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SYY Sysco

Participants
Neil Russell Sysco Corp.
Kevin Hourican Sysco Corp.
Joel Todd Grade Sysco Corp.
Christopher Mandeville Jefferies LLC
Edward J. Kelly Wells Fargo Securities LLC
Nicole Miller Regan Piper Sandler & Co.
Jeffrey A. Bernstein Barclays Capital, Inc.
Kelly Bania BMO Capital Markets Corp.
John Ivankoe JPMorgan Securities LLC
Call transcript
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Operator

Good morning and welcome to Sysco's Fourth Quarter and full year fiscal 2020 Conference Call.

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

We will begin with opening remarks and introductions. I would now like to turn the call over to Neil Russell, Vice President of Corporate affairs. Please go ahead.

Neil Russell

good and Joelle, you, morning, everyone. Thank Sysco's earnings call. to fourth quarter, XXXX fiscal year full and Welcome On we chief executive officer today's and and president call, Joel have Kevin Grade, our financial our officer. Hourican, chief

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

slides found today, At and call the corresponding and follow-up. Hourican. ask to the limit participant our of about in to SEC of can information news cause one included president includes to GAAP our like SEC time, their Additional included to are report in ensure to each to that to found officer, factors results time chief Sysco's annual or to XXXX, Form reconciliation sufficient in forward-looking A IR This our and our financial morning. at limited today this slides. app. our in on XX, one be differ that sysco.com and could all year the release Kevin to questions, the question we'd in answer are earlier XX-K investors of presentation To risk I'd June these statements investors over the these from in in can non-GAAP website. time the executive the factors copy Non-GAAP but turn this like measures via filings. the comments section at the also ended subsequent presentation materials issued those and of have is in not the is contained measures be end contained company's filings measures for The section we

Kevin Hourican

your families morning, call morning. healthy. hope are the and and with everyone. you safe thank Neil I you, that us this good and you Thank I for joining

want frontline continue to and to for through work drivers period those unprecedented of healthcare customers showed navigate a day associates during up work of home. want environment, warehouse including crisis the the priority and their our care this of health customers, than I our associates. well-being all we I our stress first both thank be ever. and at that associates who especially of our sector support during thank more associates at As our this needed our tremendous to will take always as our in every high to

current transforming how in be turn and the then call, financial this will discuss company discuss to management fiscal how we customers we business will XXXX and I'll grow morning's Sysco's fourth our service During of our the effective are business. state and of even over more Joel, I to strategically COVID-XX the who environment, it the Sysco's crisis, effective quarter results.

directly. remarks began of Lastly, It's and we impact Sysco's months to few Q&A. a for effects significantly our call business over the since the I'll make five COVID-XX's turn closing been pandemic industry before

during successful we Most this not this operating of just during importantly, these difficult during our be partners as possible managing are swift a third through of conditions. help ensure to crisis. Sysco proud to a pivot and done action the the moment. I liquidity costs crisis, and the as quarter during we our a wins a call, discussed are I business few after of sales the to highlight will crisis, immensely have transforming just tremendously of we work structural and As took in crisis, immediately maximize restaurant our onset variable to am we disruption. during reduce to decisive period that company

customers our our and company focused the transformation While survival, competition. are call. will progress today's serve we I are transforming our making our differentiate are during on improve on from we we others to highlight how

like a transformation, you general I business. crisis cover our state however, I the would and quick of to we update Before our to-date the give have on managed how

and our us overall strengthen took his team environment. which during action swift to difficult flexibility Joel financial First, further affords this operating liquidity,

for of As further, have success. the approximately $X we and Joel will describe us position liquidity, through crisis to billion which enables available manage term Sysco long

the unique our to business during invest tumult. transform We to in time company in our are of a ability

of out I costs basis. million stabilize more In more structural approximately will includes to $XXX removed annual something in fourth to taking working the and expense, a discuss than we We're alone, million expenses, the business Second, an $XXX further worth moment. permanent have on we which quarter cost. rapidly remove rate structural operating worked by of run even

of and not Third, are over in We've very time. XX% help example we our this extensive which have like better during restaurant customers. revenue, shops customers them provides work this Sysco models, done to on who to customers have been helping a to year of work the is selling restaurant pivot of the revenue be to created operators performing prior of streams I uncertain am room, powerful proud restaurant new helped up front those their restaurant A included that fact our that than successful. pop with concept includes dining has we engaged these our new sales help force additional doing sources engaged. have customers our marketplace, the which the with the for

over customers marketplaces. XX,XXX Our helped sales up importantly set consultants of have our

outdoor have We helped extensions plans with such dining our alternative reopening options. also customers and patio as

start technological already one. not the with have customers website did a provided support they if to have We

delivery delivery their maintain have connect help containers more menus provided to to-go have our menus with narrower preferred much and the a focused customers menu a helped helped needed set profitability and partners them on them assortment selection. narrow to to we them We've up needed support to Additionally, that takeout model.

these without these actions believe help will protection, sanitation personal customers disruption, retain have in the net us we impact new customer through that versus ones Promoter I'm so our business this NPS points and We of restaurant post. basis well during pre with We measure provided crisis space our say Net beyond XXX operators. continue actions Lastly, pandemic. to may compared and when that has restaurant proud overall increased that cleaning, independent win the the our customers can products operations. for Score

over XXX proven Sysco that NPS basis improvement example customer those know For This we sales dramatic a perfect improvement. NPS, time. and to of a point in improvement Increasing XXX is the days retention becoming. is has are a increase

to sales delivering chain. the products, to are just and We food products we of services. grocery valued alleviate retailers regional in national the selling products are food we strain Separately, help and have not shifted supply

we where our Although $XXX sales business Sysco items operations annual call, capability we that such $XXX as advantage an Since and an them. have million of billion us a helpful produce new win. quality during of time, be some of additional The incremental fresh through last over relationships grocers secured in new those of $X is retail fact business term select opportunistic long created or where the announced to we value have regional win million reliability enabled our we've in basis crisis. new proteins of partners on this annualized nature, business. our with to will can through larger our add buying On worth

win contract at the We new customers and have sales national the local simultaneously. to at force the the and level capability

As relates would business it to pace of current business to the our I environment, highlight like the recovery.

For May experienced steady week-over-week and June, consistent through we sales improvement.

restrictions that have as began experienced recovery swift fatigue from cases states begun restaurants it increasing in it Unfortunately, said, that real, business to recovery. home their and is a and safe the stagnated. reengage industry. and clear excuse reengagement countries locations, are are me, that upon will With placed the The pace with food is be at business of fatigue somewhat real, community. when is so to we consumers home by reopening, is food in dictated that speed certain ready that As do away has the

ready closures customers than to through then, takeout, advice. are details consumers bit. restaurant eat say our extensive there about away will just and that customers average, to like are glad succeeding quality safe the a from things access and dining. the as long ways value-added Joel further Until that customer geography business I'm environment meals, best As can patio our home. are delivery to little value is services the bring industry through less into to Sysco go we in the illustrating of by rate

business which throughout quarter was about. feel Our good the significant, we improvement

expected. results in rate, to came that than a better with exited well notably operating XXXX. We income profitable are fiscal year We for fiscal adjusted which XXXX our bodes communicate pleased today

that income operating quarter. of We able was be with initiatives. stronger increased confidence positive our profitability. choppy our were period positive sales against to generate in recovery, cash a cash transformation I to fiscal in some free last will despite Additionally, progress sales the and exit XXXX the to approximately flow fiscal to than therefore, a even flow adjusted of Sysco shift during XXXX now rate and highlight Both the XXXX we achieved XX%. fiscal anticipate of regards decline of have free

our competitors a Sysco how industry. we from and transformation customers, We are improve differentiate bold transform that our serve will help undertaking the

to our we enabled a more work company. accelerated become First, have digitally

and Examples Sysco, to these results technological customers, improving per are do improve increases relevant tool increase with are our This digital Sysco of to called those search makes to returned customers increase help function that and Shop. order. it sales order lines the platform retention. customer so compelling Sysco will following: the customers We capabilities digital for investing to with include improvements easier customer which business allows

introduce or have function suggested We will items menu order which our help also trends. a customers, for implemented new

to menu them the increased customer them base. videos, opportunities Examples and to by consultants have effectiveness customers. to trends engage our digital show their of their streaming highlighting with sales tools enabling pushing include, providing promotional We

digital deploying Additionally, we a are pricing tool.

of implementation can and create margin we simultaneously the our sales expansion. pricing increase tool, With new

Our is sales effort our model. transformation second in

our easier it making Sysco effectiveness for and are teams. business customers the increase with to sales of We our to do

structure of our closely now a will business incentives our model, sales more transforming be to to directly the our growth. of force our sales which teams across This more focus aligning objectives our business. lines sales compensation are We multiple focused, change the sales partnership the increasing includes and more on of with

both visit the with and increase penetration sales roles we these share team premium penetrate we specialists in more which Additionally, our will struggled increase These increasing of are help capabilities products, increase customers. enable to to number help sales existing and sales reps Combined, customers, of new the customer key wallet will that centralizing have past. will who These in sales our the last support Sysco and in account removal, key across customers of to accounts. all our will Sysco's inspire experience friction for purchasing enabled their more extensive functions friction environment. piece, facets international by end-to-end business. own be The have will reduce purchase from accounts also dedicated large will

in the completed the and spoken, we recently last we be will we have in not Our July, regionalizing begun third operations but regionalization public against transformation execute In our of our more strategies efforts. more are QX will call, we regionalization, our we more our company, have be Through US. This one since the earnings important implementation. we a at manner. of a initiative and new wave was we agile time will time with efficient efficient number our decision-making,

With will companies, more have aligned, and team business. is operating made will this markets one Each US of to new a to up that region performance of move us across to country. from region roles leadership operating consist we and current approximately more X Sysco of markets our help the regions, structure agile will leaders X Regionalization and enabler the is cross-functional region. will allows X more leadership across entirely the responsible bigger XX sites. an that ensure market. change, new, president for of that consist regional regionalization to each of X US XX comprised business go our for alignment consistency Broadline our Our one This centralized,

locations distribution our is decisions. and shortening It are future making importantly, the and local unleashing associates sales future any redundancies this are foundation to that enterprise making drivers, change, the we growth. note retaining This the in to for our that customers. of Sysco's lay time necessary local power are regionalization this change, our supports and warehouse force physical important we initiatives project will by consolidated We not transformation eliminating closing local our with all

transformation removal structural fourth company. our is from Our becoming business in our more fixed a cost efficient

business of operations, to on $XXX million, million we for permanent annualized functions. and improvements transportation and from fiscal As are corporate derived our call, are previously third we mentioned those fixed had from costs earnings making quarter XXXX. we in updating the to implemented identified remove approximately actions $XXX figures Today,

this savings we additional and In identified fiscal that million addition improvement pursuing starting have we $XXX that are in XXXX for to cost opportunities XXXX, beyond. will generate

our and of corporate stronger, improve The calling through decisions we leaner Sysco have transformation, that our from will impact in are combined the positioning we our were more favorable our defined strategy. customers execute transformation success, stayed our strategy. company-wide accelerating will we be on on additional strategic and this that space. through from expected are company. By the aligned that decisions We to informed said, a most. these update future emerge better Sysco we our putting these we supporting impacted agile matters them ensures will first The That at as we make. others we provide the customers With the modernization, associates as by And our are to that we move forward. the and company efforts ensuring Throughout our strategy that what for we service can that on investors change on crisis crisis, differentiate focus stronger. our will initiatives, focused be have difficult pace were and our have

into to results, over perspective after will like around Q&A. financial with come who the fiscal final you. Now, before business over turn our I'd Joel, and fourth to back quarter additional moving discuss offer call to I'll Joel, details environment. to our along XXXX

Joel Todd Grade

capital Thanks, closing overview an cash go and I start and give by and flow with results quarter. for an Kevin. priorities I'll spend by fiscal results capital Sysco segment, update year morning, Good will quarter our performance. XXXX full And comments. everyone. finally, followed on for will through fourth of then the allocation I

decreased of fourth fourth include the total the Broadline a case Our within while US quarter, total for operations sales XX.X% Sysco volume XX.X%. to US Broadline quarter billion. operations results case $X.X decrease decreased XX% Local within volume for

COVID-XX XX% decreased margin saw Gross billion the XXX the gross sales of both all profit and a result volume business to a pandemic, basis decline $X.X segments. As we and in significant across decreased points.

June, to mix the in were the for These inventory to a as margins. by operating as pay fourth in operating operating the $XXX rate With guidance loss be impacted $X.X operating result was the environment. XXXX. It move compared in normalized previous a accrual reversals note of Our will relates to impacted results. operating by QX will gross our reversal. Adjusted margin quarter business, fiscal and by a and into various proceeding of decreased was avoid and Sysco. important Across profitable that items, of $X.XX per when billion. pricing QX I the decreased spoilage negative to total help million, impacted said, review results favorably in current XXX% temporary XX% XXX% it XXXX fiscal income $XX with segment we run is individual our to shift results before which customer to a expense the even adjusted Adjusted adjusted run without that financial accrual and had income to rate share expenses line incentive million earnings for decreased were that of

with associated initiatives. regionalization our and of our France. mentioned impacted results related Kevin integration our costs restructuring that Our change Examples charges include the a ongoing various fourth restructuring project transformational technology to are by previously and quarter transformation in efforts

approximately for the receivables quarter. in as increase an past $XXX result which to the experienced led debt of fourth COVID million excess pandemic, also of a has have due bad We

we progress tightly manage will tightly to However, we good this we an risk. made, have and continue receivables, managing higher the bankruptcy of during environment feel about

Additionally, international we visibility Fresh declines global due to goodwill France the have better pandemics segment, from volume our taken their and the to businesses. Direct impairment within impact stemming charges of our and

resources reflects to and reporting aligns business our that decision dedicated allocate the better that Operations to that managing of on improvements. Lastly, expenses our made the feel fully to true this segment. combined US We leadership the US during quarter, efficiency we corporate Foodservice the are squarely reclassification

to Moving segment. on by results

Foodservice Operations of the for period. decrease XX.X%. sales quarter of both was Sysco sales cases to the exit were fourth segment, the XX.X% sales customer temporary in which and US Gross XXX was local points XX% throughout Volume to result billion recovery closures start as quarter. the to mix margin basis the for For shifts and for was points a and the decreased the a fourth decreased of year versus to the of rate customer quarter, to points US quarter billion, the prior $X.X $X.X showed markedly compared declined US improved of XX.X% quarter cases, X XXX the and decreased by XX% which total brand pandemic. basis basis driven gross as profit

billion, Our better more reductions to Adjusted adjusted $XXX XX% and XX% favorably in decreased permanent million. income in was operations including our operating by impacted business, staffing, within expenses warehouse transportation the operating improvements changes efficiency to productive decreased force, initiatives. which $X

quarter, continued our for adjusted boxes Foodservice in Operations basis, decreased impacted XXX%, providing a XXX XX%, International food program, of currency and decreased adjusted DEFRA changes the basis as need. decreased loss income business fourth gross with operating XX%, profit exchange On stable an decreased our sales of $XX Our has points, constant were remained rates. those by margin expenses operating foreign adjusted work operating decreased gross Throughout XX%, million. to UK the in we

both shown customers. the and and Ireland reopen during improvement quarter have hotels as continue pubs restaurants, businesses Sweden steady Our for to

good attention. weeks. was much rate current the for country the feel quarter. exit warrants improved, our the business. past has The the been about favorable, to And rise In of been continued COVID-XX Although compared reopening Canada, the beginning eight in fourth our results steadily we have cases

crisis. Additionally, our heavily throughout allowed results impact prominent our from cost American countries Panama, greater as by was and of Mexico have We they and impacted saw structure Latin for COVID-XX during a the to the been as most mixed pandemic. regionalized be beneficial in The continues flexibility operations. restrictions of result

However, environment. the performing & partially that of store helping partially supplement & some well Cash also in our the a Panama restaurants. sales and are Carry in Cash Rica, is current stores we new the in In Carry decrease Costa decline offsetting to opened from

on to period as billion, decreased less XX% drive-thru basis segments, restaurant experience points. and decreased year quick-serve to continued downturn, compared million the sales types. a margin for SYGMA to profit improved by XX to gross the quarter, Gross to $XXX prior of Moving $X.X other the restaurants to but compared XX%

to We by $XXX improvement are disciplined due expenses operating decreased steady Adjusted adjusted the as XX% of million. to encouraged million result XX% transportation profitability income decreased profitable progress operating And to $XX a to growth. of approach costs. lower

for Now to $XX.X turning fiscal our to the decreased sales billion. results year XX% XXXX, full

in sales of adjusted Our Broadline per the for of result $X.X to margin decreased at year XX.X% adjusted beginning The $X.XX place share volume the billion pandemic. Broadline XX the by of decreased XX% by a $X.XX, expense to volume and the to case total earnings a as softness result, US an pandemic operating gross X%. case operating US Gross led And efforts Adjusted for driven in as decreased and primarily cost reduction billion. volume in and XX% $X.X decreased decreased to income profit decrease the year X.X%. decreased our put basis points.

with business Our we year, been particularly the growing US customers, fiscal as work progressing are the well. pre-COVID of during foodservice grow doing segment is to first half the local had

drive demand transformation to growth returns to levels will We are that growth. work accelerate will pre-COVID future confident, return initiatives that and our as our

quarter. business international recovery the to has US and has the in are Canada taken during encouraged we the the segment, fourth place performed period the Within our COVID time similarly by that throughout

now business For the improved. initially our are and responding steeper, COVID-XX occurred are and European earlier the were business open since operations, but consumers has the and The our impact well. crisis UK from Ireland for declines in

a reflective revenue growth dining of had improve the Our chain during strongest out, July, the solid culture is month to Currently, our by France work team country combined France in business of challenges. line our the Europe French in year-over-year supply the which in top the top-performing basis. on of deployed our is crisis with

Latin as continuing and and businesses are for in of to the performing reopen. As recovery show pre-COVID our America, food-away-from-home were signs places companies restaurants well

to through SYGMA's the efficiently For and plan, results, despite year, crisis. gain working operating flow ability their achieved the I'll impact pandemic, customers full the capital. now and income of cash showing to move the new their operate

from accounts working to a volume levels cash operations was driven receivables For million. reduced benefit, the quarter, We DSOs. capital addition $XXX accounts and in fourth which flow improved was had by payables,

result to was of reduced Our quarter for net urgent initiative and only substantially as directed that our CapEx the fourth spend million, $XXX capital targeted were a projects. expenditures

$XXX $XXX than our fourth our indicated, was spend. free less previously XXXX million result, fiscal fourth And As cash was flow quarter spend fiscal a million. as XXXX quarter

to softer than For fiscal was is million pandemic, quarter. despite that The half throughout to million changing principally in fiscal of was a by year. the the flow top fiscal say sheet I half XXXX proud the seasonality than the that lower with positive environment. we line higher the flow rate we $X.X also Free XXXX, COVID-XX period to we income year. our $XXX everyone fiscal flow for I'm during working operations million, $XXX the CapEx and exited this positive flow flow, that lower fiscal am fourth for cash cash lower of which of fiscal about or say year of X.X% want business the XXXX due the $XXX flexibility in last navigate fourth performance, weeks stability cash cash $XXX which of free typically positive and is quarter. year had of sales. a of the softer balance I result was billion, to back the fiscal million free Net but of cash in was consecutive XX proud and XXXX. the first the the partially was us end affords offset rapidly to XXXX same have from the decline which remind operating capital was adjusted

As cash are liquidity, survivability impact an of of more have period for we extended which worse and much experiencing August XX, billion we currently or expected. than through than ensures XXXX, available an $X and

While we I access not navigate the it to do COVID-XX capital capital given we pandemic, to available reiterate currently expect allocation the want continue the same. uncertainties. view deploy prudent our as ensure we have proceeds, the majority to remain to we also near-term to of liquidity that even priorities the as through

give me business make previously we to chosen a our From with continue have around it easier customers expenditures and reduce accelerate comment Sysco do only capital to urgent to you capabilities investment to those investments area. targeted Let substantially certain for as each safety. projects an and industry-leading on and perspective, to service mentioned, focus

through shareholders to Sysco's dividend our payments. to we value substantial returning committed remain Regarding our dividend,

grow unable an due our to as We communicated. to restriction are previously dividend amendment

the committed are the long-term growth we of However, to dividend.

For future complex opportunities this M&A, not we have potential continue a priority but do environment. on deals large in to high reevaluate

choosing also of fiscal me the focus better will growth XXXX. our business. to first business at core This us our divestiture Let allow to that note and accelerate divest quarter we are in CAKE

the work dedication and The customers, program largely the our to sell and business. is to our their business The point-of-sale customers, continue not thank hard would We transformation by we CAKE to leaders through who a technology systems. divestiture, good CAKE driven CAKE for it like it noted, our will technology solution transition. should and our Our to associates support we'll efforts. impact a digital is LABS supporting employees be are for

share program, expect our as this paid to the repurchases. lastly, revolving have relates And As $XXX temporarily we it XXXX. our throughout to facility. remaining on down facility $XXX maintain to debt, and the on million we million fourth position fiscal still buyback have credit quarter, during paused it we Currently, our share we relates

have of in note October. In million maturity addition, we senior due $XXX

any secured we debt. do reminder, have a As not

to flexibility the make interest have in that of are We decisions our best the company.

for closing, across I'd on you success focus before current with with like is commentary industry, shift ability all or fiscal an throughout Now outlook Sysco some segments to provide for well-positioned XXXX. whether national. local future and to the foodservice the

QSR leisure concentration such currently segments, as such result, and can other easily economic our demand education shift or As into a and to health as outperforming and as which we pivot recovers. areas are care, travel food-away-from-home

gross help During fourth mitigate quarter, spoilage due to that pressured to were improved quarter. discounting initially margins the product inventory the throughout

We gross remain mix stable but XXXX. expect reflect to changes, margins top-line otherwise throughout fiscal

also Kevin business. has the we but approximately our we crisis have those As current have annualized stabilized structural million Interest in during a run the rate rate. increases costs from in balance $XXX risen sheet, removed said, expense of the now as run strengthened now

environment, forward-looking and cannot and expect to we uncertainty the considering perspective, in financial of tax overall tax said, that a operational estimated this results from effective current our Lastly, rate at be be XX% time. approximately With reasonably the fiscal XXXX.

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

Kevin Hourican

thoughts reduce business our this strength, ensure I'd which in before position close pivot into went to us Sysco ability Joel. with of customers. Q&A. Thank of in the act and costs, quickly, to like you, few move into final a crisis a afforded support liquidity we

communicated. has been positioned current the business tough success fiscal was our of and Although than Through now continued well a environment, totaling it just operating crisis, wins, the business managed Joel as exit new velocity more have totaling positive, well the and we through the more is for million efforts $X future for $XXX the pandemic out Sysco of onset and XXXX, than cost since growth. our billion

company's digital regionalization and the expense sales importantly, path for structure transformation, long-term initiatives, transformation we model, paving confident our modernization the More including are success. are

managing COVID company. As our I've the transforming said, crisis we are and

again want our frontline with operator, exit able will from every our now others are hard, close differentiate to serving and working stronger our to day. that, call our there ready by crisis this it thanking And once Sysco, especially our serve our for in I customers today who we're We space. customers questions. associates, a better heroes, out

Operator

you. Thank

Chris Mandeville with Jefferies. from comes Our first question

Your line is now open.

Christopher Mandeville

in light good just then of really suburban in or Hey, of can opened better your you that also operators with reflection versus specific what some any you're you're that mean, shed those seeing. performance And additional local, negative local? local to segment? mix growth penetration delta true private understand you gentlemen. and subscale Kevin, that your for just within is that could differences quarter-to-date? us the for talk seeing some or of you shift And can total kind what's a of label versus rural versus challenges help about I then geographic morning, notable early Maybe seeing urban late? whom case on greater the up

Kevin Hourican

Chris, morning thank for and the Yeah, good questions. you

a got in them You've of there. couple

I'll in through order. them So go

prepared QX As I steady. sequential indicated through remarks, in my was improvement the

So rural getting pretty in pretty the than month across globe, better was some before, the much sectors, of July, each the suburban there much and Unfortunately, both and all week, week stagnation. urban. in

I going the it's others think space. good that's pretty we been is in restaurant news both customers by not The documented well serve backward. and our

July, were for we improving and the basis. through steady month But again, on seeing, now globe sequential the August to stats seeing improvement many to are States, United week not again So that are slide. we backward month of a we improvements. going And quote in see incremental in we not stagnation QX, saw week-on-week week-over-week parts of August. surging and within a states every as a in beginning we're of the We're cases are recently, once

of I uniqueness Sysco. As that's geographic Joel some perspective, of the said, from a think

and were the they in were they hit to operations hit were hardest, European QX the earliest, the recover. slowest Our

health from in very done QX QX, in managing the that perspective, our top has perspective, being However, essentially in communicated nice the France we're and a improvement. actually actually pretty Joel crisis entirety. portfolio is line its seeing of more of a country open now restaurants tailwind job headwind And from as a Europe top-performing as are business strong a entire right in because for

very our successful, power to takeout help their et we're our closely. restaurant So, operating on We're everything it patios, go, capability cetera. with doing monitoring them be providing them providing to and customers within extensions

rural, are more on for And performance sectors. Sysco I to but better prior it the private toss question. insights answer there you're seeing in believe, probably urban the including asking brand year sectors, about we Your penetration, been over toss urban, question Joel in think that I'll versus and question urban, I to improvement on, the I'll The are all Joel your about rural to to target. has

Joel Todd Grade

Thanks, struggle. that Kevin. and as would – the time, operators at Chris, all times business, our suggest Yeah, struggle – the others good I I that win think in

of then the the And between, really in seeing operators accounts, again, mix the just I the what you're have is those to of also is national obviously care. of that of QSR, both – faster others areas some the that's not managed and health between indicative the in better of so, change of there that business mix business and survive overall think growing the impact

So I think a really, that's the perspective. you're primary seeing from impact there which brand

Christopher Mandeville

stated you And QX as margins, D&A gross that's Okay. and mix look And the the XXXX, is, fiscal since offer you to concrete follow-up going any can then likely to Joel, only more can forward? spend persist color notably quantify the impact increased CapEx will latter as in my then, quite just quarter? actually you on that customer what we

Joel Todd Grade

What that margins a I'm would consistently of from heading the quarter. and into Yeah, as talked about, improved fourth over specifically. first the I Chris, going not we margin quarter the say, quantify to Sure. course the perspective,

that go movement out the to impact away the spoilage, really really the the of something had beginning some in the we were of going other to the was not continue specific the give throughout move And that. margins I'm into we avoid guidance referring quarter. that quarter, we're of on the or those anticipate So, commentary course first to the to continued that related to impact of mix any to. quarter, as that inventory We more actually but reflective

second – I second I'm you question? sorry, The relates – as part, the it to lost

Kevin Hourican

his was up, in increased that Depreciation was question? QX

Joel Todd Grade

Yeah. able I'm to hear not you.

Kevin Hourican

was... He Okay.

Joel Todd Grade

repeat you Chris? Can the question,

Christopher Mandeville

as latter to well since uptick Yeah. spend notable fiscal it XXXX D&A just think QX? with part about saw in No, the to was as regards pretty a in how CapEx

Joel Todd Grade

Yeah.

certainly, anticipate next to prior the much than And I we're as going continue year. would piece, think year head we we as capital into trends be we those we were in spend fiscal I would So the we lower indicated, QX. the

range we that our call think what I fact one spend likely XX% talked anticipate – not. would our more the in the of normalized rate. anticipated to total we'd that point, about of the And at than we've capital run somewhere I be being

that continue course, of talked will, goes focused key by and certainly and we've We year to on projects urgent those evaluate as But that about. the transformational conditions change. those initiatives again,

Christopher Mandeville

on D&A front? Okay. And the anything

Joel Todd Grade

to out. nothing think on mean, there, side. D&A really I nothing is You – Chris, out I really call to know, there major significant call the there's yeah, they're there

Christopher Mandeville

you. Okay. back year, Thank half of the guys. calendar Best of in luck the

Joel Todd Grade

Thanks.

Kevin Hourican

you, Thank Chris.

Operator

Thank you.

Our comes from Wells with next Kelly question Fargo. Edward

Your line is now open.

Edward J. Kelly

wanted kind talk why range can going end as US, on would some there, just how the case way avoid about important guys. down you follow XX% about mid-XX% so. Hi, probably in of here. any the trend, the or to And the confusion quarter? because were case modeling to the on I to Just start Good seems in like Is just bottom, to from morning. you At rate kind up I things Yeah. Post as we're get update. like to had curious It was that you you you're we'd at of given continued think of I'm it exit or somewhere won't the that around us to current so it's you that, growth. mid-May low down follow just the that an heard better. us ballpark? growth quarter. to help logic the

Kevin Hourican

in we've that like And QX had. of August of lines if Yeah. for we've Ed, more you seen all That's XXXX. of point, improvement the global we across that will, June starting exited the number from in minus business the fiscal XX% month a range.

our recent fact, beginning week In the since of most pandemic. week the the was strongest

to in best was improvement. then into and going with get point. begin the positive to steady So expense And to guidance not stagnated since we prepared see a again, obvious occur, weekly reductions, fact That's week. improvement seeing said, scenario there XX%. we We're as July, where that be we're worst-case I this we and recent point for in were were And better XX%, to minus we at sales and in operators prepared we're weekly reasons, reductions handle are in we're but being profitable week are were a shut a at we're a for will to improvement. were we our results our if We said our rapid key time another providing in at kind prepared if forced remarks, confident occur. to of We down that rate. manner, trends business than have QX exited restaurant that that in most fiscal point that inventory minus XXXX the

Edward J. Kelly

regionalization, of Great. upside Thanks. the kind also That's it initiative, what's as associated the risk, the to on and Was you here genesis Kevin. about from just talk as to you changing a just expect curious can that benefits just any? it? it. a follow-up, I'm helpful, really for of with if And you the get the

Kevin Hourican

spirit well that foundation there's entrepreneurial Yeah. and company, coming for from as model, this to Appreciate Sysco question. which form purchasing the served culture a like families we an decades. it. grew the together consortium. Thank And to OpCo Sysco it, tied up for of was The you called

new a to excuse we were. the Sysco locations regards leaders who and But operating locations. sales playbook. grew that's me, essentially will up. force who regional, had and president, Sysco. better to and behavior there consistent new fair supervise country now we physical yes, in a the a company change, to that the of across It's is a and a amount change if company how consistent worked. will ability The from So With would wanted be in rolled it are be of as we was single regionalization, independence mentality be to initiative. ran operating the come There faster corporate regional program, thinking to we a a benefits to version across we've The we We regionalization that. who, out implement entrepreneurial multiple tied more removed strategy, moved tied alignment how a as structure move Sysco combined wouldn't be though all to and that longer to that takes to strengths implementing approach for on a on disadvantages

have leaders and On have some who departed that cared Sysco. people success were a of the as of organization about part risk these the hard-working that we change, the side,

talent. we've risk And bigger bigger side led these the that it our obviously, On jobs. top would placed, we top call opposite our be of into roles fewer, talent by

a easier impact done our an talent with to put have specific just job of you on personally resources roles, across which will even our one I've broader sharing can So an career, set for sales this physical multiple even into led have accelerate in it detail on to of force before do would geographies. want being upside, pace a we they positive change. And be now believe business net-net, our across of do We bigger geography broader explain customers. I top because very with can when confident times what to I'm my do better boundaries, larger responsibilities.

Edward J. Kelly

Great. Thank you.

Kevin Hourican

you, Thank Ed.

Operator

you. Thank

with from Miller Piper next question Nicole comes Sandler. Our

now open. Your line is

Nicole Miller Regan

so morning. you good Thank and much

for questions quick two me. Just

to seems going focus picture around survival. me, back confident for big the find just don't the talk and to and eat the really you your really lose ability is distribution national grocery. what situation? at invest wondering commentary anybody from early on others consumers back need leverage be first to Could The And you to share prepared seems I'm while It it making to about win. taking to to you is, restaurants about

I recovery of a think that are that actually there's superregionals well. seeing plenty as

maybe Thank there's between versus superregional you independent? you a So Maybe a difference global you. about talk a as versus a regional brand? could an

Kevin Hourican

competitor just one the need loss comment It for want is so you Sysco, speak. we, the to and specific which come necessarily question. win this to I can to of back doesn't thank a will environment. your points, key to Nicole, of during as

activity. changed also something key at the of share we recently sales that use are winning our we to that we're today. independent win customer the lot street roughly Today, we we of Sysco. amount come local customers have local the to the points, system we street And can the with we know we our sales increased later. there's can increase business stats because customer We've net back know believe a tumult we of drive new not Some improve. street XX% through we That business of compensation within serve just We independent consultant can declaring I today, that more to that share wallet that these motivate market and them from that go can we level churn at serve to business. is customers convey

with $X my call. of national of rate prepared today's from have including others They during have And sector. over us. to to So And because succeed customers they're product, level that importantly, we're can have billion and will did that why access have The afterwards, they stats here product. on level, business Sysco. pandemic time SYGMA they those accelerating both at the from them, we we're confidence that that business that sales going to those full. come fresh national ship actually we the business that have in the that this we're more some and confidence away remarks the because They quoting to winning I are in not business trust moving on an in in with net is confidence the us articulated grow new at

a independent by new doors national new the the confident wallet local QX, at you and level sector street that the Nicole, billion to just come at win of we follow-up. the pause if win have I'm we independent is $X since know back can I and win and we I'll described, level can increasing of you at why we So have know we share winning level. and reasons for net net there,

Nicole Miller Regan

pieces follow-up around business. the My you. of is Thank the

because casual thawing wanted of kind from might be big July. understand dining. service recovery board was the So asking and the comment like that around full-service chunk called a I'm in that is or across percentage a Knapp-Track out two-thirds, flat. or in of casual XX, We QSR it's limited to dining know so And (XX:XX:XX) I in And down what the service I limited is restaurants. believe versus

And is restaurant Thank your XX% just I dining. XX% that? if casual of then Is tell QSR. shift us do versus you. you it Can about a do to a there comment how so more So hey, about also about the in right? little about, in easily portfolio Is you can we that math, bit was flawed? the QSR

Joel Todd Grade

Sure. general is local mix is XX:XX start And about with I'll to that. points, that about it contract. our of business, if comes the when one number think it, couple you and

then So when again, the as restaurants, casual. fast is that I QSR you there's think And think of of that our versus about the smaller roughly XX% applies. business a that the percentage

specifically think that about those but and how of you given the So, think math is that representative I really points we haven't out, did about that's fairly think how ultimately. I would to

are. I think the the idea this question on really whether of the talk fishing where related is shift to fish about the

no – we're we not overall way. and on the longer Let me we in strategic not do the independents. butter. are some that We focused That's that things business our focus That's the that best. most says – that's we bread very effective is be clear, support clearly this

where be care would the and in areas that another some part in those QSR focus that we about in fishing But of right focusing where this may those uncertainty a of remains is businesses. have clearly chain And fish so space, industry, to where space, health this slower that on ours. I (XX:XX:XX). other of where a the (XX:XX:XX) the recoveries time in the be somewhat win during of say are opportunity In really

there's So there. give to perspective as anything Kevin, add that's like if I to know it don't that. else you'd the I relates

Kevin Hourican

growth rate. a accelerating going et anticipate the actively our to will one post to pandemic, that years. we in want in continue point. understand said, customers highest were We clear, to independent just Sysco, XX farm we're trends, win And it's than want profitable that cetera, as to sector sectors. make and question. in space. customers, good Joel sector. more share in COVID, eat to I pursuing table, at both were and fresher are an winning We restaurant at independent just It's We the most to And posting important Prior be question. we, Yeah. case growth the

aren't that space the fact go in of best-performing the QSR long-term to and fish And growth want meantime, that the have In expression new our business that we are, So do at we will will where and be so. about the strategy. sector time. point in fish shy we we space win that is to yes, win this in the Joel's opportunity

Nicole Miller Regan

Thank you.

Kevin Hourican

Thank you.

Joel Todd Grade

you. Thank

Operator

you. Thank

with Bernstein from Jeffrey comes question next Barclays. Our

open. Your line is now

Jeffrey A. Bernstein

Great. much. Thank you very

remarks are customers, of mentioned you're crisis. any seem seeing of be it's foodservice Sysco such was your two a broader your on, then, if wondering in the had their industry I can versus among is of you industry less doing industry. I Just to our follow-up. distributors broader color questions. closures or average. closures perhaps independent what prepared in difficult terms whether Kevin, hearing provide you one best independents during how gauge The the And that, the

Kevin Hourican

Yeah, Jeff, thanks for the question.

that in now. closure we restaurant how customers. ease, a perspective, they're succeed we're those from restrictions And quoting percentages, but better performing to in just temporary And seeing the the struggling there's We're to conversations those I closures. obviously, statement. are permanent is independent And to I the business. as so because relates for average. reports then delivery operator question, it is external the are what two as we types We're this into who closures. and it quoted game. important right think into see permanent bankruptcy that There's the embellished really is our getting industry of customers, with is seeing space, with the back accurate in takeout active than closures a been What prefer not there's some a get closure factually

prospecting industry of of those that's to and in more there'll into us this that this actually by that we the by customer as well negotiated. gap XX% talked of that tied wallet increase that the environment anticipate churn. an bankruptcy. and an being opportunity that those It will be closures back before summer wallet business in there's be we we are take as that But What they've timing I get fall a think for There new do cleared Act then ever as about. and share after important, is we've very than will caused share increase to reports done HEALS is some share exit that during permanent the into also their elevated. churn, I

We from we're would benefit proposed. hopeful are small like need approved being that that And optimistic and we those it and our what's HEALS Act. customers of optimistic initial drafts customers. business will get And because help that hopeful Act small and approved get assist the and can the

answering way substantial churn. the of not of back of and the for doors best And to follow-up. in see industry We I'll your Jeff, So it. that's it reduction a you, significant do for the an We long-term. elevated in anticipate toss amount number our

Joel Todd Grade

add other point just could there. I one if Kevin, Actually, important

our providing I think, is help Jeffrey, customers. are really that's key the the other point that we actually to restaurant

terms reason actually we've that the the Kevin sanitizing wanted one just of what that done of with help about that mentioned PPE we've containers, I that to we including things some add help assist done in remarks, things around doing and baskets feel series the so development we the that. certainly cetera. There's And lower things, call dining think things think et of industry, of a – whole feel had about one the I to outdoor the are the do web in prepared we'd good in grocerant, point. marketplaces, The that we've our the product actually, with we to-go feel And good customers. part that's the products. his than to we're

Jeffrey A. Bernstein

you And little mentioned consumers a real. very home bit but question, which reengage stagnant my things No. July. August, industry in comment. recovery that prepared remarks you Kevin, you that And follow-up in your just improving when you of the was is think bullish now said, that are thought of It's the is appreciate I will food obviously, at kind the obviously thought color. safe, month you in then, broader a fatigue again, the

you it at can whether gives in or restaurants at just home, what industry when back now, are hard right (XX:XX:XX) was so the or restaurant XXX% the feeding most that these capacity when what of XX% at get only to wondering Just to serving seems confidence least read reopening it capacity. restaurant

not not now, XXX% the just seem Thank level of wondering when it does good, you. the right but they're in I'm industry. just how necessarily or So confidence they're servicing in looking terms at reality full

Kevin Hourican

globe, really data that a it. at by ability question are why our by about is finite versus can here's appreciate geography, say with bullish across and we I it's see Yeah, a urban, good the et cetera. can say confidence. the rural the And sector, to And level we what because I

restrictions As are in the immediate on almost the results there's operator, that improvement removed the in sector. restaurant an

we from better And so, is a data X places we greater, can where see X stagnated those a the that a locales, The the the clearly X Phase reason extension did know, when pop. of most an there's of restrictions. immediate easing in move and very paused or performing restrictions to substantially et of they or easing you as cetera, the in almost we've July, stagnate in

get of with But because restrictions, level the that is why stagnated. to want now out. So stagnated in is starting business the consumers go seeing to August, what we're that's recovery even better again

point the all those wash and their way And best my some do going in know we're masks very do. restrictions the the of clearly wear urban difference the future, hands where things to the at we that's different, and results. that do we can time are so begin the see answering versus in are People ease. restrictions question. in supposed And Rural to

go safely to can You out eat.

app are our doing it. using are and order restaurant delivery. better, better used are a And take their out, I'd home. food, operators at restaurant getting getting also You to at then be do an restaurant and picked bring customers to operators it and thing up Last to delivery getting say, takeout

So have those that we for it's reasons confidence.

Jeffrey A. Bernstein

much. very you Thank Great.

Kevin Hourican

you. Thank

Operator

you. Thank

question Capital. Our from Kelly with comes BMO next Bania

Your line is now open.

Kelly Bania

the taking the more relation forward? $XXX cost structure of was to talk bit we think consider how across questions. that anything and force. for could just to structure in Thanks morning. how compensation mentioned little Joel, Good much you we savings? million is as I trying that's if received that this structural about should Kevin you change model a and changes margins going Or Hi. about sales your our longer-term in just part to wondering of And being the compensation

Kevin Hourican

intended clear, was I'll thing Yeah. do make in the align to company, first of change margin. to then which let and any Joel shape The expenses. or way, for our form not the comp was comp is But decrease very grow. our operating change part, and I'll to our the me toss to sales profitably one strategy focus of better the Kelly, consultants

other have I'd incentives because business comp and and confidential that biggest it's new be a our the the work. and get greater prefer need proprietary believe actually item our that prospect pay people than to to we've associates that provides into But their the level clearly that living to can comp will a past. pay So a we able structure differentiating been places where change rate Sysco they not what granular of and appropriate details behavior is able versus to – at be create their a of comfortable the base a net at to profitable bills structure drive with do

and our be system a felt wanted. fair needs. compensation by said, with address concerns, We to of what that their asked We However, was what appropriate compensation consultants. by sales address them advised the them informed they would their and asked method they

is tied change important. change of about your the a to feedback communication input sales this people, into performance, is we over and the expenses. to management extremely heavily Joel obviously, and about change, when going is and know to to help very efforts But toss introduce very, it question I'll positive this but question. communication to number not margin operating improved to consultants or been large drive you was our talk Change management And business the comment this. it from reduce done And to So answer it's changed. directly, leaned the we've important. has

Joel Todd Grade

ultimately I talked are like about think Sure. the tool, ultimately, that about that customers. that what we'll growth. the our but profit percentage detail that believe margin Again, more I more incent line the drive of most percentages. and would dollars. dollars, designed item continue gross talked is of a other some like from with profitable drive Kelly, that, drive Kevin I gross providing is certainly program, When is do Kelly. this as things means about, that new think the is would way to to we things obviously think we've our will me how I that penetration, is important What which to not designed to to the continue I is growth you dollars combine only and pricing things, ultimately measure, that later, some as And these more. such really I profit improve think about about way this generating would

Operator

Thank you. And our next JPMorgan. question comes from John with Ivankoe

line now open. Your is

John Ivankoe

the I to ago, couple Canada a just asked how opportunities not The this whether and me excuse you. notes, was of think so be of just all of that, it US different than kind I remember think from from Hi. negative, will, of employees if apply benchmark, then number think that What done and of there those regionalization by for Canada reasons, memory, in years Thanks. in remembering to And to I basically that. or in I I can geography whether and going markets? did learnings there back the regionalization US Canada right if you in comparison were positive was the do is the Thank of would applying and no. customers? see Canada, you that kind of good for my a US, question any I'm maybe some answer a in two the was am the we But correctly? Canada both reception different is terms productivity and of the overall of the

Kevin Hourican

things, lot a right things, that couple concepts a of things us try it's direct-to-consumer In a say and really examples, doing test We're this. learn on Canada space marketing tied question, great some and Yeah, now. host for just is of John, being to I'll up business in test We good to of one. important about ways, in to a can work Canada there's Canada. a regionalization host a

So and And similar a wanted business test a really just regionalization, helpful. It's business, described, we use our do it's reasonably worked the that well to Canada. business a and very for it's Canadian it's laboratory. team actually and is US to consistent I can what our that as

rolling As better, expense execute needed, they indicated, on initiatives. And they when reductions as Joel can said change. remarks, can things alignment his faster. can swiftly quicker move transformation prepared out on in to on more get key like They

efficient, than consistently introduces need very culture and change. now this for the benefit I better to pandemic John, a that. grown company. do more of And say understands leaner, like US to XX-plus-year believe a profitable I risk. mean for point change our company this. to two be sales proud served those And And have model. a more this and the why So And team We've that no time that a is We're my there's the like aligned middle make time profit. business well. So of a the change all sincerely, than There's we no impetus reasons. will able right? is, better we that

what head COVID leaders lining if go as the a willingness road they're for management as a headed, and to leaders we're pave I to in direction the and the the appetite doing, a Our we're we this the crisis, But never of on change to get the in with been success and us for will change that future. and where the operating board has completely believe our and higher, and silver running are model aligned light cloud, XXX. impetus better there's towards for

John Ivankoe

you. Thank Great.

Kevin Hourican

Thank you, John.

Operator

Thank call. Thank you. gentlemen, That for conference you concludes and today's participating. our question-and-answer Ladies concludes session. this

You disconnect. may now