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SYY Sysco

Participants
Neil Russell Vice President of Corporate Affairs
Tom Bené Chairman, President & Chief Executive Officer
Joel Grade Chief Financial Officer
Kelly Bania BMO Capital
Edward Kelly Wells Fargo
Chris Mandeville Jefferies
John Heinbockel Guggenheim
Judah Frommer Credit Suisse
Jeffrey Bernstein Barclays Capital
Ajay Jain Pivotal Research Group
John Ivankoe JPMorgan
Rebecca Scheuneman Morningstar
Call transcript
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Operator

Good morning and welcome to Sysco's Fourth 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, Corporate Affairs. Please go ahead.

Neil Russell

welcome call. fourth and year and everyone, earnings XXXX morning, to quarter Sysco's fiscal Good

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

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

Additional factors differ could contained the from our filings. not cause those company's in Report is contained is This Annual the information statements limited on that about factors results to, XX, the and June includes, but or morning. in to at SEC XX-K via the in be risk SEC forward-looking earlier materials this section IR year XXXX, news copy issued in app. for in of these found sysco.com Sysco's A can ended filings, release Investors subsequent the the Form

are section GAAP slides. corresponding The slides also in Non-GAAP financial these the presentation in at end the of to Investors website. of be included and today measures can the measures the presentation non-GAAP are reconciliation of our included measures our and comments our found in

one to we that to and have to all ensure participant To like sufficient answer follow-up. ask today we'd question one each time to questions, limit time their

President and Officer, I'd to over Executive like our turn Chief time, this Chairman, Bené. call At the Tom to

Tom Bené

quarter and announced all for fourth year-over-year results, year improved joining Thanks, XXXX. which performance good Neil, us. This Thank and financial morning we everyone. for morning, you the fiscal reflect

made customers' believe us transformational deliver growth. expectations we well year, to progress solid full multi-year we our against position initiatives, and long-term exceed which the our For

X% of During we earnings share had per and solid growth adjusted XX%. adjusted operating the growth income year,

and the by smaller growth both businesses. full the in our transitioning Broadline Sysco's some the in both of SYGMA XXXX $XX.X offset partially local several acquisition fiscal which to distributors steady were and customers Europe, of with by billion, X.X% U.S. sales of year results, customers grew driven and national Starting

also to our the pace of a Gross we not starting shift as product case faster are category growth portfolio, X.X% our Brand grew but successful profit for than we that's in to the drive ongoing addition the geographies we and the the the as innovative billion, management this levels. mix, although, Sysco by bringing continue of European year additional favorable to cases total customer our business; continued a as growth; beyond inbound XXXX stabilized, management mix, now pre-fiscal in U.S.; driven of continuation Sysco back only effort, to grew at to process freight $XX.X bring products, successful to through local our by Brand not now

warehouse to despite operating quarter. for helped fourth growth XXX was gap transportation labor expense comparison and dollar offset which of the points all in rising full the adjusted both the challenging areas. growth Finally management, expense modest and transformative across expense a business, with solid an for inflation by From of X%. about the overall level X.X%, our from the driven corporate perspective, we management increasing year, saw and benefits for entire of expense the only operating initiatives expenses adjusted solid to ongoing the basis gross year, in year-over-year year saw profit X% costs between The we a

billion, income drive to $X.XX. solid of growth helped For XX% share per $X.X which adjusted our X% we total up adjusted operating Sysco, delivered to to earnings

at underlying the X.X% continued XXXX encouraging by which start to business segment, X.X% results United unemployment, and with of remains economic relatively second and overall just for As let's at with we the GDP were the be States continue macroeconomic The low trends, the look which in positive. quarter July. picture

remains our still in These market. health but the of has macroeconomic solid. speaks relative currently environment and are were confidence operating the which decreased important food-away-from-home our to factors slightly, describe customers indicators, Consumer

for to and traffic industry for to U.S. As Knapp-Track with restaurant sales previously year, $XX.X same-store organic. June consistent XXXX of the an in trends Broadline Within while while year. continues for discussed, of we the grew and within be Broadline U.S. what case negative. and X% show was Foodservice billion, were fiscal growth relatively flat increase Black X.X% Operations sales Box Inflation organic, grew U.S. of case compared which in total prior X.X% X.X% volume local was X.X%, was X.X%, which

impacted sales, Gross profit continued positively XX%. dollars increased favorability Gross management Brand by category X.X% inbound increased and profit Sysco to and benefits. of gross year-over-year X was points strong basis margin freight

varied Plus, Brand, designed to looking choices. enable dietary Sysco our Earth using new brands, of a Sysco a operators reliable solution economically non-food products; Simply, a environmentally including two for customer responsible lifestyle demand to and Regarding consumer platform for insights for and the wide and planet-friendly Sysco growing launched accommodate range we customers

labor year combined costs areas, for This to increased operational driven per have hiring operating of staff both Our unit and seasonal warehouse volume the as warehouse in and the driver X.X%, expenses as with result a transportation a tight market. increased the mainly adjusted increased due basis, has costs partly softened. on of

to an $X.X compared year. was income of operating prior adjusted billion, the increase Finally, X.X%

we to slightly in modestly Sysco during the the our environment mixed year. growth. year. improved volume half improved were the for the the -- results The of XXXX with performance flat to for higher relatively Operations industry during remains macroeconomic the foodservice second The Foodservice which fiscal with sales in overall the segment suggest geographies for positive, data turning macro serve International Now results environment while

Davigel increase operating our drive Brake most impacted operating year XX.X%. performed and with in two and and income decreased decreased has adjusted efforts we of gross ability our especially $XXX.X Ireland operational France Canada mixed. our to challenges of France was million, and Overall, Europe growth integrate some X.X%, dealt Sweden sales XXXX, well our as X.X%; profit for to for an businesses expenses growth. and international decreased also the Topline was X.X%, adjusted businesses fiscal across

growth. From make a across investments continue cost future we to for of perspective, Europe business position to much us

and begun broader leverage processes deliver Sysco the capabilities synergies across to also business. improved have We European to

Additionally, to to in our improved performance efforts drive this Canada also cost continue and segment. helped deliver in regionalization results

well by business to our international show fourth growth quarter Carry continued Panama America, this year. are our also profit sales, the food in continue growth in and group Broadline Latin and businesses both and with our earlier in progress performance operating & from Rica in gross which to but business In in partially weaker Mexico, were export operating Bahamas and offset began income Cash segments. the The Costa experience some

SYGMA, overall to improving on Turning continue we focus to profitability.

for very result, a gross year, operating removing XX basis in margin softness points saw we operating As versus performance locations, continued We planned within prior the drive a Adjusted were while to in down drive our about are year-over-year. feel income good expenses focus on to unproductive by we increase adjusted an progress going making forward. driven and ability improved are year. the which of miles rightsizing XX% helped topline, the increased SYGMA underperforming and confident

both the about along Joel year, some over things with turn talk business about our offer future. perspective additional details ahead updates the the back Now, are regarding the I'll for Grade, quarter you then we excited with call will the fourth to for performance, and year. our who performance for and to quarter let overall important financial some as me come look we

Joel Grade

regarding Good you, year with year Tom. followed XXXX. closing discuss results, some on to results, fourth our fiscal everyone. Thank fiscal morning commentary some additional like our quarter I'd perspective by full

Sales for the X%, same fourth compared increased to the quarter year. last period

total Sysco within Broadline quarter the case affected which case fourth of organic, was -- U.S. by operations X.X% exchange within volumes sales while negatively of Local X.X%. Broadline for operations volume Foreign organic. X.X% rates was approximately X.X% grew the total which grew U.S.

in challenges case increased Even though, saw cost softer and operational gross X.X%. growth noting the year X% was worth basis our U.S. the is anticipated, margin versus prior case local management despite XX of the X.X% it points. quarter, total of expense than case for and in segment. Gross profit solid the prior comparison year growth increased growth We tough

for between adjusted achieved Our year. transformational benefit, to operating same basis operating growth period adjusted income and XXX only a as continue to year. grew X.X% result, last initiatives gap dollar of operating X.X% the grew and points profit expenses as growth we a the gross expense provide adjusted And compared

points. It's note, gap despite the performance was to achieved between gross well basis and adjusted important this growth comparison, that year-over-year growth as XXX having was where dollar operating expense profit difficult

rate relates As items certain GAAP and our quarter XX.X% XX%. was was to close tax in the to when it for adjusted taxes, fourth

option benefit For expense, the as XXXX, occurred attributable in quarter. the quarter reduction recognized we of a tax income of stock the fourth that exercises to fiscal

credits. France, in related and benefit recognized ruling we tax tax a addition, a carryovers employment on In onetime to favorable

fiscal billion. Now to year XXXX. turning increased the to our X.X% Sales results for $XX.X

year during exchange Foreign rates the by sales impacted X.X%. negatively total Sysco

Our the several was local gross increases to year increased margin XX in highest years. percentage increased Broadline in Gross billion points. case full basis for X.X%, profit $XX.X one growth and of U.S. year X.X% the

to For driven income management of from the year, adjusted X.X%, $X.X our by adjusted transformation with initiatives operating benefits an X.X% solid, increasing operating expense overall increase in was resulting our billion. expenses

during Foreign Sysco negatively by exchange rates fiscal operating XXXX income impacted total X.X%.

in to earnings adjusted a For by operating dollar XXXX per of $X.XX, XXX the year XX%. adjusted gross gap achieved expense growth we impacted income operating growth increased Adjusted and tax by fiscal and is points. primarily which between $X.XX rate growth non-GAAP profit year, basis effective our share

rate XXXX elections and reflects fiscal tax equity credits. to our attributable non-GAAP compensation For tax benefits

for fiscal last million compared which Net year. compared last fiscal X.X% operations Cash sales higher was was year. XXXX to to of $XXX XXXX $X.X about flow higher which CapEx million or million was $X.X from was billion for year $XXX year

meaningful year contributions generate was as XXXX offset last free which pension We fiscal reduced we part to million to continue flow cash for compared higher $X.X higher taxes. year to due in billion $XXX by cash partially achieved

return XX.X% during operating that year. XXX our disciplined capital grew investments We are solid to in and business on points our invested XXXX adjusted fiscal continued in performance the reflecting basis pleased

plan capital by goal to you XXXX. effective Capital to three-year the XXXX to XXXX. previous perspective, fiscal XX% with are we expenditures fiscal I in tax our XXXX fiscal expected continue to rate guidance. expect Now From achieve during like before of closing, approximately for sales would approximately overall days be we commentary consistent on provide to working the and X.X% of be our some improvement year fiscal to a two end of our improve outlook tax days intend three-year

end plan. the X the capital of fiscal working three-year we have start At of day versus improved XXXX, by approximately

continue to growing business. the from shareholders These capital allocation in our addition, a maintain returning investing we and include; cash with consistently priorities first, dividend, our industry the to our business to growth and flows year increasing of increased priority position; investing In in strong years. value each and consistent have a our business XX second the for for last long-term something we leading commitment done

and as in more specialty larger well it participating when tuck-in to being opportunistic comes Third, as successful strategic acquisitions deals.

I $XXX York-based distributor Food today fact signing sales proud acquire a Service majority customers. a J. Professionals, In New in which to agreement am are that we of announce are to definitive a Kings with million annual local

Fourth, a repurchase. and debt share between opportunistic paydown approach balanced

and As opportunities strong increase amount growth to a more our share of result intend the to we during leadership billion fiscal our $X of confidence than of market position, shares our repurchases long-term in XXXX. our

turn let it to closing for we Q&A, Tom over to some go me comments. Before back

Tom Bené

Thanks, Joel.

morning. first I'd this of Before to review couple things a like you shared we've closing, with

X% we adjusted delivered share mentioned operating XX% a growth. income XXXX with As per fiscal growth strong earnings adjusted and

year we own have expectations for U.S. therefore would finish didn't strong and as quarter. as the the meet didn't especially liked fourth the segment in our we However, Foodservice

we in facility, of now with Premium, the operating million to million topline, softness along and plan target national are the XXXX by $XXX from low primarily expenses to sale of When million from overall our some processing you growth our income $XXX approximately lowering XXXX, adjusted fiscal the previously X beef reduction our our communicated combine range. income in losses to $XXX end year operating with previously and regional communicated driven operational customer the increased go-forward Iowa

these said ability our improve of in achieve to I'd Having success feel current the near-term confident to continue why very some that, like challenges. the we over reinforce long-term trajectory to and despite

the from we to we business know on customers improve our Sysco. us. are with feedback our as have ongoing improve That customer to facing doing as customers includes ongoing in the business that customer our technology do the with investment track We we our work in right experience strategically way look

these of but beyond and drive the innovative Additionally, products, the Sysco will in brand also we of addition reach new and through of to continue additional not growth geographies type our expanding Canada. by U.S. in only the products

both includes strongest in core and have business to the to growth in returning M&A serve both That and continue of segments time, value increasing. competition strengthen industry relative and as in balance drive the to level position geographies, our in expect which in which sheet will that over adjacencies only to planned as in We see leverage the we as industry the the well further currently shareholders. we

fiscal billion operating over adjusted strong which investing earnings adjusted shareholders XXth $X returning achieved in we our to financial and flow and growth, strong share cash with performance, included summary, increase XXXX, all In growth, double-digit improved repurchases. saw value per business while income share and performance in the in year-over-year dividend

strategies very I squarely most remains vigorously compete highest right we on customer and Looking newly and the on price. to the importantly, the service, quality products team right remain our targets. three-year ahead, achieving and have the outlined financial plan confident the focus

would each and partner. I associates ensuring remains across thank to globe like our and continued our XX,XXX Sysco work valued hard their of for to Finally, trusted business customers' the most dedication

we for Q&A. now ready Operator, are

Operator

BMO [Operator Kelly Capital. Instructions] Bania question Our comes first from of

is open. line Your

Kelly Bania

for color. Thanks if and and morning. of diagnosis any increasing. to sales start of service I you levels maybe made with taking that you just comment factors with I or you've a it's the level either function wanted industry. for execution really a reps guess, just of think and see a a all just think top-line And growth competition Good there's my the the case the questions about or

So maybe seeing about expand you execution? you there how feel on can you're what and just

you of then second maybe does just XXXX -- in the question on stronger guess And the a through takes is and last fiscal thinking and I about of that? guess how puts walk for us years bit year if million, help helping the than a $XXX part I seeing outlook little imply you're modeling the can two

Tom Bené

Kelly. Yes. Thanks

it's a the Let's with and top start line great question.

we I national our focus to have as shared, as relates customers. So continued to and disciplined growth this profitable seen certainly on it

even New we've And as fourth that trajectory fairly of seen change we're we've kind the some of quarter there as in so certainly and in business we're -- the some Year. significant the impacts into

levels. big what about that's also a some We've at here. talking regional seen So part of that we're the customer of

that micro cycled so that we've we focus over about and on in we up competition talked we've the year the up picked last or also seen past So and space. our ramp these chains some business in

line in And so that's fourth the our biggest single impact I year-over-year. think you talked quarter, overlap will see top the the about both also had Joel performance. just driving we

Our total local our quarters biggest year record QX one in was and of cases. both last

on things, is what most as far executional operational the of talking side. expense As or about we're

impact again and of customer we're we've our but feel finance is ordering working is short-term Although a of everything don't done obviously and for do. of customer bit that some platform. that both issue as some challenges seen service time us through think we service long-term that our And kind We're some cases talk not are new initiatives with get the the certainly we've about in transformation in from and we that them. about are we our broadly executing, a from transformative been they time that work in But we've little paramount we to as we're of also both but concerned that see created. there learning like

performance today. does it correct, As step-up across mentioned from $XXX number that is where point improving I at which obviously segments, SYGMA we within suggest a business year international that fiscal see million as I XXXX, as performance think think to relates your are And the even business I improving in combination continuing and well, the that to of U.S., our perform a good well. continued and it's is

So for that fairly increased number board, can the into and it's deliver XXXX feel step-up XXXX. little a that but going across million bit confident year we $XXX that fiscal we

Operator

Our Edward of Fargo. next question Wells from comes Kelly

is open. line Your

Edward Kelly

on great. wanted been guys, really question first good here. follow-up -- data July I hasn't Hi Industry morning. for just Kelly's another Yeah. to question question

curious what seeing Just of in to kind so QX? far as you're

think then just year given here kind about how disciplined Just should should in case as terms saw? the QX, growth commentary of up XXXX throughout you in of case what to on just how being more -- of we growth we put And progress through we about what some of the to given accounts? curious what expectation the the be progress as

Tom Bené

Great, Ed.

I'd softness question. we in had areas just and where national think QX talked the mostly I there transitioned And regional the with us these start customers July same business or we for about had that as started let's we it's has of for QX some say, that So some same losses. QX. and some

trajectory the quarter. So we that see we started as similar

talked case places broadly, on continues so can about time focus think local the a now, we those as As customers. value long for growth we've add where our those most to we be

those Some still are of concepts. regional those

that still to to customers the growth well. of those have we to I lead don't story believe important as part aren't that value, want continue see year most well, you you that where we part independent of But business our performing customers. some at the nicely to well. of with not progress high performing feel maybe continuing like but We saw that if we're a see ago, business we those the

we We in that the XXXX, throughout for I originally as I growth some talked that going the a overall we had some speaking, three-year plan. year numbers in little be to about year softer last start earlier cycle are do fiscal think believe the generally But we quarter will sector. like than to projected case we we think the customer national we to continue as the volume see improved losses feel

Edward Kelly

bad on. you going really debt just kind just what's And then of I wanted to and Okay. about ask

at but cash looking curious, accrual, there -- and haven't something high flow is assuming XXXX one since this I'm this kind XXXX. just I'm is normalize? hasn't Does broad-based? drove that that it more your the it year? been of We Is -- this situation but statement, really specific

Joel Grade

Yes. Ed, it's Joel.

about I think the some that do is, of have I way for I debt. the think we environment bad seen think worsening

the at wouldn't situation, call it -- a certainly worse. gotten certainly crisis -- has think it it's I but I

days impacted are one had hit significant softer. to that little had We've overall fairly about extent us. a -- per quarter Our some we has

when would bad pickups the and hand one in for an you numbers at is you on a the gotten of worse. year's a has environment pretty so on. had nonetheless, a say, keeping bit years, It's last we've if that last look difference. we performance eye relatively half it had the there debt And I little run. say element some expense close at of about our something few -- And the certainly year-over-year strong over account look we're But I'd

that say I a again so gotten -- it but to fair And we're monitoring something certainly think gotten has has it's carefully. somewhat comment worse,

Edward Kelly

guys. right. All Thanks

Tom Bené

Thanks, guys.

Operator

of Our next question comes from Chris Jefferies. Mandeville

Your line is open.

Chris Mandeville

morning. good go more greater doing there Just then aggressively? can you and just a common is losses competition customer of little detail? there concept? to add in bit perspective they're choosing to with in count respect a from some reduction elsewhere, or more thread why little Can terms in a something loss Tom, Anything national Hey, -- or just both bit planned. the of in regional a and the go into in you of losses characterized you is

Tom Bené

Sure, Chris.

been do of day-to-day with. basis customers pricing. than go typically continue that that loss, aggressive think are generally I of been a work into how the are by fees Sysco. we we would been comfortable. so end for And it's almost we've customer. we've mean it's we've what part we've we cost our negotiation When on not the as serve there's to through is -- driven competitive what to beyond to being suggest by a that There's And is up customers I what you're we taken competitive distribution obviously the because tried both. any renewal improve what comfortable for fees But have more when lost, a to right

happened And customers. to some been of so regional big what a driver these that's has of

Joel Grade

would I been to we're of bit That's say that wanted say been, just little more I'd the a a industry monies comfortable times I those I upfront the the there's that of not again too, And add moved to have -- point. Yes. little areas at around just discipline-wise that. making mean in decisions. things this some at bit in there's

So it's the plays into that that other same probably part point.

Chris Mandeville

XXXX fiscal for the Okay. outlined able in larger much here total acceleration OpEx and in very just guidance the so. million, to updated if which event again essentially the we see are hit And then, don't Is predicated any And just looking buckets million that on cases? we material past? really that EBIT $XXX $XXX still in to or the you've and

Tom Bené

great question. It's a

a I be conversation of balance to going gross is key. for profit around the had think this now operating years we've and couple between expenses

And so sure dramatic got in spread uptick profit, points. if we've make we do gross see at therefore to -- we that basis volume, XXX that remains don't see a that

I -- but that predicated is is it that, as the move those really So only two important of we very balance forward business. to continue it's on say, not wouldn't

Chris Mandeville

you. Thank Okay.

Operator

next from Guggenheim. question Our of Heinbockel John comes

line open. Your is

John Heinbockel

So, -- if some some the peers. could some right, you Tom drive stacked you think it against can up growth? incremental muscle think to bad, do growth right, not me investment case particularly maybe be Where local you is business, can put better let start but behind you

MA you population where the their and case And made do performance? two to the that Is like a growth years in bit happy you selectively stepping ago? little you a are for did be how there up with --

Operator

from Judah question of next Our Credit Frommer Suisse. comes

Your line is open.

Judah Frommer

is those the kind of nature? Broadline. you you away with landscape why Are taking then with costs morning. to on competitors in of helping to you? local may help Can lower good winning Hi from more within customers types what be first serving locales? of us for Maybe those questions. they follow-up just scale competitive And kind Thanks your the not

[Technical Difficulty]

Operator

Jeffrey experiencing your We're for stand please difficulties. is line by. technical gentlemen, patience by. your Bernstein, and Thank Ladies open. please stand you and

Jeffrey Bernstein

Hello? me? you. hear Thank Can Great. you

Tom Bené

Hi there, Jeff?

Jeffrey Bernstein

there. Yes. Hi, you. Thank

Tom Bené

Hi.

Jeffrey Bernstein

Good morning.

Tom Bené

Go ahead your with questions.

Jeffrey Bernstein

of Thank about into I'm follow-ups we obviously profitability you. sales the A of couple target think side things. from perspective. wondering three-year a the cost as just you've baked

I was quarter creeping like know the best few on up it's past guess X.X%, First, past commodities, inflation been seems I the this quarters.

in a you're or Just in of further on inflation. proteins fiscal color be anticipating terms to whether food acceleration more XXXX Maybe thoughts you wondering, cost the assuming of provide any side you're any might specific things? what vulnerable can that

Joel Grade

consistent, say Sure, we in Jeff. have has to this as over categories are the and levels I inflation I It's to of Yes. couple some well continue quarters, meat, Joel. at would point, interpret I been an would refer that's as the then next mean, and extent what to to of we're today. anticipating frozen as where modest been have really certainly something which potatoes say we're some fairly inflation. in produce – area we Jeff inflationary poultry continued And to

quarters we're I are of but we look really next do say we the inflation, in I'd anything – couple know that and today. range, don't above the dramatic for certainly at I So continued or approximately that, anticipate

Jeffrey Bernstein

Is on inflation number the labor there's look from competition of a associates? in front? how you for and can at drivers you turnover or And provide any or just basket there whether color it terms

Tom Bené

Yeah.

is manage the for minute here we've what it's here spending worth and through Jeff tried to probably think – everyone's a I benefit.

probably to selectors of aggressive some what number softening trying be would have volume went traditionally, the have. we – the reduce and on the we we much drivers we As number into more quarter of did is fourth

the we've the market given we're long-term chosen take view on environment And operating labor this. choose in more really – we and of to a

much these of operating market, now wrestling but people rates, a increased maybe sure part – to of labor trying pay payer the make right good softer by little our not increased we're not during we're because bit with so go so we volume And a we're letting labor times. is what expenses in – pretty driven

levels still the historically paying support for to maintain a we're level and haven't that at probably those customers. we for our service So resources

forward make look of of manage be numbers appropriately. think a we'll trying to more sure, – we're where But retention get we of if the As the lots to volume were not we couple even fill volume softer in and to period in will a just a I ago, longer challenges over time, years we're that routes. were we struggling where we drivers situation had

retention. next offset the feeling customers. that as the anything we've rate the impact I And we with beyond the labor don't year, look we dealt labor So to kind look today, our over And X% we're that's to of to about the much just see ability some our past. the operations. about still pretty to anything that in better X% in to not think feel good productivity and the of increases, we're continuing with benefits doing sure We manage to service rate retention we making our short-term

Jeffrey Bernstein

softening. wondering, of and geographies? it's brush more just to a I'm comment regional there, all if that across able just a is Got kind there's lastly, you a broad – all differential, versus casual service dining, customer or you're quick differential national just dig across mentioned it. into brands whether whether it's And whether it

Tom Bené

Yeah.

it's customer. a performing or didn't think was certain There to it broader I anyone some comment. Part and it's are not but geography customers, in both of and renewing losses the or renew of successful and of a challenge are even sense that our portfolio probably more type. so are It's those a positive side. on are those the you side others meaning, some of we I softness in specific brands of on than who in customer certain better would more say, weren't have guys probably

Jeffrey Bernstein

much. you Thank it. very Got

Tom Bené

you. Thank

Operator

question from next Heinbockel of comes John Our Guggenheim.

Your open. line is

John Heinbockel

me? you Hey, hear Tom, can

Tom Bené

glad here. you're We're hear can John. you I or back back we're

Joel Grade

We we lost thought you.

John Heinbockel

local where are, opportunity say MA stepped you months? right do a quarter, or you to deterioration So fourth you think incremental bit there ago, added in growth seen and because about have probably of you case is would do two-year result three when local the right? or you years there six obviously at any gains? an a think couple stack you look it to A the you up hiring. in selectively better then, little think opportunity, trend growth share in again, don't or And that that last Is case

Tom Bené

with point that some into about we about these that. this start are let's years, two when stay where the got competitive sure, so the over to focused to customer, about It grown cases. was situations of quarters. pretty still last So couple making to But on. something we we've at. independent little and we've regional local stack we're we're very look at that's even and move is how I on about that two-year feel chains we've as year last There we've as you probably to think think good the a we're And it. some we your be that feel staying as the softer we of talked those of And part going close where seen good in true impacts

about important portfolio. think continue our there accelerate a that to in the MAs is play we As an to even way growth role further

that benefits them of we've talked fact guys the often obviously value customers about that resource and having we our you As know, really out the there. see

we've such do have for a where sure we're it right the resources, support categories other it's proteins customers and but resources don't have important in that make online or are trying of or customers the sense position especially and add of that of and that got specialist whether the go to makes area. technology feel around them, built go selectively we think they've makes is there's I that maybe upside those share our support tools sure to support make certain product will that is we to – it's add lots to them. it around sense We amount we we some around What more more and us to significant meaning as

So, it's forward. going territories like, about size the and amount pretty think we're because, resources handle less adding the we I can more that they have that balanced in they of feel

new about business. are We our thinking ways to increase

strong, happen. has had of to Our business especially side new increase of these we've transitions new business opportunity been an there's things always some the as but

John Heinbockel

XXXX I impact to Is Joel, of things, million two maybe about down that XXXX, range a you look And $XXX so a to fair at? XXXX of in is so million bit. for 'XX. then map And that financial to think sort range? been in D&A then, in maybe it's road know, the be when $XXX right, likely stepping versus

Joel Grade

perspective don't and say think add not falls of why sometimes D&A that's I typically as make I start these it comment? up anything mean, there's -- may tick. that. -- or just I we I from forward. our relates the speaking some things D&A there's some find and would again D&A with any significance should that I'd we broadly mean, So, I don't a D&A expect moving have investments, change if I -- as know, significant to But our a say and you go stuff off that anything material

Tom Bené

And road John, spoke when particular? financial is in you map, something there

John Heinbockel

group bigger that a XXXX curious, just bigger difference I'm than a your have seem impact financial you and of one be ones Is initiatives, that one of would right. could No. not would road operating big It in which this at think that can like about look map past when of four, year. right? right, make you

Joel Grade

say Yes. would way. it I this

in a XXXX we fiscal impact road think, finance certainly had year actually slightly more fiscal XXXX. impact map year expecting transformation at actually significant and even a I significant our in

think year. it year carries regionalization those in that as Canada had initiatives. both when kind the well couple and the was something benefit really that and the a Again, key started in think that into this about of next a as you of of I middle year

And which the carries would of the fiscal the many is then -- John, some you them benefit the some in started that. then first initiatives, second half year builds benefiting way that so, of remember on at of if into look the and these obviously I further

So, I expect of a say would last year year those year -- we next again impacts I another strong solid as would well. into and head call certainly couple as

John Heinbockel

you. Okay. Thank

Operator

comes of Ajay Research Our Group. next from question Jain Pivotal

open. is line Your

Ajay Jain

for taking question. thanks and morning my good hi, Yeah,

as need hit I over growth think others target. the you $XXX pointed have to million I still incremental deliver of to three-year out, think

in growth to Foodservice? across I'm expect in from flat pressure think we QX U.S. that's I segments, earnings decrease where trying Foodservice, sequential mean in in continued your were And be XXXX. or the so, will do that just pretty growth rate. out that sharp should I a and figure think you coming U.S. in broad-based was

segments you what the So, growth three color for assuming do main XXXX? on of have you're any terms across in

Tom Bené

and balance earlier, I do as gross mentioned balance good we we that. about across U.S And all expense between ability Ajay, a think, see the about in operating it's it's to and pretty going profit and feel to be our maintaining international U.S. -- that SYGMA.

We drive have initiatives to that. in place

of think, this As I that the like business dealt it challenges had not few international, rest to the a we relates feel European with we we expected. and year

next better also think about Specifically, think, SYGMA, we're just and we much trajectory point. And on we I we France Mexico into this a and year good then, about so that. going talked feel at

business, more to ourselves both a to got deliver cost now top to the we've so place performance. but and can much a sense, need place not operating in we see balancing makes where got able I We've side, continue profit around improving, so line, that be where we it the because gross think, in

Ajay Jain

you. Thank had follow-up. one Okay. And I

flat in I you traffic presented terms of economic softer sort negative in backdrop, U.S. but trends a the prepared spending your strong industry picture comps in trends. of think, comments with with restaurant Tom, and restaurant mixed

weaker who've I weaker performance weaker of volume. your So from any wondering of reported independent -- I'm think, traffic case competition? reconcile the industry trends, I'm independent apart just of business just the the I'm specifically, to like you're in your to competitors piece I trying relation apart with feel from that your an acceleration with do the and the you asking, backdrop competitors, operating some losing guess, to

Tom Bené

there's we guys you operate amount number local amount all competitors tremendous and -- regional of as in and Well, space are guys a of the folks. are Yes. know, there then public the tremendous There in.

more others. there I competitive a had environment where geographies think impacts than are from we've

day, broadly like out is aggressive at. our portfolio. getting service our everything just to earn it to we we speaking, maintaining But product things feel we're customers' platform comfortable where and our every make price, just not on with we're continue sure would can obviously and I but need doing on our say, we and business to there and position competitive more

Joel Grade

though Yes. well. as And, Ajay, I think, a just reminder as

local I also some versus I we of different types to of customers. the was again, of independents of talked couple the when kind true what within think the about related think And regional think the talk as some you about commentary about fact earlier that, local, a chains. and of those there's

some to upfront also a some think, seasonally I eye in, ramp-up trying pressure -- close Tom that we're a just and we I that as a again, seems little keeping in bit is of area but have of in earlier, Again, bit, -- some on discipline the talked about there our more to where maintaining again, been a pricing again very that, think those remain areas. of

I bit just would true between, actually to relates more feeling So we're that of it and other I the distinguish just pressure. areas a think some little as independent the of

Ajay Jain

much. very you Thank Okay.

Operator

of from Our JPMorgan. Ivankoe John comes next question

Your line is open.

John Ivankoe

you question, even had to cited you case that in few you actually. gross times, just think, a I are service that's margin the or you. direct have level-driven, materially That I Thank on Hi. competitors a are seeing of prepared follow-up drive your remarks, do think that level growth? competition previous using

previous at times basis? that to of drive which at least been of, might on And we've several And obviously case cusp is this mean, something, margin customer-by-customer this history in industry, be do before, using and gross point, using like your the growth? a that that I just we're contemplating you're companies itself at you think in in

Tom Bené

out And it's some to certainly articulate tried our Look, that. competition certain with, are, always we in segments. comments increased start we there competitive and I'll are been seeing geographies and

forward to we that. about make investing, do and day intended we're relates to think need we it every others going are and competitive in single that every we As need to whether how customer to sure

I we sure our way more cost to about think do and customers is includes our offering service, for the product and making with pricing. has think overall and that that top-notch that

impact think don't on our having any adverse service. I are based we

side, about the -- continue of And operating to priority. top with levels I We some argue service continue investments to we've as we'll high we we're talked put on as a very that provide making of service. would the expense

in We business to important critically our know customers. that's this

it have the doesn't you what If don't price is. the really product, matter

won't not to want really looks a or certainly in broad-based position a one there's John by specific thing. be uncompetitive, type is, we customer approach -- so And that however But and it's answer geography. and we therefore be be the don't to

John Ivankoe

can or distribution industries customers. being efficiencies often Understood, including for it for lower corporate different thank And you. levels maybe margins improve it's change service across some but foodservice certainly many and -- corporate, cost can where the

to service those you service point. in So some in years? across terms you how in levels levels, maintain of improve terms how the And of or into base that's of first measure even of couple can go the customer past able you've measurements been your

might there regain You've are think may whatever be specific and you of that OpEx to need that changes case secondly, any a investments changes? do wants like things in volume? And about get their delivery any day-of-the-week some you mentioned are but to back there make that customer to case

Tom Bené

Yes.

we -- our our the earlier year couple you're -- the -- a of third of We start quarter. adjustments made expense referring things. So, our calendar corporate to in end

John Ivankoe

before that I am occurred also but business even yes the of that. some broader efforts transformation

Tom Bené

Yes.

really we us. focus our those are of So service-related we've there to or things -- do non-value-added about talked kind as remove business. operational or what really designed expenses try non those in investments And is for

can that do that sure all doing when the of making to are And those the be competitive expenses we're here kind so tightening about -- corporate marketplace. our in we we belt things so we talk need

is So cost pricing standpoint. a improve nothing our be further either our or do affecting from to a of would necessarily ability do that or our ability there take we've we to done serviceability our customers Only care that.

As hallmark everything. service a long has a been for we time. service the it And to at look how for relates Sysco we

there. have lots We metrics of

communicating customers of examples throughout delivery the both doing -- application is that so at. things is technology an to example have to use -- we service some basis a But as can even where sure day our make they look see we have where and level is they and to on we're daily we a improve way delivery their so an that our their of have

of obstacles we're expect might have with making any we can staying they they have more when to in the ways also delivering remove throughout touch that drivers But day, customer sure so delivered. to be we our

table that. for when we've us and as of we to big make talked certainly technology investments, I about delivery a sure is is it's some kind investments of is about. talk some part of it service stakes So great resourcing But offering investments of a intend

Joel Grade

we've are be of Yes. I just some And shape a it's to important but the to just provide as investments no would we administrative, reducing or that. streamlining -- think done that or terms form our work just summary clear in in had ability in really of John spend again just of layers service. somehow to great grow way efficiencies been

really the takeaway I here, key just reinforce. think I wanted that's just to

John Ivankoe

and think you would consumers and you have clearly had have were place and business purchasing I was an that on case XXXX, delayed. put fiscal corporate driven. transformation it for that were be with the impact certainly actually what that some could And into before was Absolutely. of efforts the But that routing

And so question I asking. was that the was that

service your forth If at whether big even service has the seen. or put which of changes, those that and been business levels levels maintain able increase looked efficiencies versus several transformation profit Sysco you've you were that and to of go part efforts you've been the obviously back variety to years despite after growth have ago a

Tom Bené

Okay. Thanks for clarity. the

well ERP our to the And make and customers' in road driver our sure to big well. back challenges referring service that had significant we certainly that of transitioned. some got implementation the expectations. fairly you're systems the beyond are a had our deliver of on operating yeah, If companies certainly we've assets is some ability We're work, those that that to

we we're yeah, we that years continue improve much So, in have than good ago and different ability to very area. been a place to feel our about would

John Ivankoe

you. Thank Okay.

Tom Bené

you. Thank

Operator

of question Suisse. comes Judah next Credit Frommer Our from

is line Your open.

Judah Frommer

business national, independent guys. hoping, first commentary help U.S. you cases. the could on Hi the good within I regional truly competition morning, between unpack was then and

competitors. some words like opposed that And have as competition elevated help guys case to more to why on want you're chain can that seeing probably you do but in chain I your business be may within put number sounds things happening? us local of And independence. You mouth with it your side don't than the

Tom Bené

the to oftentimes we always don't larger we about -- here. as don't changed. about accounts talk When talk regional are have you them what I as But them of about folks and changed, about regional some guess talks think I we might referring certainly concepts I think talked is

And so competition. just I'd say we're -- just seeing increased

opportunity balanced growing. on their susceptible a I more ability product we think that aggressive and so what after going pricing change do to they that more is to look and they that have as and our at to to we be become is them growth to Joel just as around certainly Folks earlier important those to certainly pricing that but focus tend they on offering, -- those some our look make service sure and keep accounts customers of Those aggressive need referred have the in customers. are are type

Judah Frommer

base? the improve where your relatively margin customers are potentially average local lower within that create of but, a the local dynamic Could year over the down maybe seeing kind if you of, some course Okay. profitability slow you're across business cases customer calling

Tom Bené

to certainly of our trying not drive feel You segment. see we're that's per based on well a change the objective, that positioned like that to looking or We independent pricing those there. but certainly in not mix, we're in mix customers more not se little meaning our today

with the point trying… not margin it's I'm customers guess additional driving key about local So is I

Joel Grade

again you I to you're of if past fact when a where related this you terms But away I little little little some towards a that the which increase that -- from is a -- a of little -- of contracts. more do a think inflation. think that bit our the a the of in move bit growth, And the there's of now in the continued -- shift to margin will some seeing some see higher bit Judah quarter despite

Judah Frommer

just I if in. one And more squeeze Okay. could

you to the namely $XXX and period operating you three-year guys things area. are million inflation three-year inbound plan kind after the seems concern to of As within that of there income in supportive freight out the expressing kind lower be a worked have

that executional drive kind continues Would of upside that QX current guide? you're QX, setting make kind say you you into would to is say there the improvements guide early everything you that as assuming or updated that could can are of the and

Tom Bené

referenced the deliver the got we that two able prior the talk that think about we years big step-up is and know that way to to earlier we've is that. someone from be -- I

we've like the that reasonable the things costs execute, in on industry to our talked out day now. about pace So, a being need all that continued at there are we based and the number that feel every sure improvement at at we the topline so it's that the it's and ultimately least we continues competitive making market

think about today. we good So, of as sit number I I go is feel the based we bunch wouldn't far on there's but assuming where say what would a there we in upside as

Judah Frommer

Okay. Thanks.

Operator

Edward question Wells from next Our Fargo. of Kelly comes

is line Your open.

Edward Kelly

get And years to beyond planning just on we'll I sort three color? just guys. and the back of ask here wanted this one next Tom question we'll letting an any Analyst thanks think you to in. for relates later at Hey, all XXXX. some just of Are this year? Thanks thoughts when Day me kind

step take X% your the growth operating the you to in while. period hard rate we consumer. really what still in was this and going find a a quite environments to over in toughest of a kind average hit EBIT of you're million, back $XXX And one industry That's

about this thoughts beyond Just you're qualitatively outlook it's point. on XXXX the if of how kind even thinking at longer-term

Tom Bené

Well, those appreciate points. couple you of raising a

feel and delivering point about really good results. we number three-year So, the that's solid really to your

current ahead best ends. or Analyst date as the through and have do talking that that not yet Day when to Investor we we to Day three-year think certainly to a I the we're think is set are plan look given time but an do about we trying

the to drive invest is think and would how is the term way we long we for about think argue I in it what top continue quartile do industry. we results the

And two. of so a the it's combination

we lot M&A invest have we forward. how to think put believe need we're right there making to going still that to of in continues do U.S. still place we opportunity are a the We Even here the things in be about the in we as the sector. around And an continue grow to international technology in investments obviously, ourselves in future.

over good performance to together here So, of a in we and we'll you that's probably we've able be years. about want We not last we you should giving of with than say be feel the other deliver forward future the performance what get going like talk about all day had kind the to that the you couple able not-too-distant that. to that pick and to feel

Edward Kelly

Thank Great. you.

Tom Bené

Thank you.

Operator

of comes from Our last Scheuneman question Rebecca Morningstar.

open. Your line is

Rebecca Scheuneman

Good morning.

something not should new in and The division. in the could something forward, better wondering unique possibly want was carry a kind more about or not than that was temporarily a there a profitability base came and gears I we that of hitting of boosted kind profitability just the quarter. and switch that bit and of I international that reorganization to sustained bit ask So forward? the a Canadian about at will we be expecting QX X% expect margins to this -- the little just operating is were reflection

Tom Bené

any happened I joining was things Thanks Hi, say, in wouldn't us. it for Rebecca. unique quarter. that the

of drive case a there to more we Canada, the we a bringing given the side, where how businesses. consistency combination our a the need geography regionalization because on The us out is benefit it's And international bit leveraging more help a things. could were of cost think I run whack. good be the of example model of in that across costs

processes haven't same businesses to Europe, that the and same exist. these have heard way. me a of to kind those starting we that bring historically company comments the relates maybe we're operated And that opportunities some in as say it capabilities to of some As some prepared that of of you

think what good the ended say would we where that feel I we year. we So is about

balancing it international some As to little time bit operating the the of expenses about half have to though sector and -- and kind rougher work investments in should we're us had over do, should a be way see in improvements said, first think a the forward. in think was we we you I we the making still our going

Rebecca Scheuneman

Thank Great. you. Okay.

Tom Bené

you. Thank

Operator

thank have conference. today's all you program conclude may you a participating and Ladies day. and gentlemen, for in Everyone does This disconnect. the great