Sysco Corporation Q4 FY2025 earnings call

• Fourth Quarter Performance: Adjusted results exceeded expectations, with restaurant traffic improving throughout the quarter. Sales were $21.1 billion, adjusted operating income was $1.1 billion, and adjusted EPS grew to $1.48, up 6.5% relative to the prior year.
• Key Initiatives:
  • International: Advancing selling initiatives like Sysco Your Way, improving customer and colleague-facing technology, adding local sales resources in key geographies, and continuing supply chain capacity expansion.
  • National: National sales business focused on foodservice management, travel & leisure, and healthcare, with technology investments to deepen connectivity with large customers.
  • Local Business: Focused on stabilizing sales colleague retention, improving sales colleague training/productivity, launching Perks 2.0 loyalty program, AI-empowered sales tool, and price agility pilot.

U.S. Foodservice: Delivered sales of $21.1 billion, up 2.8% on a reported basis and 3.7% excluding the divestiture of the Mexican business. Local case volume was down 1.5% in the quarter, but showed a 200 basis point improvement versus Q3. International: Posted 3.6% top line growth on a reported basis and 8.3% when excluding the divestiture of Mexico. Local case growth was plus 4%, and adjusted operating income increased 20.1%, representing the seventh consecutive quarter of double-digit profit growth. SYGMA: Delivered sales growth of 5.9% for the quarter, with top line growing 8.3% and bottom line 12.5% for the year. Growth rates are expected to moderate in 2026 as they lap large customer wins earned in 2025.

• Fiscal Year 2026: Reported net sales expected to grow 3%-5% to $84 billion to $85 billion. Adjusted EPS expected to be $4.50-$4.60, a 1%-3% growth, with an approximate $0.16/share headwind from lapping lower incentive compensation in FY 2025. Dividends ~$1 billion and share repurchases ~$1 billion planned. Target net leverage ratio of 2.5x to 2.75x.
• Expect tax rate of ~23.5%-24%, adjusted depreciation and amortization ~$870 million, interest expense ~$700 million, and other expense ~$45 million.

• Macro Environment: Industry traffic trends, potential impact of tariffs, and consumer confidence could affect performance.
• Operational: Colleague turnover could impact customer retention, and change management challenges for price agility rollout may affect its broad implementation.

Q: Jake Bartlett with Truist Securities asked about momentum in local case growth and if Sysco is gaining share in June and July.

A: Kevin Hourican responded that they're pleased with Q4 progress, colleague retention stabilized, new customer wins strong, and growth initiatives like Perks 2.0 and AI tool will drive share gain.

Q: Jeffrey Bernstein with Barclays asked about broader industry factors sustaining momentum and local case volume growth.

A: Kevin Hourican said industry traffic improved from Q3, they're confident in taking share by improving customer loss rate and launching growth initiatives. Kenny Cheung added on foot traffic composition and guidance breakdown.

Q: Alex Slagle with Jefferies asked about International segment growth moderation.

A: Kevin Hourican said International will continue strong growth with sales resource additions, improved websites/pricing, strategic sourcing, and technology deployment. Kenny Cheung noted margin improvement potential.

Q: John Heinbockel with Guggenheim asked about sales force local case growth relationship.

A: Kevin Hourican discussed colleague growth expectations, cohort productivity, and customer retention impact. Kenny Cheung added on headcount growth and leverage.

Q: Kelly Bania with BMO Capital asked about price agility initiative financial implications.

A: Kevin Hourican explained price agility aims to improve volume profitably, with change management needed. Kenny Cheung added on growth drivers.

Q: Edward Kelly with Wells Fargo asked about sales force turnover and cost per case.

A: Kevin Hourican addressed turnover ripple effect, confident in programs offsetting it. Kenny Cheung broke down cost per case by COGS and base cost.

Q: John Ivankoe with JPMorgan asked about consolidation in foodservice distribution.

A: Kevin Hourican talked about AI's efficiency impact, sales force growth with AI, and M&A opportunities.

Q: Mark Carden with UBS asked about promotional activity and restaurant stress.

A: Kevin Hourican said successful restaurants are those with strong value props, and Sysco focuses on providing value to operators. Kenny Cheung noted low bad debt from restaurant closures