitely, the So are that's controllable, year. full more reason the we confident it's why and in

Operator

John to next with JPMorgan. go Ivankoe We'll

John Ivankoe

sales on the The is change. question force compensation

the least or first to mentioned have You in been unanticipated quarter. word least of that does minor transitory may transition at relation some like to the or degree. unexpected a And sound it at

we that as performers the impact of we over right as kind any XX% number you've some want type do kind see terms think Or more this So on line you what think of we kind can really still so? behavioral existing underperformers based little here? sales basically did we drill see? the get people target growing as of or changes type more we more years, bit transitory XX% keep? the keep new turnover? And we from seen of of is can all there to in model, a to compensated of still about we the unanticipated couple of [indiscernible]? Did comp next the was in of that best kind force they're do Did out Or of people

Kevin Hourican

process this tail start. me end I'll thought overall the Kevin. impact made we is had, of it's to the again, SE new can the but the question your a the comment is that the let why of we hires, economics which question, to it. This change, part about behind address the John, wanted and Kenny the of do. first change we've

that Our base for of a total potential space job high percentage were was commission. was colleagues. earnings pre-COVID this XXX% as population the too a our Reminder,

during question a program to Their and have answer equals it's culture. bonus below plus on risk pay-for-performance underperformers outcomes we their base unwind more Sysco top a that so their their pay implemented and that, success. To time earnings the versus output of or performing your their people success we COVID years, So of at average. some will performers putting determine and

every love to opportunity in Our money has they top potential want colleague performers, the earnings than the John, Sysco in program. earn program this sales they in more old this program. more

this last actually are We in with year own to versus did X performers see money very need said this QX. We [indiscernible] our with in turnover likely change most the to of we've an that program. or and will year money earning in change July, stabilized. our Behavior individuals themselves outcomes that top is What in rotate activity more our X leadership program. in internal is anticipate increase So some did our more did that. colleague to turnover has of an increase We July. things They're out. pleased this see

to normal SC returned have We of retention. our rates

us. with are colleagues top Our

inbound more money we're challenges from industry fill having needs. no earning from and are and colleagues to competitors colleagues SE with new top Our our hiring hiring the

because made made benefit do. to change the So change we've long of this Sysco. want for we term We this

will, will a behind to our a that us you is headwind the go, QX. change be this if change performance, confident We to SC tailwind curve, the are vis-a-vis comp for not and year

anything P&L year-to-go Kenny, to hiring? on the add impact on the

Kenny Cheung

say. I'll X John, Sure. things

the new of year-over-year First the were [indiscernible] of back program on most in professionals higher the half compensation sales incremental and [indiscernible] our is in 'XX July. early

So the year. headcount. the see to standpoint, adding expect of the will benefits around ROI to your an we half mostly happen in . From question second

we growing head facing disciplined professional our expectations count. on volume be will and to And sales committed some [indiscernible]. local are We

remarks, meaning we on will in too high-growth said correlation not add, we prepared when and too to the return ensure growth where go and count not seeing volume we by by slow And investments. between head market. on his and fast, a are we high Kevin go deliberate will adds be way, optimal markets an will As investing

increase. our The good growth that to last not which was The one had within contributing region international us. XX% would good quarter thing portfolio every news X%, just the is was sales. it's international And say local I [indiscernible] a market, grew for local a is

Operator

go Carden will UBS. with to next We Mark

Mark Carden

some on So of with these in force some so to reductions the shifts adapting lifts model, salesperson the How the to the team-based some you the another is sales compensation territory And changes have of selling guys anticipating? you you one adjustments far? kinds rebaselining. done seeing are of new were

Kevin Hourican

a to count happening, States. [indiscernible] incremental fueling incremental but adds is going head spreading question. United markets shocker for the on to those where across Sysco. count occurring, the where approach opportunity robust, everyone the To our headcount. on and where high-growth it's be not adding this is you won't We're growing, with head evenly to are on of we're clear tell count We those that them places Thank the by are faster make even the geographies head going specifically, activities strong, business call, for

where to profitably. to population So share and win States corridors we United tremendous other win market the see share these growth areas do Sysco for market and in potential are

every not it's So colleague that is impacted by this.

a percentage new impacted in. small reasonably fact, coming In by current colleagues of our a are it's person

has Kenny joins, X of many And times, small as give a a business we when book person roughly accounts. of new starter said them

X account. So that other SEs one customer donated means have

of We territory colleagues. negligible is book we SE reasonably the occur to increasing want current that colleagues. existing grow the to Why beyond we're is zone make impact to business growth red our for size our headcount. grow want adding to the doing our So by It and customer count. this without allows us

specialty customer they're We They're from buying a a local want to that is total be I already component the data, those take buying of or the who shop. this and competitor. the pleased it selling not trying for of who's the with know from protein Broadline, entity Broadline that's entity. to or So first customer buying from their Sysco. really identified not is selling. Sysco business your good through us we're placement from on That's with buying produce who What the to our customer colleagues clear, with buying produce and question, meat cut total currently from produce meat they're we're specialty buying work prospects a a team with specialty that's happened specialty track is starts specialty. and from they're news we the team are

need those And business with and the that We goes and calories to when specialty Xx also put products, you be that our just Broadline talked that business, up that margin we're specialty we capability May see going are the just Investor to let higher as that. that me Kenny a clear customer. about, the about competitor kicking adding we're some why, into Day but with out given selling is Sysco's one account, together bringing that behavior and colleagues account specialty seeing of introducing our is to businesses collaborating, back

can't enough produce. selling on money entities specialty Those just make

start disposables things produce the Sysco. of you they and account, and that then from they And when from like get out were dairy. buy So things those they buying other specialty chemicals selling entity them,

So unlocks of comp When that specialty our bring and they earlier our new a Broadline one business sales comments their that's colleague for friends improves map one see their of proved benefit model, sales into Broadline my about to them the the they and sales organization. account. been to when consultant as well, we as

Operator

We will to go with next John Guggenheim. Heinbockel

John Heinbockel

just -- about you with Kevin, about points And to if path, are they you're of the think Is in last year? are proof succeeding know And -- or specialty. just the are What's XX% or accounts. the you? about a Why can of book when possible geographies the sales it it that be high are full the that then buying you right, X new you get business, accounts number not the seeing, Could is corollaries? to right, in specialty your X months one right, that Where those from think the geographies, cohorts, higher talk of or I what particularly? then start maturation, you one? to quick talked no? of sort

Kevin Hourican

Okay.

questions. Just on you, the part. the John, for first Thank

will. is the in place they if year. Kenny of cohorts half are hiring hired The the we take second question, On said, the part year of classes As first performing? colleagues did you how the which throughout your majority as of that

those what are of cohorts they each versus tracking week are We in.

at unless be a should XX weeks level. certain to be XX should at they a So certain XX, they level.

up these to each rate curve call productivity the moving on report the cohorts actually provided. expect. ensure skills trainers mostly part the we added is of being that training. product efforts that as to news We sales today's is The of they're at It's knowledge a

brand, fact, So that can, in they sell example. an Sysco as

I call at comes we can growth of their expect winning that They're hiring the is, net So rate share cohorts. the business. the curve we're their maturing what with from on up pleased new performance XXXX today's productivity

and to we as in pace QX, year as count We month-over-month our are increasing customer progresses continue, up expect that along. Sysco pick in fact, for our the

anything part want Kenny, of your that? John, question? you to to the add second

John Heinbockel

second the was part? What

Kevin Hourican

please. Yes,

John Heinbockel

curious, proof that? there your to commonality was the geography growth, second piece cohort size was I'm of part terms Well, is just in the the then opportunity. right, they're And any just attacking points, the specialty you're that how last succeeding. of

Kevin Hourican

Yes, very good.

and geographies in where in we're the count be the more perspective On to and very geographies from head share of we we the in why growth even reinforces we're geographies clearly head see need a not. we adding how have proof better point points, And and performing can deploying importance market count that that where the growth the those in the where happening in share market, confidence from where us talent keep our markets, I with in a won't that we're markets. under-indexed but perspective you metro growth seeing those those about we've a forward and capture. hiring we Head from pace metro name is our and the market it gives history, hiring share count plan. Think know and metro market strong metro. that

north it's quoted. percentage to opportunity going the quote it only. to As It's will from have selling, team buying Broadline number for who the of currently not number customers but percentage, be of the you exact a it We're of our the that high. total relates substantial customers are

Operator

next We with to will Edward go Kelly Fargo. Wells

Edward Kelly

over but the year. initial some the impact maybe hires elaborate which ability on in now, 'XX. this Kevin, about you're does Can an sort turnover is pace XXX -- you've but that? hires, of the that on sales I emphasis force talked you measured sounded like about this by had mean issues, it sales maybe about force sales to a hires grow your you of balanced,

the is I'm you just applies? magnitude that that kind 'XX? of curious, I'm around rethinking can Does target are that, that of curious, like the color that sales you hires? of sales impact the the pace still all like, So Any a of provide? hires,

Kenny Cheung

Kenny. Yes,it's

can start off. I So

P&L committed our on margin and expectations, expansion local types we in ensuring sales count we have and to well. that we'll for So year growing as essentially and the of pacing head this disciplined we volume still market many professional on leverage the the But [indiscernible] are ago. periods ensure be

we'll [indiscernible] disciplined not are one and ensuring It's add. on we where Kevin it said, that appropriately we market, As smart all. by pace

correlation strong there's said, rates. a Kevin now growth between and ads market As

Kevin?

Kevin Hourican

based that's I throughout net think the leverage -- the very Yes, have year looking we that but flow-through for. target, that to we're the hitting we'll responsible committed hiring be we're

having cohorts, and we're Just additional and out from AKA the restaurants candidates call candidates from at all no existing them attractive We're difficulty attractive we getting we're from put we job people. rec, from When our getting comment. one competition, hiring industry customers.

Operator

We with Morgan will Stanley. Harbour Brian go next to

Brian Harbour

on Based it to about you label like your sounded the environment. talk just higher had confidence comments, been in sort maybe penetration, due private your Can running just of it right?

actions push specific to of do to higher? that kind what what time it and So will continue take think you

Kevin Hourican

for earnest Thank question. Yes. we to break customer Brian. into and you answer Great, have. one this is sincerity the it down the To types with different X

have the we customers. street mom-and-pop customers, So local

We that and small have chains that I earlier mentioned chains. big then

with Our very customer different types. those X percent penetration is

well our We're penetration actually For local . increased street run it's mom-and-pop continued customers, in doing the there. play. the and extremely customers, year-over-year first to the quarter

value increasing a small cuttings, deals positive. the year-over-year, suppliers management what the need mostly brand customer is That's trade the Within make national by case, driven a of brand What overall their product in the product, is. the we let chains, what call for taste rates, some with growing type industry to net-net management concepts, share front Sysco fill is win with slight which deal that our progress that them, when to dilution them customer. creation to of we we do trade

that progress, will some The confidence that's examples There able ago case a able of national give be shift the are order in of invest on. a there. be make favorability that case, substantially with of product to multiples Sysco, new we're and make brand what we working Sysco a them to year that customer us introductions to profitable brand can and with to we more is than able have be that

some education this opportunity And make health brand, an with This shift. would customers Sysco have care those the third put the those deals to Think the is It's to value of in be encourage then This counter, with Mostly, entities. a them customer noncommercial show chain behind as types management kitchen to to concept. those largest favorability trade of in a of more would be back similar customers. conversions, not we front about restaurants. invest them the entities. our is national

if issue, prepared profile, year, creation. year, talked I continue Kenny over a the are creation competitive confidence for that remarks. will timing-only sourcing full this It's margin term, deliver versus the have we sourcing, Sysco my RFPs, value half. strategic about margin confident for just long go, in and be full just the prior year and target. margin, bigger the that you fully strategic our year a are will we're QX penetration, take The the bids they be second for growth and time, brand to confident Sysco story fully it's during So These I at value we margin more the [indiscernible] story to will though, tailwind. look component The

Kenny, anything to add?

Kenny Cheung

Brian. Yes.

about quarter So global portfolio [indiscernible] and XX% quarter. have the And customers, of we mind, about customers. still i.e., after keep brand portfolio, it's is think penetration penetration, in growing strong Sysco local existing

get innovation. product call As Kevin benefit the expect is well, not a about, the half. in important Kevin about Sysco reason we'll to back excited non-Sysco strategic leverage brand sourcing. out, as said, and [indiscernible] as [indiscernible] think sourcing, talked the only brand, I well we're but Strategic also it's that also as that's confident P&L in the as why we're we leverage

Operator

We'll go next Bernstein Barclays. Jeffrey to with

Jeffrey Bernstein

questions on this related think growth rest year. we just of Great. the Two as about sales

guess, I one, this XX low growth was points quarter. in first The basis case

I [indiscernible] think XXX. Edward said you Don

the hiring XXX changes. maybe most down acceleration. in that, it I without is you was get very ramp feeling it the the in basis compensation about guess I points, guys of but So confident and seem the

quarter to risk assumed greatest X, a the play what's some it in curious, out this as for just if I'm expected. doesn't reason, So or acceleration,

broadly, just fiscal just is guess, more follow-up my on I 'XX. And

Your to couple of I you X% points said a slide X% of deck inflation. sales, think shows

X% X% about talking we're maybe So case to growth.

about chains your Just the the confidence 'XX gap between line? in narrows broadly, the more and meaningfully fiscal asking wondering I that presumably the the growth top bottom and how you case just think guess both independents guidance, whether the

Kevin Hourican

Kevin. it's Jeff,

a this good it's a this up great is think we're there and question, I question. putting and capstone

So question, process final second address going overall then part of I In directly Kenny answering which to will question, your is and the confidence. question, start of growth I'm words. toss to actually your that for volume

of in impact the margin, gross line P&L. X management, year. the the that Kenny gives progress we and the full our on what the of progress and we're for year growth, expense of of following: each the sight levers therefore, making full is have in Volume direct then main So the confidence X that I and

So let's start with volume.

Those remainder ahead go that and of as we as year. performing month-over-month headwind growth hitting into give making already of carry the is our comp The volume we confidence We're QX at mentioned was the progress the success actually that earlier, full our will are They flips country completely key that regions highly in change of tailwind. regions are becomes that of it the which rest [indiscernible] realizable. our a in curve. a than change As targets. level, more a tailwind, get

as growth head will training now of the XXXX, continue count happened our fiscal still said, mostly goes count growing of Kenny We're product They're of the folks classes. has, still The half year knowledge in coming class. they count the their these out customer on. out street. second are hitting coming customer that They're training

Total team selling, this Sysco. muscle new for is

We are the selling. getting better at team-based

are. clarity crystal on a the getting account. have doing targets better the customer who of into the We We're job specialists

increase at hit rate do when need the continues continue our is number to per period. to We we targets. just of and we close exceptional to Our call that what that

throughout all the When to light not switch year. from It's it's you steady that a a off sequential progress on. put together,

that from, gap just of exists national for have were of expectations. will line tighten we our process volume a we and that between have The that and that about. can where and currently progress deliver sight that how doing will confidence net We you come local asking

on topic volume. that's So

which is gross Topic X, margin.

timing the said, slight I year-over-year issue. a in As QX dilution is

to margin we expectations and It is strength We deliver gross Sysco, deliver our ability will in point of for have confidence full our a gross expectations. the year. our margin

year-over-year. to Last but our the year-over-year. modeling not supply economics. least, to in improving up transportation our chain Productivity Kenny Retention inbound talked improve. about opportunity continues area, expense strengthen substantially the improve and and

all routing to things. working on opportunity customers reduce the of these miles have on to outbound or road, the update we're and We

improvement will So year. continue the our expense through

those us also the though, together, And that's when things you confidence. long Most game. all gives we're what put playing the importantly,

Sysco our facility continue in last long with term. last the in to We We for brand-new out facility brand-new the quarter. success opened the opened the of L.A. in business a for We Allentown invest Italian within a quarter. [indiscernible],

competitive enable strength deliver Sysco term, in a can in sheet to decades year leader come. continue expectations the moat investments to of that's while make that's that this continuing industry the We will and to invest our action. for long defensible the We to balance a current for be in profit

Kenny, over you, you'd for to to like anything add.

Kenny Cheung

things of to add. Yes. couple Jeff, a

So the we guidance as are is, for the month said, things confident very strongest September line. our one, number rates, Three point financial in of news of bottom was Kevin the exit quarter, our some both and headline year. top sort right,

Next our into this the is X we and P&L. levers is have continuing in Number quarter.

GDP, ago have what year to corporate a -- but expenses. for and expenses as So we still think repeat first down about we between pipeline Kevin I year-on-year, also chain and won't were the well. about corporate talked X, robust supply XX%

year, to on not by deflation, a that the is and right? flex guided come how than we also disinflation, what softer the last our and was muscle confidence dynamic. floor. last were overcome we midpoint our around And It had the last question can year. able were reflex we have how So before, different, we to macro of do? your can backdrop if flex about to things we fact higher We our managed in and but a know We the expenses. It guide. least, Think

said, Kevin as fantastically. So

can we facilities company, are year quarter. model line both thing the right are of the the Yes, in compensation our we long new playing our We top have Overall, and game. it's achieve But and purposeful do as some are and we bottom confident roll out line. we full company. for such the managing to guide decisions

Operator

program. this gentlemen, Ladies today's Thank does you participation. your conclude for and

any time. You may disconnect at

Sysco (SYY) 29 Oct 242025 Q1 Earnings call transcript