Release Date: April 29, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Sysco Corp (SYY, Financial) reported sales growth of 1.1% on a reported basis and 1.8% when excluding the divestiture of Mexico.
• The International segment posted another compelling quarter with double-digit profit growth, marking the sixth consecutive quarter of such performance.
• Sysco Corp (SYY) successfully passed through approximately 2.1% inflation for the quarter, converting negative foot traffic into positive sales.
• The SYGMA segment delivered strong sales growth of 9.5% for the quarter, driven by significant customer wins.
• Sysco Corp (SYY) has made solid progress on its $100 million profit improvement efforts, with positive contributions from strategic sourcing and inbound logistics efficiency improvements.

Negative Points

• Sysco Corp (SYY) experienced a 3.1% decline in foot traffic to restaurants, reflecting industry challenges and adverse weather conditions.
• The company reported a decrease in adjusted operating income by 3.3% compared to the previous year.
• Sysco Corp (SYY) faced challenges due to shaken consumer confidence, with the Michigan consumer confidence survey highlighting low levels not seen in approximately 20 years.
• The local business segment delivered negative 3.5% volume growth for the quarter, a step down from Q2 performance.
• Sysco Corp (SYY) lowered its full-year guidance for FY25, expecting reported net sales growth of approximately 3%, down from the prior target of 4% to 5%.

Q & A Highlights

Q: Can you discuss the sales head count investments and any evidence that these investments are moving the needle in terms of positive organic growth or market share gains? A: Kevin Hourican, Sysco Corp's CEO, stated that they expect to end the year with approximately 4% growth in sales head count. He highlighted that March and April showed stronger performance, with new customer wins at levels not seen since the COVID recovery. The productivity of new hires is on target, and while turnover was a headwind earlier, it is expected to become a tailwind in fiscal 2026. Kenny Cheung, CFO, added that select geographies are already meeting growth expectations due to improved retention and a new compensation model.

Q: How has the local restaurant industry backdrop held up relative to national restaurants, and are there any regional challenges? A: Kevin Hourican noted that national restaurants had a tough quarter, with softness consistent with local numbers. However, Sysco's national business showed strength in sectors like food service management, travel, and education. Weather impacted performance across the U.S., but the International division performed well, not facing the same external headwinds.

Q: Is the decline in local case growth self-inflicted, and how does it relate to fiscal 2025 guidance? A: Kevin Hourican confirmed that Sysco's performance was consistent with the market, and they are seeing positive separation in Q4. The steep drop in February traffic was unexpected, impacting costs and volumes. Kenny Cheung explained that the guidance revision reflects the challenging macro environment, but they are confident due to momentum in self-help initiatives and cost savings.

Q: Can you elaborate on the sales force opportunity and the potential for local case volume improvement? A: Kevin Hourican emphasized that stabilizing colleague retention and improving new hire productivity are key. The sales force is expected to be a tailwind in fiscal 2026. Sysco is also focusing on pricing agility and reducing customer churn to drive local volume growth. Kenny Cheung added that as sales professionals become more productive, the gap between sales growth and expenses should narrow.

Q: What is driving the elevated churn across the industry, and how does Sysco plan to address it? A: Kevin Hourican attributed increased churn to customers seeking value and increased price transparency due to online ordering. Supply chain resiliency is also a factor, with customers diversifying suppliers. Sysco plans to focus on retaining and penetrating their best customers to reduce churn and drive growth in fiscal 2026.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.