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SYY Sysco

Participants
Neil Russell Vice President of Corporate Affairs
Tom Bené Chairman, President and Chief Executive Officer
Joel Grade Chief Financial Officer
Edward Kelly Wells Fargo
Christopher Mandeville Jefferies
John Heinbockel Guggenheim
Judah Frommer Credit Suisse
Marisa Sullivan Bank of America
Jeffrey Bernstein Barclays Capital
Andrew Wolf Loop Capital Markets
Kelly Bania BMO Capital Markets
John Ivankoe JPMorgan
Bob Summers Buckingham Research
Call transcript
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Operator

Good morning. And welcome to Sysco's First Quarter Fiscal 2020 Conference Call.

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

We will begin with opening remarks and introductions.

I would like to turn the call over to Neil Russell, Vice President of Corporate Affairs. ahead. go Please

Neil Russell

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

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

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

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

their our today the also found measures reconciliation Non-GAAP The and all slides follow-up. our sufficient at limit time ensure today to each in questions, in are the ask end one comments can GAAP our Web in to one and slides. we'd included section time the that the of Investors of to participant included answer measures To question site. we and measures these presentation corresponding have be non-GAAP of are like to to presentation financial

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

Tom Bené

us. fiscal transforming financial for good which continued year morning, the and performance. everyone. first in joining This we morning, announced of and results business year-over-year momentum Thanks, XXXX, reflect improved quarter our Thank you Neil, for

with line in largely were expectations. our results overall Our

From to sales same a line compared we perspective, increase year. the of last a generated billion, X.X% $XX.X period top

quarter, at during which we rate and throughout continued the see quarter in carry also confident of fact, the based we beginning line exit of fiscal into we As the quarter, quarter. saw quarter said the the improvement feel did, that and QX sequential about comparatives we discussed We difficult as therefore, top first expected, would that on softness XXXX, during the XXXX. of softness future the but trajectory saw fiscal

our customers, were contributed Broadline There of continued several driven and growth past of including a sales national U.S. rate SYGMA part in local transition at things our quarter, both customers that for in and to the by growth volume rate the large during national our the than customers, certain faster the year.

of facility, Secondly, fiscal impact the quarter the sold rates, of million to exchange was our had of $XXX XXXX. of and for the processing Iowa divestiture quarter the in an divestiture impact This Premium, amounted foreign an the which million, fourth additional negative in beef $XXX that quarter.

we portfolio the XX at to than grew X.X% in for margin penetration Sysco And dollars. grew units. continued driven customer we $X.X billion profit a various across quarter Gross local shift continued growth total case basis our gross points, our business as and the of cases pace by faster growth. brand mix And expanded

and decreased the efficiencies regionalization strong the as Turning in such expense our greater management by $X.X including transformation. initiatives, quarter, driven transformation cost. to operating X.X% Adjusted finance our operational to benefits billion, expenses during work from Canada and

growth we led for growth operating share delivered X.X%, solid income per of adjusted to result, of a Sysco, total adjusted As X.X%. which earnings

well despite a spending, but the in from in of all GDP an trends doing broader the healthy X.X% spring, X.X% growth, broader down engine the time it at the that X.X% quarter, economic U.S., the some growth industry third global rose signs during all was at Consumer and the unemployment and Looking remains economy low. concerns. was is main

other therefore, home a and away good seen industry to meaningful have some to about trends feel impact indicators market. softer While restaurant haven't food in been continue from the we recently expected, what than economic we're seeing

quarter, store During sales restaurant according Intelligence, driven by increases. check average Black guest slightly, same to rose Box the

food Although, food that traffic operators industry continues in United to it the in the service modestly are mixed, favorable conditions be market for appears service States.

Turning as Traffic soft service UK continue uncertainties well in activity. sales Brexit markets. as around Ireland to international other affect operators, the and as be food and economic to

quarter. in Household to unemployment spending performance. compared is positive prior up, and Canada, industry are However, reforms. these down, picked labor trending has which In consumer growth is boosted and in to by restaurant conditions France, trends GDP expected is broader market reflected and GDP In are employment relatively stable stable the continues spending continue. decline, to

like our by I transition with results management and segment, with the in business were U.S. to strong beginning operations. would first now Foodservice our results segment expense U.S. Foodservice to quarter operations QX. pleased top-line We in

were within now XX grew first the increase profit operations, growing increased grew quarter quarters. volume grown of income Broadline solid adjusted expenses U.S. and for operating gross X.X%; X.X%; adjusted operating consecutive X.X%; X.X% Local case and was only billion, an sales $XX.X for X.X%. Specifically, has

such our disciplined growth mentioned, grew previously X.X%, restaurant volume was partially within business, profitable less national the cycled in quarters Total by as loss last Broadline of we performance at solid some one approach case local ongoing managing As especially our this business. local reflects offset year, customers, growth schools. bid-type reflecting account our U.S. as traditional of largest which operations

impact continue to transitions the certain U.S. into We expect as well. see to of quarter operations Foodservice customer the in second

was higher mix cases, growth XX basis brand, in management up Sysco by total inflation by positive U.S. continued in category points, primarily the and grew and efforts. poultry Food X.X% continued to driven dairy cost the inflation, meat, profit of cases Gross categories. produce, driven Broadline, local X.X%, by

were initiatives costs by the quarter. higher of earlier, costs will and decision labor higher was some the due our for expense warehouse expense an slightly quarter expense the quarters. of larger over personnel our labor for mentioned improvement Similar our XXXX, second transformational partially retain to continue business, the operating the fiscal to had drove market. signs overall impact next tight X.X%, only operational see by labor offset market, a do the strong the down labor From evaluate management to of we grew of the This and one we the right driven driver we half practice in in adjusted costs. perspective, which while And the throughout including some discussion to this of is during in couple business

for had to Foodservice Moving we the operations, results mixed quarter. International

more and in just you results few that provide Joel impacted Our to changes minutes. details by were on foreign international in a exchange, will

However, X.X%, on expenses operating X%, increased adjusted currency X.X% gross increased X.X%. basis, a increased constant adjusted income sales profit and increased operating

performance had in uncertainties for coming in from programs, such by around America the quarter, environments the Latin stable, combination market. line positive our In business in and Brexit a effort Europe, business regionalization driven the of driving performance the as UK Canada certainly positive synergies remained improved Canada. with although, top remained

of our year. likely negatively the challenges performance However, continue operational chain supply fiscal in and most to with remainder through integration France and overall impact our there, our continue

the segment, somewhat The our for expense other relatively as income growth from expense various offset throughout initiatives solid see integrations soft was benefits Difficulty] the by profit quarter. we and improved management international [Technical gross continue to performance operating management

remain of overall of by as and Moving disciplined gross points focused X%. on portfolio included our SYGMA, as in which of this roughly mentioned we improving profitability margin gross on XX previously, we reduce saw customers expansion total basis the segment, profit

last of a the closure addition, improved expense X.X% strong resulting year, down operating expenses operating distribution same and period management the performance. In drove significantly adjusted in location versus

to throughout within improve the continuing segment, the year. We operating performance feel we're and progress very forward this look continue to our good about to making

feel In business our summary, of good about we fiscal XXXX. for trajectory the

managing managing increase We our have customer through our the continue making our business. disciplined to national in we in progress approach local various at expenses initiatives to and customers, discussed transform our profitability portfolio, growth

anniversary As are celebrate we XXth to fiscal we year. ahead, this look our excited

company and half being about committed at has dedicated our been responsible. to service customers, passionate socially of food to the For forefront our service distribution industry, century, the

is most trusted be vision changes years. enthusiastic business making we in market and remain to the the we're business team customers' XX partner for Our to our leader, ensure our fulfill next about our valued the model and

across choice for of like I'd our for company truly thank They so make distributor finally, And associates all all dedicated the many are their to the customers. efforts Sysco to in.

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

Joel Grade

Thank you, morning, everyone. Tom. Good

segment. International including the Premium As SYGMA impact X.X% Tom a difficult despite number mentioned, foreign quarter disciplined and accounts year, period the in Foodservice rates in of of managing segment, negative factors, our the of versus last U.S. exchange comparison our divestiture within and same for sales national our approach a Iowa the first increased

Local was operations the case which quarter, of volume within U.S. X.X% for grew Broadline X.X% first organic.

profit within volume Sysco X.X% versus X.X%, US margin the of increased operations organic. which case We gross same Broadline X.X% Gross points. grew increased total and period year basis While last XX the in was U.S. our quarter. total basis of first of XX.X% cases growth sales brand to to cases U.S. the products, basis and XX XX local points which saw XX.X% of increased points in

with management pleased the our quarter. are for strong We expense

continue adjusted period same slightly to ahead year, generate initiatives decreased our last expectations. operating X.X% to the as business benefits the compared Our of to transformation and expenses

period income XXX gap adjusted As growth was dollar growth gross profit adjusted the and between same grew the compared year. last operating and a to X.X% expense result, operating points basis

It challenging segment important our a operating the to is despite expenses environment. Foodservice also note only operating adjusted within grew that U.S. X.X%

business Although, to throughout continue areas have of our help will we growth. we quarter, reductions future invest facilitate the strong expense in that

was support and last our versus areas make growth. that us continue example, streamline in helping higher spend customers our as while the period supporting to better workflow, For advancements we technology to help better same year

first the translated gross XXX which saw dollar strong growth, points During quarter. between profit adjusted and we adjusted in for the operating Foodservice U.S. basis gap operating segment, into leverage expense quarter growth the

currency a decreased basis, increased on increased a and rates. the our a results that basis. X.X% on Adjusted a In on currency a by operating operating basis a income increased and profit were constant on a exchange sales As currency Tom on X% basis. mentioned increased Gross a X.X% X.X% basis International impacted on decreased decreased currency constant segment, reported and constant on but foreign reported segment in reported X.X% And on basis. increased expenses constant reported X.X% basis X.X% earlier, X.X% basis. adjusted

As it year first period. taxes, in XX% rate relates prior in our quarter compared effective to was the XX% to the tax

guidance While tax higher lower rate was of based share year, this due to our XX%, primarily compensation. per from than than benefits

to of Our grew $X.XX share, per compared earnings is year. share the last X.X% same to which $X.XX per period an adjusted increase

flow was XXXX, the the Free to in $XXX the million for million the compared lower last of million $XXX $XX was was working operations was prior which by in fiscal to year. cash cash year, in for Cash capital which flow due year. in $X from flow the last compared period. quarter was increase Net period the this first period an period part primarily decline quarter, compared an year expenditures million same to lower to $XXX totaled million, the for same in quarter capital free higher was increase The which driven first million receivables. $XXX

spending higher to Additionally, year investments in capital timing due we period. of prior the saw the planned

year we expect for the fiscal cash continue XXXX. However, flow to strong full

changes as and that In operating the on July lease of of our right by consolidated sheet of also leases operations changes flows. of cash XXXX.The adopted standard consolidated balance related accounting the lease and of results recognize the we consolidated fiscal liabilities the we reflected assets in way statement use including are XXXX, new

share minimal paying only the priorities, which M&A participating our there's consistently through are net and our to shareholders for strong growing However, on dividend, remain capital our term and investing in approach as a long down to balanced follows; focused delivering in a debt. impact. and allocation We maintaining consistent approach results business, buybacks

We growth month. our and later expect to rate dividend each increase dividend typically review once this our again November,

We previously in rate also of prior committed have the than year. to share repurchases higher a modestly

and in continue we that the expense right toward we fundamentals solid deliver quarter first gross as reflects momentum continued the of our of dollar sustained had business industry to and to as In local strong, growth profit remained our case work the summary, a our transform achieving confidence steady plan high that areas growth, business. of three good to our path execution a experience all delivering level on we and enhancing as progress business, strong management. of give the These year objectives. our our results us customer remain we

Operator, we're now ready for Q&A.

Operator

our Instructions]. [Operator from you And question from comes first Edward Wells Thank Kelly Fargo.

is open. Your line

Edward Kelly

what's some you helps impact us we that of should about we to kind progress thinking you've cadence just the I to kind maybe customer I I'm case Good here. second quarter. a just ask to mentioned on as overall, case acceptable talked throughout detail business? was you want other and quarter. provide about think as on growth comparisons, in And expect you out and morning. just an the level on little improved slower any business, year? Can case the U.S. what about, And And us more you about Tom than easing the case still what how that nice of with bit through you're that? color from overall losses Joel. curious in growth, then drive that's you for can give the an hoping exit momentum quarter growth you really of You growth the outlook be the as rate? your about could help And thinking

Tom Bené

case parts But came all did see, talked some about the talked we nothing both to by we specifically as just about too we of in growth, had general QX numbers we when quarter good prior we there, we the quarter, So certain business. softness as specific. of and is out some know the softer but of also driven year, of the lapping a

these we more about of Specifically, and the some talked micro accounts chains. national the

What we grow. solid customers performance independent we're the out first local quarter, came to was seeing, continuing maintaining and of the as

case expect going that And finished feel think that forward. of X.X% like out so be you that of we us range what should in we'll about, -- we we you about growth, come we over we from talked time. have is And what the quarter we the of historically if like guys in end good this as feel feel that, local lower you this about, more with we're

X.X% that you you in going And be that back so the should on the where see think I'd idea us about. is that every to local same. quarter doesn't But you range cases mean this to is should X% tell

year. made it of fairly the we had and have transition really customers transitions just account ahead that’s QX. saw again overlap of you of As national relates in it comment half the account the us. We quarter still in in and the back to in total last I some year, it's we'll large cases, why fiscal this that some of some of about the know And that the first continuing, softening and the timing have we

think the there. headline I that's So

level. When you acceptable talk about what's an

about, throughout, we to gaining where share, the think independent talk market with parity gaining couple what certainly, being if clearly about continue which fact wanted the is focused. the will I to be where want I just is the at even we're continue that, we that of the all And at continue current be talked to see to levels to be really we're and years, we we to doing. of last And we the to share, be as relates rates, at we it close market.

And that in shared a being about want a so we in I scenario. share think you growth level should to be gaining just think

As you see showing volume very little And case was up these had to any activity. forward, as from little as we M&A recent more bit noticed some acquisitions. we've attributed you'll a that of go in numbers,

gives we're we're foreseeable future. things thinking of So where and seeing now hopefully, what you about that a for the sense and

Edward Kelly

competitive intensity really micro highlighted last the Has the the little that environment. up You on have, a competitive front? over on And a chain. quick more quarters, follow in just so anything bit changed couple

just I'm curious seeing as there? you're to So what

Tom Bené

us had change some think dramatically not at about, competitive don't we've made what a in And recall, last I comment being end quarter had areas. you we talked I maybe of about. anything the as if from Yes, seen

and And weren't so of being our reinforce is trying business, the not kind then that us make really and sure that we're was competitive. and on that we'll to just somehow we -- point re-stepped of have to losing make efforts today that, we're because up we

say be competitive I'd so activity out what but And in seeing we not increased obviously talked level past. from of any about we're continues there, the it to

Operator

you. Thank

Mandeville question comes next from Christopher from Jefferies. Our

open. is line Your

Unidentified Analyst

on Chris. Blake is for This

about or quarter, just be upcoming holiday terms that. like anything the on of you year-over-year case can in other we wondering timing, comparisons on details Just of should growth talk of, any timing aware

Tom Bené

major Blake, nothing I there's not mean, there. really,

called national there out still be we still will of business account in that some that As cycling this we're QX.

just So that I think we you mentioned. that expect should the made. or else based what than comments But I nothing on unique other different that's

Unidentified Analyst

I CapEx. And of capital capital and you then the some spending. mentioned my cash follow free on, in up flow is from impact know working

little some what that you commentary then a free us you about the On can more cadence you talk investment? mentioned give the throughout with would the flow think CapExside, maybe, was on project year? about bit helpful. And the be cash timing. I Any just Can going that of

Tom Bené

had couple cash anomaly just year, things on some CapEx QX fiscal that, actually of off CapEx had on related of of as the we fiscal the So had previous of an a last flow, a come in year, our specifically, We we because piece. last QX as accelerated in bit U.S. our year reform. where tax the little

fleet. quarter, So CapEx to some given us reform opportunity an the tax in at has that particularly the accelerate

So where it had, an came low CapEx. last we quarter unusually of what I'd to year actually first consider,

bit particularly where of what comparison, it in I fleet, year-over-year more normalized quarter year. purchasing this would spend year be first last characterize we as that normally would I the So -- of would that we relative a had as a more

really again, actually bit to year of reform the the prior and the that's to where a there's a U.S. So QX in tax And little that. relates element. timing it

last few bit we fair had I is seasonality relative -- our our kind we've The cash typically just a the cadence and our remember, think we QX. overall would how of a you, if on actually first flow, actually we actually of about of of some have have somewhat lower also, We you flow to an you typically anomaly over last quarter. related looked tell year, years to the number if

somewhat an you to cash year This that bit there's and again obviously, better we capital impact, historically, of certainly flow word, numbers not our though timing of a working so some know, spend last a even unusual And there's while of is at a had sequencing this number. somewhat, capital and short I, necessarily a relates as look as bit term. there’s our

So as I cash you of of you obviously, lot it to year. issue our here, gone pretty flow confident flow a of our a think good head of here. few what look And again, continuing then take strong a way years, would -- just the has I have you, outside of of into cash tell a ramps certainly, certainly some the part the strong at when our feel latter over should last fiscal sense the that look despite we will like up But here. time some ability get

Operator

Thank you.

John Our Securities. from next question comes from Heinbockel Guggenheim

Your line is open.

John Heinbockel

So between account existing you're out share gains, you market to over share. that Tom, maybe that new about opposed parse taking think as when accounts

account assume bit existing getting with are a share regard market And probably seeing think right? little larger. is that's I I So that Or you pretty size? what drop static? then to not is

Tom Bené

different it on wouldn't or cases look mean, and from say so holding at more I business I'd new assume think driving As an and and from them. right. business and obviously, comes that is comes penetration, places. from two retaining the new maintaining our opportunity. share, And it both customers current places. through It business, I our It we about comes you're current

business new us. no would market, roughly year, a it for haven't opportunities the in share for a of business plenty there's be business, new as relative business. our with someone that new us, business we then for done And define will Given

that this in customers regular on basis. are there cycle a So pretty business

I still So at isn’t a all think business part our wouldn't big that of to new grow. opportunity

that you because relates it customer, sell we're that's the very case get. existing into say focused to ever we any on then And can most more as penetration, I'd it's obviously efficient can the penetration,

buying selling are exist that And organization now, got identify that that type from future. we're on place in bought There some some products based those may tools either some on they could And focused of might that have might not customers. well. to in be we've in they opportunities very help so where be us past be they customer the for as from us are the our they or in buying the

two. our say really do I'd size balanced better further point, penetration that it's pretty and mix talk help we the go customers. current And at and between drop job always does business that penetrating on the we our generally our about And retaining So to look new as up. of

are but we in So improve focused has drop increase very overall, I always there that wouldn't say our penetration. sizes drop with drop on -- size where our as we're overall our a are, significant size improve been comfortable trying our to and

John Heinbockel

out a maybe then high. little looked And expense when transformation, adjusted, corporate the take Joel, for I

that I think think million that, up run Is $XXX X% a rest we drove it grew run rate? quarter? as range, X%. a and Is that the rate, new that -- in the $XXX million to year? you to Are that of or about is X% what the

Joel Grade

that I some work some in organization. Well, I happening couple cases, that in I transformation again, and again of spend then, that, of think is out John, some some would actually things. of corporate in our of our results further about those field -- mean, characterize the coming we where as guess, a investments

Obviously, bit we SG&A. I the think positive, a which net what of is actually when some look So our effect there shift. a a is of you're geography of seeing overall at

So that. the the I majority that's probably way would again, I of think, characterize

take a and take progress that's G&A overall of I you sense more when that think again, from would about some whole. the to perspective, think holistically we've spend make I again, a But in made good sure we how probably just it reasonable there, -- think about view as So way we that. that our a

Tom Bené

technology. point made a might his earlier I Joel John, comments add around that just And in

in that there mentioned But corporate to doing. you work a the of that other up we're show offsets like are expense it's technology So some transformative investment, as line. going

to going you where focus a we're So big technology just give for more it. be need so context to continues area we to. invest little to And like behind us,

Operator

you. Thank

Our next Frommer question Credit from from Judah comes Suisse.

is open. line Your

Judah Frommer

sure gross business. a the us Can balancing to the talk to the or that impressive bit you're areas right on top-line the gap of business and was way in and going making profit that into and One the little you dollars was certainly half year? OpEx the you further finding opportunity about U.S. more OpEx, grow reduce move the and in as the forward, back the OpEx in to margins year next of this pullback

Tom Bené

start I'll this, Judah I'll the chime for take and at Joel a let in. question. thanks

great we're you that, accordingly. I just say our support it We've where where a are that, absolutely look, investments think, talked we like to quarter expect is about expenses with example, that things volume it not and as as we And a business. we Because to when, exactly focus very a flow be, continues we're talked said the that the the this from making to in gap us. And that make Having of going to in would I lot. all going on. about conscious may sure are should technology and it drive if something fit be be to important. we continue

is last that initiative, year we're some the getting from. spending we're still leverage things getting costs talking we're had We've areas regionalisation The here, here which this types smart finance kind And the expenses around administrative that's some been of just where going that still on Canada, about. non-value had We've of things that's had been business removing are focus like from we've effort parts work benefiting that making that's about sure benefit the things on. some talked the then we're our we've added in in transformation some possible. and journey impact. that a of but We expense had

So to areas focused think about cost, But say that not opportunity I gains are way, you to the in add? there's and stay both on if transforming would, any we're want as, are been those on to our of areas it going do the additional and opportunities we the down there there. Joel, driving would believe or that growth slow reduce anything talking. accelerating focus and share our we've continue business

Joel Grade

it's think said. I well

last find opportunities. added however stuff. -- that there's to it, of receiving we non-value that, or second lot rate that your I'd to continuing answer more the run or the I kind Again, in to of in know, think on again, of we additional you maybe talked about the to that in things want of very what's is on a of the on of further the come terms certainly you of benefits some -- context small some of I to some we only are transformative, taking But that, stuff. question obviously, say And year. started what touch in the is that of terms those point half obviously, think Tom some of part remain there more, focused here, that on of

those somehow of And so in to of the are way pursue, continued us that are benefits have again, the that's just something you that for reinforce growth. we point, certainly things some going get investing to of and things over none course continue should expect to will to of But Tom's year. the the

piece that repeat so can't And I that's certainly, critical a -- we enough. of message just just

Judah Frommer

of and follow-up out as Historically, to important have review an flow? does size. on and largely last your of over couple larger the M&A deal kind and that. line piece would growth businesses. able strip that that of of I both deals With M&A say what the And to you've acquired bodies regulatory assessing driving costs the of But affect process also, seen how in years, just of top terms going you're is on forward margin

Tom Bené

the smaller you M&A type on Well, has historical strongly of I the deals. points our fold-in been think made, kind one tuck-in pretty of focused again,

to I that our is that strategic And work that space. do of from time-to-time, Obviously, our eyes the think so focus. smaller within certainly, fold-in the for about open we we vast talked tuck-in be majority certainly have continues we certainly -- and as larger opportunities. But

deal we we that much and I example in paid that significant opportunities J. Obviously, Kings impact existing again, But quarter on So that on those have to of the one I that's yet perspectives of certainly can't say on truthfully announced going the portfolio. just what's certainly general, last there. really had that. think, in nicely another into that attention our we’ve our fits

so, feel been And and of Judah, about And it, can't of M&A though took ahead feel we M&A real how about overall our I think just take significant about we would a a impact I has generally good pipeline. us. We of on we say opportunities even speaking, pipeline. note lot certainly that, the say, a good to

Operator

Thank you.

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

line Your open. is

Marisa Sullivan

I then just maybe and for gross what margin? and see on touch and keep Any the other inflation could takes for just year? rest margin would rest improvement, you puts the XQ in inflation was on the and as the then we of the the gross in be of to year, impact about mind outlook think modeling wanted to the gross Thanks. if what of margin, and quantify

Joel Grade

This that is take Marisa. one. Joel, Sure I'll

costs again, sort to -- customers I speaking, as that. the pass the -- longer those is we'll that the range where range to I sort have our again, inflation, those along X% ability think and we term. think to specific this I of along -- we've But pass have to we optimal for over the the quantifying industry, to ability X% in their an think impact do the customers the always costs of know generally takeaway of think is, of our maybe terms about I had don't

certainly inflating at obviously think the place issue categories either something that I for nothing, is as always we in point. that again, and it problematic a there. particularly are see somewhat or we find good so And an pretty ourselves depending driven, Again, that's on this us

So the view have be certainly other few to nothing call think to perspective. modest over I this from we fact in my really would but on the like than inflationary And of that we’re an than we level expect inflation again, next the we -- out a place quarters. that

Tom Bené

as numbers is, I you few couple big in either. we've a Marisa, going quarters, relative sit, a asked the margin think about are to don't you be gross pretty the talked need where on you about about we And our kind and we gross think, we hitting to be I increases. talked on feel I just feel the we think last competitive environment. hand, what I'd we remaining those group. know modeling think But should don't I good this in competitive we've what peer say times think self where of do about like, perspective see? I other forward of you margin from

where confident and but comfortable at should feel we where -- are right think can going I probably end high we you forward. so about now, of the we And us think

Marisa Sullivan

modeling on if If just quickly of indicative of performance of Should forward, SYGMA. just do XQ we cycle some what when with you'd I is that? -- rationalization. as another sales expect And kind given you follow question, about so, can start the up think the business to going

Tom Bené

QX. last in transitions some, saw aggressive year little in a more Similarly, we -- the QX was we I than about there. fact we year, customer But talked are large fairly some as cycling in last think probably

for next also So transition say a existing of about numbers. customers couple customers. the And within performance think of quarters, I and you would balance to is there similar ought

you we a we business on in their case, of geography. in the side, every SYGMA not know, As but probably majority customer have when have

will the relative about. so we've you're seeing fact there. our performance numbers transitions performance affect in the driven are been bigger their talking But by And

Operator

you. Thank

Barclays. question from next Jeffrey Our Bernstein comes from

open. is line Your

Jeffrey Bernstein

versus topic of chain of accounts. transition chain one the on the presumably And mentioned of Two independents. some questions, the ongoing you

I'm terms for of in how of in sequential importantly, each think health top either the line being the in the some just again And about you're business. late? recognizing you and independent. some trends how change maybe chain independents maybe of of just changes chain But performance larger you performance, sub-segments their terms would So that characterize pruning wondering of in of

Tom Bené

kind we of to and information. access the same you as earlier the guys So mentioned some comments to of have

the do you're seeing than general, customer numbers have softness for in think within us, transitions more certain with to types. I

good were feel about to continue business as Independent potential we there, it's to or we existing growth talking gain think out opportunity earlier. our I new the customers whether

the others. there segments some think of larger we growing relates have of national customers it as faster are that I than type market are the to

harder environment you speaking, well, for good think doing is see but QSR feel operators. casual about like little the I the Think generally of the we some is time, having a dine maybe pretty restaurant

say numbers with customers decisions or we made think we about the doing about or And reflected in us Sysco. so have that business would I talk you may see will made, more here be

that environment, now, pretty say good feel that right we in I'd about market. So

Jeffrey Bernstein

guys, M&A With huge only guys, on tons do seemingly just the the that still discussion, increasingly you of that growth consolidation you've and regulators quoted scrutinizing. for around wondering, said And often that uptick following then I you in just for you expected a M&A terms M&A room I be think in US. Foodservice share numbers for yourselves. of more comment you changes industry? to for but so involved XX% than with And and up But modest the a not for just there's you know I'm mentioned it landscape the expected. the of broader being think the

Joel Grade

Certainly on X.X% of don't I look as of couple and we we way. year. point, given about, around mean, good it obviously anticipate we a deals. I any or again given between we certainly And that in companies know years. pipeline we good moves about the about that our that may given we at brought by not quarter Again the over think our about total I bit, have what X% talked may lap. or M&A Yes, feel last feel Tom's think of sales our And

think think room industry think know, from I well. I I you broader will of continue and plenty I And think, overall happen. is continues just for I from from don't ourselves an consolidation, should industry as think to I there that and again And that expect perspective, certainly the

things would as I I call, I interesting in what's we significant just, some there happening those think on regulators M&A. have the And But how we out. as in, this are impact I believe, how see math. interested don't all think to play the it's what about really of said earlier in

Jeffrey Bernstein

whether did, spot. said upticking signs or X% the which or quarters. protein, inflation, is range two looks you you're whether it of what inflation. of dairy of the just expect But It more And I'm produce said, the approaching to three just I would commodity a maybe it wondering X% kind like about has to number now, your which past And otherwise. been sweet significant to you earlier clarification upper lastly on like have upside. some it's you to of lag X% seen of that if end

Joel Grade

mean as I think I Tom again can Yes, here. and chime in

some are of Obviously, bit. higher there be have range certainly fair been of A still end I that. that range. category certainly our that's moves some the on challenges documented. most been we've the for terms think within some Obviously, we that part they end that and had of the of oftentimes produce is the that higher that has are commodities that other a related of of well pork issues again. little Obviously, stay around certainly would the pork view in on of the

of that of kind speaking, that the we anything that, that significantly. I drive the a But are our again, we overall bit of just would a just the overly get about don't our say, fairly of people should outside certainly, see know be place. are pork, we I seeing, We're right. that, mean, not I over questions on would end in would higher consider that optimal the range if general. that question So on there's the of you're future. business near generally We seeing and something concerned folks But fairly often on something small our pork percentage that

Tom Bené

of ones drive the is, because important it's the things are along. everyone, for impact plate add menu such where can items as an thing Joel operator I'd think, that pass biggest of and struggled the I the only they the Jeffrey, center part for mentioned to the

So stay segment those on poultry, categories of pork have seafood, to certainly the focused within I and think we meat, key just falls that. plate meat center

And as then the produce. mentioned thing Joel last

it's been end the on and a think to something where that got ago, There year just higher stay ups downs close up. we too. some were to. has ends dairy I And seeing

that right. So I within you're around produce maintain -- we about We're that center we plate good where things think hope they if concerns have any now, feeling those range, items. would it but and we be are this think

Operator

you. Thank

Our comes question from Andrew Capital Markets. Wolf next from Loop

open. line Your is

Andrew Wolf

at $XXX one you quarter, the the think I said toward reported. -- side, acquisition you the end the you expect of you of this On more the announced acquisition -- last, million just end

to. you So sounds math you a get what doing think XX that's the little bps, like below can it about

all, would that of that bps XX of you've we could other roughly. add model First acquisitions kind are now that there to right in

largest look How large this, of related of and but different looking in you kind stages, in as to at the availability Secondly, to next the in for distributors on. industry of, targets very terms there involved market out pretty two acquisitions valuations? a buyer terms does are the early in

Joel Grade

couple things. a Well, of

can I of pipeline in about continue the First to feel sort again place year, reiterating only around of our reported And of feel guess can reiterate it's I again the other the relates we a obviously, able thing given some. X.X% to is, something specifically we and can quarter is But front good obviously We just in again into any say anything that X% in it again to all decent. certainly, acquisitions, by specifics, good we around moves go it's we're us. certainly all, overall I able talk pipeline that without about. there's as there to guidance we have our obviously being to there, think with I so feel

certainly will We that. do

again, the in other say there to speak thing view though just in the the I of general, certainly, large, only I context. the want don't just sort I mean of I of would I for space. terms guess competitors guess in the

of this in in density significantly higher would say, others is, the certainly in the the obviously I our are network You our States than space. United

we additional the so at look on different additional take for ability is bit or for a space you those things. some And that of areas them than to would them consider obviously geographies the white way

and recently markets Hawaii that the obviously of America. are North deals done outside our of in outside in so we've core And

little North are then largest in of how our in competitors. But network bit terms business, our it probably American a probably the different deals some density of place of look two us at and in puts those a we again our

probably We about So would I time. again opportunities front of you think the I in think that be of continue just would contextual can the that. this again aggressive way give context best certainly I at there we'll lots space. from to in have certainly But and be that perspective us

Andrew Wolf

I How scenarios contingencies Sysco But to wanted of swine on, Thanks. that you fever of is kind about, great. sort and from African parts just different I either not sort and what kind I'm at, not Asia that any? make of viewing hear mean, circle then a ask views of And you other on probably semi of kind to catastrophic directly that you are just this? you're what this asking prediction. in so -- if not looking to you China of thinking back have or about

Tom Bené

months it's that we their to. that impacts be over I next there the think needs. it's especially close some think Andy that it's stay We Look, are very because may It's about in that other Tom. could you be beginning markets if something there. that's, import think something more of that to area starting out six of

about the the components important and various some and sales more others. part are that, our of are think you if think segment, that bigger of pork I there

understand we're areas. what some think close staying I to so to of different impact in try And might exist those

there probably two certainly that and could still think there seen we should are our while, been we impacts operators our believe I with work with just we the it's there closely for haven't but about So is, a And suppliers. way think restaurant I we out you two, mean, be some. major things yet, about. think

it's the be a that situation try impacts to it to matter are might drive think in with that's abreast certain we're a work to in items And prices their stay point menu think categories. to work doing going their where always that some I product have profitable or position we're issue, of not start And growth do going businesses. of in about those be affects really menu ability transition they get with be dramatically going items. to not the proactively not our so the to to to customers in not a areas availability. those them the customers We're these the differently where on That's own happening where

So kind things. I'd just say, we're very these of close to

resources trying next of sense that company we six involved to customers. supplier would our saying some here, our think with with are partners right manage that both are the both have our the We increased while And be, we'll lots and over we're now, I proactively probably here. impacts months, see in

Joel Grade

say just availability would of substitutes. just terms in I as And product, even of as well sourcing

I managers things that's So are in navigate certainly and things through forward. past think working certainly and those moving we customers one of with the the active that in we've very been

Operator

you. Thank

BMO Bania Capital comes from Kelly next from Our Markets. question

is line Your open.

Kelly Bania

And and wanted the could Tom X.X%. Joel, unpack I growth that wondering local was to case independents. if could back or and I the wondering if you go you just to

X%. a exit is, underneath can you're Just targeting closer And comparisons, that help customer that. open elaborate understand improved us the last of seeing types I or think Is you restaurants, rate, is of part or new openings. types the the And regarding kind on then been just trends, trends regional to you factors. what internal external of had that

the segment? X.X% that And table so, I'm forward you. of X% or should curious kind Thank is about we that a for thinking to still going be on

Tom Bené

from the kind talked about about do talked of restaurants So time-to-time. change micro about we would within well. or about that talk more local very almost of talked things, about impact we the did good X.X%, We this feel of about part is we growth couple think what we've bid is, we what in as including talked business. and independent We from the segment on see be the regional we the of about a as the this earlier

some into that local falls that some business, these literally national it's schools There about local not fall governmental an things agreements kind because numbers. of example. well. that local is that we into talked It's or So of as as local school-type

we growth it and and good is we side is we're see seeing what there. why strong, think is I of restaurant that and confident good So the feel

in also that penetration selling can I think doing. we're rest understand their the organization as to we're our those a space. that so sure I tools should, customers. work that we're competitive feel improve within And us it's about, of, good they as But I remaining them also we that there overall some about combination think talked that some, providing making help piece you mentioned, And we assured are where

I think well existing pick able opportunities new exist we're up, a those good balance penetration both as that and customers. So business it's as to of that the within

as today and number we far are X% where I As X.X%, with versus talked the about earlier. maybe

think to continue fact to we're growth sit in see that business have in segment we about to there. have just we this think fact things like this the I going improved given bid an here can't that local not the unreasonable to number whole today still deliver overall still I the X% X.X% that time is frame. for and like feel say us. we that we the But X% for

two talked. our and as cycling of prior we've are we year, in from biggest QX QX So quarters

of get And that wasn't may the sequential of talked forward, we'll I so that benefit be part exited some really we think about I improvement, going as but QX.

Kelly Bania

could some where you're mention elaborate and on you wondering or are market. -- the in Joel year? think in improvement staffed of you of I thinking I And about And the rest the how signs what if and for I what you was seeing terms appropriately you're heard maybe of then, mentioned labor where

Tom Bené

say seeing mentioned settling had it. are that I some we I guess Yes, right, I'd

last seeing been and like we and I our operating better we're a little we're when our little and own about having retention. had bit for talking say stability feel mainly there tight. we market, I it in seeing -- a more think our -- that years, in feeling front-line we labor I'm drivers. retention warehouse As better associates is has a while, the to what than about both see we're be is, And all of market over But associate very tight, know numbers couple this we therefore, the labor continues found we

we've on the And we because one into focused up has season. we'd naturally have of some as to ramp been came is, softer, about things the new so talked the transitioning also is, got back when then what of that have not we business season

still rather when and in to associated seasons in with maintain to need are were back new a speed. like we're of in comes not good to evaluating time the past be them now labor our to them We'd what development which continue where lower during ensure to to training hires and the them we so we're getting we training. There's we the do And thoughtful ramp associates and situation scrambling up, is is up lot of the and here. that for having a least, not of lot potentially invest a expense

was I what really that's So referencing.

year, volumetrically the us. one get mean could I we're we've that of into we practice that and have continue of we’ll and right we understand as sure just employed. to the a of the think parts I to think have pros the we we model lower evaluate, now make is that good cons some for But business some impact trying

Operator

Thank you.

JP from Our comes next John from Morgan. question Ivankoe

line Your open. is

John Ivankoe

some of other to In is that the might at a as in there like, be The it and delivering in learn from to to some States able times, Canadian project, what volume to more that it And learned more sounds Are United it's States? happening at having words, the of in couple or is well regionalization as as United States lagging terms case be terms in that of well. was market lessons it profitability. mentioned United relates structure, like least any implementation Canada? looks to something as least effect that that of the

Tom Bené

Canadian it few implementing regionalization have started a about And we XX effort is we and throughout So ago the fiscal that year. were talked something times. last about it's an months we

of getting some see operating had we a regular as different had the had companies, smaller it's some facilities like have smaller sheer the and U.S. significantly in the we're U.S., continued U.S. because we We you'd would So we fiscal. in into I little than size geography just types that and than And move expect the we companies this to benefit operating there. say

one management And those in of similar at Canada, case had structure a the facilities. we every of

some a facilities. take And expense so there to that an was of some out additional those smaller associated felt better just perspective cost opportunity up we there to from ourselves like structure with of

forward. and feel there way than it time we There and applicability is to that the opt the is believe might about do bit we little had I learning good certainly will setup feeling but in work-in-progress, it's some we're been similar still to going effort we in say different here time learnings have but opportunities in But over US, good would drives what and there that about lessons and many, the we the think it U.S. US. we've have some not show the about a have or difference is some the whether we're

John Ivankoe

intra-week spiked your big market different terms happened company there that your But where inflation just or would wasn't see been that really beef behavior numbers. happen in up because some happened very this that spot noise? beef within enough quarter you bit of on unusual the anything the number of little plant considerably. in pricing is kind actually was of unusual apparent volatility, maybe because this And specifically of Did happened that, side cuts just overall this processing that the fire the have state of in results, P&L a the

Tom Bené

years when the Well, nature, but mean, those the seamlessly. our of than are way think our that's go helps that their a sure. we've of they unfortunate pretty us our impacts our anything and that It's really able things talked, And type agreements, market these go good longer over for to all, things is, are else, noise suppliers. the But John, probably should for they because with for partners, one events. are suppliers of as dramatically as happen, and I in more big bit we've with we're way those difficult us we first we through and of term relationships manage not long-standing about I of short-term, little not to the built own I relationships, in supplier the think it's of generally out the and feel

Operator

Thank will question And we last Research. Summers take from from you. Buckingham our Bob

line is open. Your

Bob Summers

and question quarter, second the period quick for on between a Just the calendar has Thanksgiving Christmas shortened.

it demand you think weakness really restaurants. went impact I think last Did impacted. at any all associated or be should mean, for with we Starbucks was something I pent-up like I this, time it's expect through that?

Tom Bené

where you to have think, problem. sitting don't question I so. a and that's more a be historical we're necessarily It's do certainly But work any Bob, know point, on. going from at impact we fair see to feel or don't, today, we're we a don't like something go believe this little

Bob Summers

second, really confident seemed the acquisition then you with And guys pipeline.

seller accordingly the I'm of if time. two price have I Just point, of big expectations point curious what on wondering now of mean, seller competitors expectation you've period seen modified. view? are out for arguably the market some

Joel Grade

impact. a don't I had lot that we've I'd say Joel. know it's seller of Bob,

about SGA lot that price asked impact previously did sort mean overall U.S. I have that just We high the expectations. a was. Foods been deal of

Just direction. I we've -- I specific the steady into is got opposite again, hey, we've that view different. where some no. we I very mean aren't run say would or a we is would lot of situations -- every very expectations, generally can't pretty inflated deal deal a say of say, just there where

I'd within discussions that speaking, I had I we've say had of M&A -- mean, today generally we I a range. have say, generally normalized And be. historically are multiples people to our what view we So think we would with pretty, expect

what from higher up situations outside what related or you come either of nothing, would There So I is deals say again, impact, lower either very deal call is to nothing specific suggested, or that the, that of, direction possible today. the I'd there time-to-time. timing as

Operator

And for question-and-answer this Thank now and gentlemen, great you. have session. Ladies end concludes Thank disconnect. participation does you day. that today's today's and a you conference. may Everyone