SYY Sysco

Neil Russell Vice President, Investor Relations and Communications
Tom Bené President, Chief Executive Officer and Director
Joel Grade Executive Vice President and Chief Financial Officer
Christopher Mandeville Jefferies
Bob Summers Buckingham
Edward Kelly Wells Fargo Securities
John Heinbockel Guggenheim Securities
Karen Short Barclays Bank
Vincent Sinisi Morgan Stanley
Judah Frommer Crédit Suisse
Marisa Sullivan Bank of America Merrill Lynch
Kelly Bania BMO Capital Markets
Ajay Jain Pivotal Research Group
Karen Holthouse Goldman Sachs Group
John Ivankoe JPMorgan Chase & Co.
Andrew Wolf Loop Capital Markets
Call transcript
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Good morning, and welcome to Sysco's First Quarter Fiscal 2019 Conference Call.

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

We will begin today's call with opening remarks and introductions. I would like to turn the call over to Neil Russell, Vice President of Investor Relations and Communications. Please go ahead.

Neil Russell

Christina. Thanks, everyone. morning, Good Sysco's fiscal to earnings first welcome XXXX quarter call. And

Officer. Tom in Joel President Financial Houston me Bené, Grade, today Chief and Joining Officer; are our Executive and our Chief

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

Instructions] the like to slides found can be Bené. news could results IR App. filings. in in these presentation limited slides. via the website. our included time, to ended at that but those factors the A Tom to the XX-K forward-looking and on non-GAAP Chief section President release XX, materials to Form end earlier of contained factors from the our our not year these this in also July about copy our found of or is this [Operator in the at information Additional section contained can turn morning. are cause comments report and reconciliation the to, the the risk in Investors subsequent is Non-GAAP in over This differ the annual measures our included At are statements Sysco's SEC of GAAP and The be SEC measures I'd today financial of presentation company's measures Investors corresponding call includes, XXXX, for issued Executive filings in and in Officer,

Tom Bené

temporary more performance turn will us. the financial across Discuss operating key an detail. of priorities. very thank drivers categories across to inflation our strategic and operating environment Hurricane we our by financial Due the additional and a I'll of the across From of Sysco's four growth segment. decreased Joel driven business. walk operating offset late increase you reflect this quarter, as businesses. initiatives in sales first year, a to we a $XX.X billion, we who international performance period variety impacting hit including currently compared Florence morning year-over-year last joining This business I'll Officer the some call morning driven and the results our as persistent by of strong results across provide a headwinds, top-line discuss generated some Broadline our results. impact our everyone X.X% of including by overview mixed US and our are results had of morning, improve each Chief more announced case the same macro some and that performance, perspective, slower growth in the through quarter of in Financial as But our over always Sysco's Good expense pressures, business then operating Grade, well each to X.X%. overall for southeast to

increased by Additionally, and growth adjusted discipline, enable our and $X.XX achievement were income our suppliers of growth the and closely quarter organization to the Adjusted operating customers X.X% expense saw working profit EPS with and to X.X%; Overall, objectives. focused of gross remain for increased long-term to increase deliver adjusted an our we we fundamentals $X.XX. our X.X%. as operating solid profitable

high spending. trends consumer driven industry in which US, confidence healthy Looking the at broader remains is overall consumer economic and

same-store growth despite the the same lower store black During traffic. intelligence, particularly quarter, saw box to industry performance sales improved according in restaurant

forecasted the are being somewhat outlet GDP labor factors closures UK, the positive in due of the consumption grow of projected conditions continues in experience have foodservice the data to industry. the for remains driven In in supply strength concerns signs economy addition, are the sales for confidence. in Brexit over European mixed. household foodservice implications points is that the foodservice growth all The economic improving with about markets, next the food positive restaurants to year, sentiment and been performing market geographies growth and by market well chain continue other In than to GDP Canada's and X.X% negotiations. growing. remainder longer-term positive consumer demand healthy such Economic further reflect both continued anticipated remains faster consumer as but negative and to of consumer our US international and historically

impacts driven to international seeing address the As the will slowdown business, are the affecting and some segment environment challenges it US businesses, relates which labor various operating we current the in our the in tightening in a results. specifically in some by cost our of I of and growth Sysco at market

increased and service we our and few globalization changes our benefit Given utilizes finance see A December. from initiatives these helping have multiple of and placed automation and the initiatives our for allows platform include initiative spend focused G&A a savings. to at will This visibility, ongoing transition which ownership are to reducing which is accelerating processes some Day first acute Job certain overall expect we accelerated up forward. as centralization and costs commenced our digital drive also would already lower discussed contribute the across Canadian operations, which segment the to on Canadian now Smart improve roadmap and on look managing our over focuses at that administrative results unprecedented several financial savings planned with management for on administrative beginning workflow, next productivity in move on of maintaining of I begun and our customer of This effort all performance the And increased of our Foodservice over US our ramp this streamlining our categories back-office This quarter customer. third, cost regionalization finance effort challenges, is detailed This in initiative to originally by as business and on Investor having quarters. to quarters. like taking transformation next finance will drive is costs. to standardization improvement increased indirect focus has and our global efficiency. providing few cost overall to these Operations. business. to and the areas a more spend recently by while our enhance spending end-to-end focused we business support we modern an roles,

with Sales our expenses gross of for result operating X.X%; X.X% increase X.X%; as significant continue X.X%. grew first pleased case profit local follows. the grew as mentioned results an billion, growth see and are operating are We challenges. $XX.X increased quarter The to but we top-line and cost were income

and % growth. local now As consecutive grown case and a volume mix mentioned, local customer XX volume Broadline X.X% US Broadline within for case national previously quarters. of strong Operations growing within Total US reflecting Operations both was is X.X% grew

As it both of in to added Doerle see of moderating relates we HFM which XX.X national the by up in brand hurricane acquisitions, year expect numbers in local impact to the annualization growth % prior X.X% and to and despite Michael. softening to large is forward the Gross Sysco continue inflation two we volume, as annualization of grew see cases. going profit the of some growth the the through year-over-year customers

concepts known to continue We these as also as unique resonate micro also locations today's chains continue to local with consumers. see with emerging accelerating growth

including the local portion the transportation costs expense of the growth the type and fact, perspective, X.X% both warehouse grew larger expense cost coming with currently customer. operating tight due chain driven of for to In is by and From in significant associated market. this our hiring from expense an quarter labor supply overtime

rising prices higher operating Additionally, to quarter. the also for fuel our contributed expenses

We challenges in control are to we continuing in and hiring training manage place drive supply and by with and our teams on mentioned working putting to to earlier tighter addressing productivity better retain talent chain and initiatives practices costs, operations. these our working by improve our I the how

Europe, on Moving were than Operations, Top increased accelerated adjusted increased operating surrounding we expenses France the gross and is fiscal expected grew International half X.X% businesses have by results uncertainty similar line second of solid saw performance momentum our moderate. the From adjusted we XXXX, our met restructure as were in size in impacting to Sysco Davigel operating to combining of the results American of first performance Costa in ultimately adjusted; create environment our have of the France, we progress transportation. performance to some and we combination us in Sales towards France. operations, Brake operations a which made in a offset driven market business in and includes Brexit. operating the and X.X%. after year-over-year will profit we flat warehouse softer along UK In had experiencing deliver activities were challenges quarter overall challenging a Rica partially saturation partially X.X%; enable US which growth Latin we cost that In a with Canada quarter and rationalization businesses, quarter. leverage And of perspective, these our in lost as Canada for as with customers the mixed performance Canada by scale the Foodservice both sales expectations particularly began restaurants good for significant our Mexico. to cost income a in

Ireland final Sysco France cost combine we as phase continue integration Brakes with Pallas strategic there. in in of our efforts along transformation Foods Europe Additionally, with occurring the the well of and synergies progressing

as Finally, network and improve customer cost distribution experience enable the our multi is the the ongoing across supply we structure country. us moving chain UK will forward our investment reconfigure overall eventually temperature in to and in

macro are our this and Moving the with in warehouse chain also underlying business. on the both to of area segment SYGMA. impacting +The challenges transportation cost supply

with disciplined our sales some first to and a take the modestly we approach to transitioned decreased continue business during have growth quarter. as We customers

important look opportunities opportunities value synergistic looking while to segment, chain continue for our improve in for restaurant growth. this We for proposition also to

in despite of also we guests segment, our which year-over-year and we on Overall, to the in tariffs are segment the to on initiatives continue certain business. products are this variety challenges experiencing increased along of with combination to challenges business environment, cost other business of largest increased working the hospitality top-line in see related summary, in with shipping associated pressure the categories mitigate experienced due of put a In to results activities growth began of operating to a product some some cost apply we to customers. improve the business. delivered segment our our expense Lastly, and operating of

and to our long- three roadmap term Furthermore, serve remain on for we value which solid objectives. focused ability are will remain as delivering believe priorities, fundamentals our financial overall creation. confident strategic and year Our growth against our plan we in we additional achieve our

the Financial Now Officer. call I'll turn Grade, Joel Chief our over in

Joel Grade

with you financial our performance provide Thank would details you, additional everyone. Good Tom. to quarter. morning, I like for the surrounding

categories. larger debt warehouse as for by foreign year. US billion, Tom large costs, going XX%. related expense local expenses the to and rates increase in for by first driven and Sysco Sysco deflation X.X% As points and in quarter poultry supply were total first as Changes customers out costs profit a and fuel increased compared to the as increased couple sales Gross in and The the quarter. in exchange prior Adjusted year was in period for decreased noted by primarily sales largely year-over-year in discussed a the operations $XX.X operating in margin both bad of increase the inflation decline an increased chain of driven well last the our basis increased produce in to part due previously total two business. quarter grew gross X.X% expense recoveries in for transportation meat, same X.X%

make integration continue international to and we transformation in business. in Additionally, investments our

growth the quarter basis was Regarding the compared between the gap income continued approach profit to in expense operations, XX forward. X.X% were can attributed in exchange decreased the quarter. last same and gross we accelerate customer the costs to the improve first indicated, performance million year. going aggressive and But supply this compression an in to we that performance The to of foreign by increase quarter, Total be for as taking Canadian rates adjusted are Hurricane period operating growth, Florence. initiatives increase Changes gap costs in $XXX and points. dollar disappointed in chain an operating adjusted operating our Tom US income our during mix

I'll per discuss earnings quarter were lower a of this of moment, earnings our $X.XX per XX% which tax a terms result share more by impacted in growth In than adjusted an per rate, primarily share. share, more to driving

variable the than than increased to year. was Returning due higher However, changes this rate last interest to was year the exercises partially expense offset taxes. stock option same and which period less by prior in slightly

benefits Jobs XX.X% share by the were the to Cuts first is lower the Tax rates Act fiscal on from XX.X% of tax dollar resulting tax fiscal rate based XXXX With enactment effective and primarily based first and XXXX for and XXXX The local, tax effective based of and tax rates to quarter quarters of the for regard Our repurchases, other higher due a the rates lower of amount we and in offset excess equity impact compensation, jurisdictions. shares program. of partially repurchase states favorable respectively.

in last is year. this to period means It's a repurchased $XXX liabilities Cash weaker quarter opportunity exposure. shares flow remainder higher flow and good than from assets the which we driven previously improvement to a operations no demand payables. seasonally was Canada our same to geographies. our In million with $XXX fewer notes With the balance pleased in quarter, flow for fixed quarter cash being the investor increase working in advantage year. period was the for good than $XXX during compared share last September, that to of are and issued quarter. income the in same further where changes year different the price for cash capital, compared the Free had Canada and net is period This million The take I'm to often and in performance versus mostly improved the which cash important the period same We is the Sysco note same higher receivables our improvement in first $XXX working capital senior had year. last million was last primarily by is year. flow of million, due

US created on the Reform. as we to very Canada term notes We're a out will Tax with paid interest be April and earnings from that beginning in looked of XXXX. the debt transaction of was pleased to April October and As internal semi-annually repatriate result the in

the shared Before closing, look messages we of with I the would like couple of some to next ahead quarters. we to reinforce you as have

a environment in as expect mentioned, initiatives continued volume our have growth US result Tom a macro capabilities both the our competition. to As we differentiate and of from business our healthy

emerging and large this annualization chains, customer of we will Due in moderate. the other of are growth begin national gross overall will beginning customers will acquisitions. impact our dollar annualize large to towards the to a which our And growth. we to shift However, we growth volume mix to annualize to a now micro or of two year. begin couple fiscal annualization, of annualize One, along half expect more concepts the profit with the second

few to and as and benefit next expenses, quarters. accelerate to initiatives have the mentioned, these for As Tom cost plan our we aggressively expect manage a the initiatives up of over ramp

result, second have our quarter. a income As during expect we growth modest to fiscal operating

half the second still objectives momentum to the results in our committed from In financial fiscal ability achieve and three-year confident with in to performance XXXX improved plan. expect our our for reflect summary, the quarter ultimately continued we three-year of are solid and plan. associated However, our macro-environment gross full underlying business, objectives costs to That our have work financial local case to headwinds, dollar of and do our we profit growth including growth. achieve overall the more in said, mitigate order the manage and strong

executing we're for a near of improve long-term. are To in We to Q&A. both servicing performance financial and in and to our all on committed now customers business. continue our ready areas our Operator, level high the


from Christopher [Operator from comes Jefferies. Our Instructions] Mandeville first question

open. Your line is

Christopher Mandeville

morning. good Yes,

I basis nice organic to close improvement prior XX sequential provided had You of XX cases number. think you points. in first-half to year guys some don't your saw

hoping had So maybe I those organic off. on was for just off you QX first hand cases QX,

Joel Grade

this Yes. Chris, is Joe. just

mean I half just question M&A. very think year of is-- the I to clarify there's there first think your little I last

just at that M&A And a And you're last if think M&A note here not question. so looking year. is that having and your is this and I that's I we probably part what of year difference in hadn't,

Christopher Mandeville

you thinking about the two-year things for maybe line on that a two-year moderation matter. on somewhat Okay. a Yes. you're cases basis? expecting about question some in basis, top be on trends for that looking QX or How do you keeping would suppose I stack My feel reference stable of

Joel Grade

coming the the we the future things HFM a some Doerle been of bit we're Those fact around large simply part sight some our move some some at year is going acquisition, to suggesting really assumptions from think, we of in that that of - volume including look, there. some would and that happening made Well, think I move or X%, growth. some, an over I as as X.X% we to three-year M&A acquisition, here X% is seeing think near that this we things to to on of as that little I Yes. M&A about plan things some of X.X%. but about grow here, one about about to with going still about back I the talked reference overall about you about Again a to of --what next some trying to that is certainly talked there's of little here we Again the but that next we're are benefiting that quarter we referenced volume of impact our the have overall think just that local three good line be national of moderation going plan. We about things we're give broadly feel the every accounts some head we some X% quarter get the volume talked and numbers we've into over as different I forward. look talked just

Christopher Mandeville

your would the gross to that up accelerating forward even overall with year. follow you you the see back in offset weren't your improved and the that you'll trends cost quarter, in dollar half going my help growth so profit be savings programs and be happy to trying referenced Okay on some of

that predicated mentioned has degree half were that there's and confident over of gross you improve going on profit also out. be softness some recall was growth to the just on in algorithm should we and some or be we'll to but near-term XXXX outlook, I You still the changed dollar so here dollars if your profit growth gross from thinking

Tom Bené

Tom. Hey, Chris, Yes, this is

disappointed don't the think are I I gross not we in and gross What - was dollar So between be. profit expenses they gap we profit hoped growth. we said that said had where we think dollar was our would

And so to get not still profit increases think of is current dollar the are better comfortable see I expect gross What management are good where we're focus we've got we with the and cost at. because growth. to not, they cost

And but that expect is of some mitigate to now. headline I got growth what we talked right gross think see externally, that we so decent to rising similar to still these us were challenging figure how are out the --that to profit as just we've about here costs


Bob comes from next from question Our Summers Buckingham.

open. Your is line

Bob Summers

good Hey, morning.

leverage think I think the a deflation favorable I more any way that And impacting about case volume way texture not if mean what's number growth right that. the profit gap to it? between wind Just to off dollar growth to in a little that gross I view out and like about

Joel Grade


Bob, Joe. it's So,

was part as anticipated is deflation inflation on and point this less level is at with some we So there I'll of today had I plan start obviously that. of and three-year where couple projections of an the think that. the the than we're things

a mathematical profit less some that out that what the I percentage dollars. in you part you a environment have margin of environment have we're the gross in improvement you are less actually think fact calling inflationary deflationary So again which is typically

lower profit. lower And tend having the inflation gross so does impact to when of be

so I of that's seeing we're what And there. think part

we're micro some thing within local the mix out think talked called would we're some seeing cases this are some part some that little versus the our the pure calling was profits out about also will accelerated of some here call actually something of of our think chains, bit I we mix of I of we of leveling gross bit growing of the somewhat the referencing independence --even what is of some the things as we're at some even that's an a between that's here. off part rate other I of of a a and

So are those - couple of

Bob Summers

way volume the side the any cost Hurricanes you I side. case referenced and you but in size on then up didn't it normalize? And on try How the should

Tom Bené


to top-line I Michael and quarter one think will talked is look typically, both what the of lose actually we hurricanes them still the We two. the our find quarter one have the the them recover. reason impact is we We Bob, cases because the sometimes get to costs. down, outlets try the shut are of one, We more those about down, basically we've impacted and right. other of we way But don't typically people. but shut try still we we pay at some markets still

them overtime to are we there. need where having We when we to because many are we struggle need get them paying as people

And less a situations. And what so cost tend experienced of first we situations. year a both bit a the those in of little ago get we had couple top-line in of in we to hurricanes. more and Obviously that's that with quarter is those

somewhat in the second will smaller a be quarter. little real and the is here impact first quarter the larger probably in So maybe

Joel Grade

penny I little we call. it I say Yes. Florence you're the, itself somewhere impact And is size the mean would less it some Bob, than of where didn't a right, a let's out. pretty


comes Our Wells next Fargo. question Edward from Kelly from

Your line is open.

Edward Kelly

of just just What to into gotten has mix this Has along fall bit think of relative guys. I little cogs there's and as or Good a talking and lines, worse here been there's they're OpEx within relative asked in sort and the with morning. is guess to this going P&L some how historically. hi, that impact started about freight? dollar of this part quarter to Bob more there's and that we impacting the of we truly as is lack profit a extent on think wanted you're growth about a Yes, the issue right issue? case part just a that pressures cost further I that short was what I growth, inbound because about think a on inflation to going gross clearly there of dig

Tom Bené

I'll then can jump start and Joe in.

of I suggest. you think more probably it's

more and of is is somewhat but mixed think which look, a of issue key a impacting planned, it's of, it's couple that had seeing the a also down I us. deflation it inflation slowing of categories we in

the I great think freight we were consistent maybe I addition, it's and in last but look, inbound think is gotten more experiencing better. not year. It's still think more I

because make and challenge. everything sure the in. hire door, it's can and Whether think or that So of coming to us retain all enables bit get challenge doing manage ability our continues everything drivers be still obviously up better. it's that It's a through I to products say a impact as to out the-- consistency to a we're around of little we it our products we'd still the

just there stable we're as inbound as we we more the see optimistic with season, but within a just that we that continue a the We're do pressure throughout but on to will year what worry more think that were we they're get I freight we're more year than little road. cautiously seeing holiday this is ago.

Joel Grade

inflating deflationary plate yes, I'd we've are on the think these to produce fairly had about or business per large themselves in we number are it again what deflation are. in talked of example, Those cases center has it and just some Yes matters you're FreshPoint in And dollar referring also that one deflation area. experiencing some some what but that to. and or add in that, is this earlier Tom's on in case consistently. is always actually pretty and ways the that more significant some the our deflation I It them, case deflating this this always a had the of we comment impact I - categories in for the area the are matters We've meats about just and you the start of thing that important. inflation think categories are

Edward Kelly

take at industry on thinking All right. and mean given rising the pricing How the And this then obviously very issues and about strong offset your with with lot offset like on pay just price? in what's And, why? a the of you you are try to to looking top-line I pricing up not, a is offsets. the pressures? warehouses. side driver potential follow it to going doesn't point the cost if of actively this some Are cost and

Tom Bené


So, pass of pricing we reasonable look are try to a is we to always perspective. and from course, along at what

I this quarter, we think that creating between as which of and inflation inbound is seen, adding along rising pass in our see in the much categories about. are said talk we've and we as of trying as challenge the the the I'd seen some only it we've is obviously freight this we're say Having can. the our that, we of a gap pricing pressure between some to we talking did a is of some and to cogs little cogs bit that

We're revenue to couple just-- customers the our without can management we're or we the our creating move for growth. everything work issues years. So we continue to and leverage of we've for along last over obviously doing overall done top-line our it tools all

Edward Kelly

And just versus there. SG&A back of mean When an about last to back GP in growth? do question the when you you're that say expecting you think X% that you the obviously gap year, half improvement

Tom Bené

are the very cost and side tighter. Yes, get we our focus sure make do of managing that's how very strong we growing keep, the then business is top-line the much

Joel Grade

targeted that and that Yes just that of part remember as for three-year gap at again time you that period. was three-year plan if

some So certainly acceleration. that there's a plan has


from Heinbockel Guggenheim. comes John from question next Our

Your line is open.

John Heinbockel

your How that know planned? start EBIT. So a you Tom that--I and that part little these overhead shared grow Did lot have corporate would you liked do line the have but about item attack low? on is a or me basis to services faster specifically corporate in Joe, period of the go-forward of on fair than attacking that hold with that is right or to are us let next You X% or the it quarters? And can think can or talk couple X% growth maybe way for that that too you're a the then here of to grow?

Joel Grade

and we not can question chime the happened original that start if then answer acceleration I --first this me let quarter. Well, all, that of part of the did actually cost Tom was no, mean-- he is wants. your not I

address. that that of finance have the comments in said of one not some of opportunity were things again in but areas still is technology a continuing so particular today. the some accelerate of the we his operations the even faster So world the a having the where need around rate some that we're had the suggest have smart are macro roadmap, we to of that areas don't referenced we Tom of of we some continue that, that in in have than we at challenges about spending areas in These side. talked terms to to And in

think of there's each be I are in a so we year, those --there that finance the categories. area. things always it with going of talking type pay going to starts and is in that are there spending as increases but increase doing to and decreases in in so are couple accelerate And things Tom about some terms and given roadmap about cost And points referenced think that we're further of what these now things them again any smart technology actually

John Heinbockel

some that of same of the pulling warehouse in or forward light it's cost timetable on Yes, the timetable? are the on pressures you

Joel Grade

we that, stay doing some yes, but puts In so. we're but takes can't on sure obviously either we're some and cases, certainly or all and track where we're making accelerate there's

John Heinbockel

the All a of when position obviously a about of you lot think for you right. of data maybe you're being in and position. which question peers your far this think flipside you've the pricing got right just competitive about better And then Tom lot versus is

account know you I take can path and that's an in look If do, when step the by up but that account you item and is really to to share elasticity don't not what's not you or down? lead go there by pricing want item they idea at

Tom Bené


our lot in about As you past. we've talked John, know, a this that

if share, marketplace, not you with buy to of out will. would to We and should and be pricing be there but downward not you competitive need leading expect are We not obviously kind we in in looking market customers. to on create those all I we've things We're call experience talked focused differentiators We based earn share. on business would drive the better that need all a for the our to very to the about.


question next Our from comes Karen from Barclays. Short

Your line open. is

Karen Short

Hi, thanks.

in So XXXX. be XXXX three the evenly and you'd achieved early that year your you kind September of two-thirds indicated between that in would $XXX guess that you operating probably a fiscal goals XXXX fiscal to to with to operating you is the weighted doesn't and pretty heavily my million And loosely in of achieving is or million question remaining us distributed $XXX remainder case XXXX. what and million appear you given third income I indicated have $XXX of the today pretty obviously be your profit

guess I second the guess question would I I understand what question an be to September that I today? still early So to changed mean trying And that statement guess really right? is from first I am is the accurate

Tom Bené

XXXX. I just So, A year couple say a Karen, would is, not

all. of telling with can numbers half think confident and back we've you we're those XXXX is we are XXXX that but shared still you I we achieve

that from to everything last So by to I a balloon that to we're assume I and going for. is means when you're - big think this standpoint have you some any wouldn't the stall need off pushing year

is time pretty whether incentives in a don't it's I like think than We now those have building you So big to if the gotten not that people are prior feeling have that look, because folks to right we we getting as And if had we're literally need changed, cost supply door, drivers point the knew And feel we to it to in been but we and pay to over products like was are are anticipated that of really need then pressure invest I out. far where we enough to it chain faster recruiting starting a what's so the think and what what I now or get in everyone probably think the day well, feeling as all else. us side. are out pay in than to mean we've we people it we know we this more but what squarely out. about in of that on managing that hit we everyone it's these the We were thing of maybe the --one get day things of there. were that I quarters. last in, out is others it's all to less we have And of like more we maybe couple had there, impacts now looks think kind kind

here. some So lap that's we'll single bigger year just that got that's we're about more ago and I in things talked thing going to acquisitions, that other offset and knowing but really that. customer have we we're issues some where forward lapping the we we acquisitions it's new going think all to had start these a accelerate of saying this chain some cost some supply is some we've we about areas Obviously, changed had biggest to

Karen Short

should smart of clarify Okay components case leveraging achieving think XX% were of that, or three kind that XXX also that we costs regionalization I to asked be some cycle this the not called XX% the that but of expect so in to is dollar to asked you leveraging contributing that so XXX a still was were earlier then terms gross in the the the of and profit a terms buckets in to you And factor? just more could color just the finance out chain areas admin would if supply but you be transformation, of then spending you give helpful? us reducing Canadian of

Joel Grade

--again different. of shifting I I come terms materially are speaking, things different now There's more in and to it the confidence probably that start that conclusion is little those goals going some I towards anticipated, if our right that call some looks necessity, Karen, originally a mean wouldn't than - of I'll of the buckets. again all think we express side. so in the a bit necessarily wouldn't to skews around out I - but little we'd it every broadly there Again just bucket dramatically shift cost

really we we're going where that in on some I of to of we're can all some again, experiences supply saying take issues focus particularly our we think these that continue just to of out continue costs is chain accelerating areas to those have we're that's, area, our system.

I items going say, So accelerate I cost to guess of assigning of some talked Day. and about [Multiple we're actually to on again not it and when here. Investor looking that their this message haven't-- those portion we that's a and we specific we savings, certainly suffice in really And think the we're we think so. Those I were yes about out just sizeable those to Speakers] specifics, do - G&A talked Karen, and yes main can


Sinisi question from comes next Our Vincent Morgan from Stanley.

Your line is open.

Vincent Sinisi

guys. wanted my morning, Thanks the good very what for up cost focus. just taking great, much course questions. Also Hey, to follow of with

at really be Tom bit talked guess to your said geographies, chain with a you then breaks your versus for I least certainly cuts it all supply like maybe just cost seems opportunities So the and felt you quarter, in but around of prepared it's difference not kind kind whatnot. and across of quite last biggest commentary

some a more strictly that or ran initiatives more should is costs that to first there may guess be And --may by fair be combat statement? you headwinds realizing you then just are I efficiencies holistically geographies different through overall? these that of So the be just

Tom Bené

a of are couple there Vincent, So, things.

think are, if the talked various business the segments, about. So cost the you about challenges we

in America. biggest cost challenges North Our are

So business we're the a supply majority Canada in That's perspective. the chain feeling of US where the from impact.

things driver while cost Our business that a issue. there's big a our few are of European not

supply big the so North focus, it's chain that's America, one. So number

we've finance spending, talking other I about talked Canadian I regionalization. to opportunities smart about is I what Second ones roadmap, would regional, referred say some while those been are the

kind Some look exist will focus out of and international. for of opportunities those business opportunities, of an normal areas. cost in continue we for strategic or well beyond as We'll the and we'll to look they're big those US whether are course they're continue drive that whether to

or aren't. think And Some some? the not last so is and are thing they I asked you are the some in plan

We're for accelerating finance so plan about that. of of talked And we but for the some some of things. we planned Investor these work some roadmap Day, there, that we had

So should of we I we we out can them them model had this think committed. should really some areas. guys is, other headwinds in a got Joel taking you the after by understand the be saying saying aggressively we've going That's mitigating we not and shifting; we is key that we we be And than but might cost are the shifting we anticipated. cost headwinds some but look, basically those we're as by are cost those taking expect of think we're There numbers; we accelerating, I that why today deliver for anticipated. going look, message adjustments more out seeing lot. suggested you so be comfortable to feel the are some not focused some other, we And in were on are slight numbers

Joel Grade

again the three of in as final all year, just this into starting think year the again seeing Yes second jamming that somehow opposed that and again, I half of benefit year we certainly some the anticipated that plan.

Vincent Sinisi

follow-up. that's was rate inflation helpful, I right, quick rest for How this of guys. a of you year. then the just how of you is more forward? Joel, as Thank which and should very just are tax all in and this just think terms about Okay, maybe you going slight guess we also thinking

Joel Grade

around is perspective, of so within modest is, would somewhat were I'd say quarters an this a quarters. think coming kind right over the this kind mean couple area Yes, couple inflation from deep-- splash anticipation and that you I I inflation certainly flattish say just of next I around flattish this area our

still earnings that call bucks rate view twenty certainly continue is out talked probably obviously, while that think have we certainly now. right our at there. And you I a this rate, to I can opportunities for drive called this about point continued we at guidance our point though at we traditional XX% this point. factor tax looking best in fourth-quarter XX% the there. Tax that certainly some we're At think and


Suisse. Judah from comes Crédit from question next Our Frommer

open. is line Your

Judah Frommer

it to is like pressure is the the growth top-line sounds taking a continue, and in break strength. pressuring pressure macro some for there talking the the said, pretty sound Thanks That to Maybe that's shifting of margins. to that's you're Hi, channel US. expected just question. but the wage supportive from on it guys. out like tied about does mean going I expense expense kind

You about talked versus the independence. micro change

So confidence term? strength potentially continued you in top-line in near how do offsetting costs much the have elevated

Tom Bené

all the growth, look, we there environment line of the were, said I us say, continue segment I'd give pretty food confidence service to lot see solid the, the a to the Judah. seeing and there. we're across should like positive things Hi, is you continue of feel macro think top as

some raising and the think we've talked that about pressure bit on other the some is. mix already where in little I thing the There morning of is margin you're this potential customers a on of growth the this and call is based coming.

increases was we expenses costs we are-- we mitigating short-term. at as have had these growing And, chains short-term, through manage continue And why the faster yes, creating so We're I aggressive earlier in this at these will how these to growth emerging see we aren't segments, continuing figure to have to that some those areas point. some that's So these well. don't to a maybe I but the micro of pressure this are think think of kind anytime get there. your out than point going see rate seen on in because

Judah Frommer

coming in of broader there are different the kind call industry. going and is this beyond amongst the of where executing first there your where shifts or players. Okay in the share seen that's in and industry? each you'd top second the things quarter plan guys kind the Is top-line then at the the going expense anything clearly on out pressures I on material you public Or from? into mean of is players you've

Tom Bené

the just can't I speak but we're guys other is --this case, for our of plan. really in say would I our Yes, continued execution more

be to thoughtful to We of but and we're focused value. also good and sure relationship talk focused. we're create still fit continue for is the We profitable focus customer accomplish, we being business challenges on about, we're that can a each on your what some and growth for trying these to have way. making about this We disciplined while talking very very we'll about not continue managing every customer there's

Joel Grade

there, of size often Yes, of sheer maybe where lot there's industry at the the size, a Again remember the XX% top the us share but really share have terms we just three often, of in the of is us of think competition around the in just competitors. moves conversation so and three to and around. I


Our next question comes America. Bank Sullivan from from Marisa of

is line open. Your

Marisa Sullivan

you. to I bit my growth you for morning. a Good taking on and little the follow Thank detail more in the up date quarter you share Thanks US? drivers case of just just Are penetration? top-line continued? give us Was commentary to on that's it wanted Was question. more any the you new business seeing focus. Can accelerated whether it then saw bringing? were the healthy on increased gains that you the

Tom Bené

Marisa. Hey,

think So I standpoint, the above. really of top-line it's all a from

We the important business gains. see new all of of some in segment continue to for that's industry. us Obviously this obviously

I a industry managing and say those we've sign have of through our are say market, kind basis. think we weather in kind than the better US, should of or regular say. others. the manage constantly the related it's so with certain performing market penetration like good certain is in probably which again I we last of geographic from improved some competitive that customers to everybody seeing have that in on And are through guess whether of I'd whatever, we I markets got And geographies robustness and we the situations addition, in industry are say in certain situations or segments is I

- we growth perspective. we So good some of top Again, but that Is I'd the and really of we are what seen about nothing growth. changed from relates feel some top question? acquisitions line your say historically. right thought second that where from about And it to what was is was still we've the be that line dramatically talked of would part we kind non-organic we organic

Marisa Sullivan

momentum continues? Just you seen quarter-to-date that have if

Tom Bené


some these things, issues. general into we of quarter in the think of go talked about second some I lapping as we

yes, that So shared some that of understanding lapping we these I'd general, things we say have we in as speak. occurring

Marisa Sullivan

Got on follow cost side. it just could .And up the if quickly

Thank from the see transpiration. help some that warehouse the that this us automation of Given of opportunities wage more could little and in more pressures there. that underway a you for is a supply midterm? pressures these the Just give other both have productivity you on coming offset over initiatives color in any bit you. both Can and the lot warehouse chain some detail you of

Tom Bené

pressure so And to Sure. the wage extent. just some it's on

coming with people driving folks everything I churn who trying their of can And overall we our that around we important And cost. that's certain at is or of reduced And overtime just out it associates. attractive that little the about helps higher retaining we the we for wages aren't already we about that's that more know to again We necessarily that. I to think above but out because or the retain time we it's generally cost think rate the the are the just I this at situation impacted talked or longer, and it's we of churn those thing our there rates, paying out bit work get in our wage aren't rate; this are we're to door. money what not that's pay don't availability levels is, rate increasing and finding or having --folks for are we're a harder by get of spend a we force minimum where or employment, as maybe we with the or having current customers into and associates, experiencing are retain everybody with we've wage when remember, enough know like associates. talk higher there

doing, As talked things like we delivery about things vehicle. small other far as we've are

where us not there for a about talk of for find we've now huge also great fair but having to dealing is Automation, things. need a overall example necessarily with. cost right been you that we that let's customers person. folks amount issue items driver some So our a can That's for may commercial of we might automation do pressure but put slower of facilities our we wage you service like expense CDL. the We to dramatically to accelerate that initiatives that second. a couple Ability our like in facilities. can Help are That's where around be of our its of who items an can instead don't use into to example. driver license and CDL automation of hi-tech able know have of moving a rate - automation driver's that think impact more in

cases delivery our also we in in routing be is little then piloted - the AI, you ways term. think of trucks have, about driver the decisions, get as more and around will all do lot have make tested short various areas look don't necessarily bigger really do to a can way approach improve a can the we analytics big way our and we things the that. truck I'd hear more can to to. We've our something quicker continue us through us improve to way We --we the we efficient you where other customers, about us the the driver use think also say in a took to challenge our with chain manage of and cost. some maybe obviously that around on automation and can being for manual we pressure the those automation route types we that the that. last take but about. to supply do this cost, that enables mean the help warehouse that the And we us drops enable thing our that might have us meaning continue in at and on look But is and we maybe to information enable doesn't seen we not more a past kind we How for do


BMO next from from Kelly Our comes question Capital. Bania

line open. is Your

Kelly Bania

taking assuming and planned in on than Good question. maybe I of previously of labor ask bigger for chain way freight warehouse guess you initiatives just kind just offset my the expected next to question which be to period the the what morning, that versus those it's sounds these I chain Do year guess question. more three-year another cost think cost need some you but your over costs the thanks order supply are maybe side like supply a for costs half? the drivers and over to

Tom Bené

it's So, Kelly, things. a think of combination I

We I think just talking I the as rate this manage of continue question. are think are to and we some need comfortable with higher improve our run They Marisa's supply we're that we've sure we to initiative than were cover seeing. that, current chain underway but to make with cost. to increase we got

some I'd say cost initiatives not are We had there. necessary that probably going the we've to accelerate but out bigger of

faster areas of We bigger to the you. and accelerating those of them about think really versus sight opportunity have pretty I if a good it's line making

Kelly Bania

of I have gross of gross can take a have we Joel the the been kind maybe more, impact it more impact us little and gross went has. margin gross guess so on and deflation on deflationary help and comment would time bit have quantify on also Okay some a I rate? just of that the little the the I bit cycle it would up puts mathematical did guess you guess margin? what you can margin this and thought through underlying up was last margin that understand

Joel Grade

we're in to really I we haven't mean yet. is level Yes on actually but deflation, is experiencing point quantified are you but and What kind to certain the deflation clear less we were want an that, in I in not that again that we place. overall be to we're really it of and so actually again referring just was having, not some deflationary inflation call categories here

right was contribution happens really point that you also mathematical comparison so making in was look the point at trying and the the had we're there's really if now to point the percentages same some quarter, last was environment earlier deflationary you that But it in I actually I that's that we gross that inflation look you total. when make want that not to the Now guess of call to year-over-year. at was margin but if of year the in I more the a kind

when more than talking today. are margin impact So we again which a deflation. much about that what has couple ago percentage were significant of couple talking And points obviously certainly a this years we we're

Kelly Bania

Okay more are How chains? you defining and independent Ad to how the how local chain? profile understand And margin that? think us we help should a about can restaurant you're these of a they? micro close big how versus is

Tom Bené

them multiple typically operating think but XXX of company. kind from units, our I view-- we've less generally multiple about covering than talked

a that have independent we're now stage or like a being of usually few while a feel well customer it they're starting to instead think And geography their traditional as expand. they the with to where concepts for done locations ready local as grow are within and So concepts are these a borders. beyond at about local emerging that there are like

just require getting seeing the do as to a kind both a cetera. And from they're that from also how that similar are so they bit national account, of probably things we're segment starting suppliers but manage they grow market faster their the that to more we little of business et programs

operator, but than chain they And of their you traditional say --they're that size changed kind that to of a emerge scope. in more they not like margin not a shift --they're so beyond little typically an not segment certainly and vary that's There is pressure and independent market. restaurant and starting that why we are think but


from Pivotal question And Ajay Group. Research our is next Jain

open. is line Your

Ajay Jain

really for if some had general operating wondering environment top backdrop to that And incremental last increased that more associates. even growth. you marketing if your get the by maybe growth that bit line there's associates the was on challenge. on that though itself earnings And challenges been case call they've competition I recent I also have could competitors a case growth morning. This a address also driving to your good marketing strong, hi, competitive mentioned at been with wondering Yes, has for independent little case independence. think independent you Obviously, of time hiring some cost you pressure. were adding and expand some the I'm

pricing for if wondering industry any you combination increased expenses for just headcount seeing So drivers salespeople? and are and more of

Tom Bené

I'd kind by we Yes, recall us Ajay, associates. maybe had answer the now believed adding the add we had allow we way tools that if We you to the months to nine is so some these actually that and or analytics were marketing to to probably resources. going where led focus data of ago

that on now. last and of year started of kind kind Q QX through So --our we that of carried

customer we associates, that's local So helping growth. associated our believe have our us marketing case with we adding expense also seen that but additional some some and drive

general. other more there, to so separate growth we that what operating seeing as marketing those need be in case compete, environment competitive we out as the expense expense strategy to that there we're put higher place Is obviously add gets as from markets say it to we of drives see as separate I'm I'd sure, would certain I working. but that look to and operating the competitive obviously higher is than some the far associates changing in is And Now others?

plus to are you growing and operating expenses the cases in If going grow. you're should X% expect your

not we're on what getting on than grow. they're leverage just Our the we're obviously problem our or growing operating is getting expenses, case faster them

issue our got is and this get check in we've morning. what to that that's back which So been here really talking about we've

Ajay Jain

Okay data than US and cited I more performance improved you it you confirm to this to and in you growth think breaks it could income or can operating points recent Tom supposed SYGMA the but then growth in improved can mentioned that earnings environment whether moderate and rate mention on be worse potentially be that in spending, of comments your for QX similar the based but or QX? is you, prepared restaurant QX quarter you a economic in

Tom Bené


of we where I talked aware all sit make just a couple the like to issues you about. think we're that we suggesting today lapping feel we want we've of

for sitting we're down anything. not here So calling

what think need that's pretty probably international we the very continues the rest And out to in this gets market that's feel think in but question or some in decisions creating as to uncertainty to you date some France said in there. situation. Sweden, be talk different it right about, of now, where good there's Brexit here I and Europe Ireland quite I make clear more honestly of dynamics the closer markets see breaks when our well. market because the in the they as all doing we just certainly about remarks, And that that's I UK

bit are so little bumpy markets. of is what some a our we just in international --we through And sort of a environment managing

Joel Grade

Yes, Ajay, is I this just, Joel.

think clarify to to think we QX lot just saying something that opposed anticipating the more what worse than think what I a looking I I are is similar have to quarter this that. somewhat we're as we

we of So a is due acceleration some of and think some the that talked kicking of in I what these more about we're the year. expense in, some and anticipating of just calling we're some moderation lapping volume of again bit half then our to second the but some the

calling just is really second your similar we're we the think to answer more questions out is there is quarter. to I in a So clarify

Ajay Jain

lastly And Joel. or all? to of Is the the thanks rest a going remain you. at does just expect interest Okay, that you that Do headwind moderate expenses? for for year higher

Joel Grade

that No, headwind. bit that's I anticipate remaining a a - of


from Karen next comes Our from Goldman Holthouse question Sachs.

Your line is open.

Karen Holthouse

thanks question. for Hey, taking the

be pulling XXX point Just basis would savings sort in to that on It inflation another cost at question addressed? some the sounds we worse gap if side three expenses there things. way but to a inflation or between ask forward year of have plan much gross would cost and operating the of point the like before how or the of level get profit wage you're

Joel Grade

per to warehouse inflation se. transportation are the couple I make on and is impacts characterize pretty like again the would low this Tom I that not slight side wage for comment as particularly obviously retain that on like try as labor just one things. Again ability to unemployment with just well. a you demand Well, to our It made. side right,

of these these really mean has blows bit shortage I I'm And that Karen, ready talked what us a of It's driver going to it's course what wage about again, call challenges. to now. we've been low, while that's environment pretty starting happen that it is is We've is, unemployment to pinch it been just the guess I'd driver how plan. I causing we've it's other now three-year to a the we've question, there. before through while an --some which impact. more opposed to inflation itself just a for say So certainly not your the here. reality where again that, much that that's had as out of that, navigated of though make the for

I where this don't, today. a we've We've just certainly-- certainly gets don't I whether that it yet. couple so know And supply exponentially contemplating --it's we we as we're productive a talked become We're other blows that. just accelerate more our somehow it plan need scenario out a headland, worse times some the that and of both deal to with on costs to from deal as chain got how with well we've about to

we're this so numbers. express three point achieving confidence have plan year we again continued at to We and in our certainly should will we do our certainly

Tom Bené

Will still deliver sit talking we think that's to like important feel some adjustments? where the the this thing, that's we've I morning. make No today we we about three-year mostly what is been plan we will continued Karen, committed. doubt. we And have


Our question from is from John JPMorgan. Ivankoe next

is line open. Your

John Ivankoe

question whatever plus for some up own true just to of different delivered backdoor it your to contract it kind of was that your of the your allowed for or to In general function set wondering might seeing this whether them, you. contract to internally price some per local you not on other just on these you're is? is products contracts a whether you it's of deliver the thank cost you to words your be a your to and pricing price dollar basis than accounts one at passed is these current we're in over particularly customers? are Hi, in cost-plus The to accounts. but pricing percent to but cost what rolling I capture And or pressures case quarter selling cost be accounts new

Tom Bené

wouldn't increases Hey, driver impact that John. that you them say characterize cost because here question. should There but I of it. big It's I time certainly for along, something pass as are of but contracts wouldn't some a for have us some that's big longer a good or to of periods of a there's but sure some that's for see that major switch swing adjustments

John Ivankoe

the from And at that or not? is locally XX% managed. that it still contract least XX% historically I within at what your remember mean was I and Broadline has breakout

Joel Grade

John. right, That's

Tom Bené

right. that's Yes,


And question from from Wolf Andrew Capital our Markets. comes Loop last

Your open. is line

Andrew Wolf

maybe drill down items pressure. to morning. Hi, want this good I the of line the into on some some of on just cost

the guys came. was over it confirm than in then at --one terms sounds change maybe that So where pressure want still And in I to of more but the answer side. still you're side saying your it's of like talking can once. want to the change driver do started more two I just referenced on you and warehouse

of and warehouse issue issue? referenced over or that a it is a One driver time guys more you increasing also sounds like

Tom Bené

Andrew. So let's start there.

you the say in both are business expense. as have side, we the our would I that it's manage driver so The of on both. associated both but are higher think I hours So of it's significantly transportation and think if types well and those obviously costs have to service are driver And the things warehouse. relative about we than cost

plays And being disproportionate a the really that's the the that So if the but expense you point. role both have drivers transportation on heavy and impact are in impacted load. overall

Andrew Wolf

terms the central turnover of and think very that's shortage labor And to in the I that.

it and could pressures short and you're more a you're --these In there process just time? most turnover just of of perfectly labor the is or that's it's you you sort mitigate? caught generally of match the If would words supply labor demand, general lot short with a unpredictable other up of when is just-- cost and of it's just

Tom Bené

the not historically time. of have We Yes. short labor most been

and drivers to have about. a talked is high skilled just factors there's demand levels do we long them have going CDL have licenses we are this all we and just we drivers. a remain the phenomenon Certainly is would now. the there as ones right as need. So I the to to of These industries the ones we're what that new a lots attract everything we've And it's clearly and driven unemployment they think lower; by call of a shortage short, retain lot in can the for of

happening. And a this where of so is that's lot

Joel Grade

there's of imagine, cost, that just can more accuracy exacerbates training there's are there's retention, to the --the retention. you your churn; take some Andrew, up having things. and productivity you some mean with it's stuff more mean Yes and all I you're I more issues --the all when --people the more time having issues those ramp and of

both transportation really side. - just the and that's that's on the So and warehouse

Andrew Wolf

housekeeping. just of Okay I and could if kind ask

in fuel give future don't this mitigates for swing know whether I to first I time that on comment just be a a and you'd of things? if in what think willing you while. called the out fuel surcharges, degree sort us

Joel Grade

well. Sure,

use up. on derivatives but nonetheless costs to also to up of to continue So, continued some some go that increase, to we those a XX forward obviously go rolling has yes, those as hedge continue fuel are that so fuel

terms fuel $X.XX And so we quarter. of certainly our had this impact about in a case say

not a you clear. certainly I those that's continuing again coming it's surcharges the the way dollar-for-dollar to offset think can fuel pretty significant, way ours-- So be mean that I work and anticipate

We on have of contract had those surcharges our and side in in. the some most increase are negotiated those

contract customers have and on move down of type do based up We those grid. and some

the continuing those as and move something the do side, that's again to well markets impact. we're tend move aren't an On but some as nearly certainly as yes, big street to evaluate

Andrew Wolf

especially And having quarter any swing going Okay. a Joel going quarter line other that income. to just on share. forward? and Otherwise $X.XX adverse other the going to quarter year a swing to so annualized reclassification income we're ago this or without income you like guys like-- pattern was this and sort the It if a up. or a it's we other Is decent pretty big back this it's going go a of

Joel Grade

accounting up again the pension the works to related change the was related Well, above line. used that to way an so that to be accounting

this so quarter. that up That's something see impact to this that's is going issue. is because the you're above And yearend a to from main That play income the see again other on a really classification you'll to just below. beyond. that down reclassification And for


you And Thank today. today's you disconnect. conference may everyone for Have great This call. day. a joining concludes now us