Sysco Q4 Earnings Call Highlights

Key Points

• Sysco exceeded its fiscal 2026 expectations: Fourth-quarter revenue rose 4.7% to more than $22 billion, while adjusted EPS reached $1.53 and full-year adjusted EPS totaled $4.61. U.S. local and national case volumes each increased 2.6%, supported by stronger customer growth and productivity initiatives.
• Management issued a positive fiscal 2027 outlook: Sysco expects 6%–7% sales growth, 2.5% U.S. local case-volume growth and 9%–11% adjusted EPS growth to approximately $5.02–$5.12. The forecast includes a 53rd week and about $100 million in in-year cost savings from efficiency and AI-enabled projects.
• The Restaurant Depot acquisition remains targeted for fiscal Q3 2027: Sysco expects the deal to generate $250 million in cost synergies and expand Restaurant Depot into more than 125 additional geographies. The company is preparing to preserve cash and accelerate debt reduction following the transaction.

Sysco NYSE: SYY reported fourth-quarter fiscal 2026 results that exceeded its prior expectations for adjusted earnings per share and U.S. foodservice volumes, citing accelerating local customer growth, supply-chain productivity gains and early benefits from efficiency initiatives.

Chief Executive Officer Kevin Hourican said the company generated more than $22 billion in quarterly revenue, up 4.7% from the prior-year period, while adjusted earnings per share reached $1.53. For the full fiscal year, Sysco reported adjusted EPS of $4.61, above its previously provided guidance range.

“Our business momentum accelerated on a two-year stack basis,” Hourican said, adding that the company expects that momentum to continue into fiscal 2027.

Local, National and International Volumes Rise

Sysco’s U.S. Foodservice, or USFS, local case volumes increased 2.6% in the fourth quarter. The company said local case growth improved 130 basis points sequentially on a two-year stacked basis, with June representing the strongest month of the quarter on both a one- and two-year basis.

Local case growth was 0.5% in the first half of fiscal 2026 and 2.9% in the second half, according to Hourican. He attributed the improvement to better sales-colleague retention and productivity, as well as targeted growth programs including Sysco Your Way, Perks 2.0 and the company’s AI 360 sales tool.

Sysco said AI 360 is intended to identify selling opportunities, including opportunities to convert customers to Sysco Brand products. The company’s independent customer business grew faster than the overall industry as it exited the fiscal year, Hourican said.

Sysco Brand mix in the local business rose 30 basis points year over year to 46.4% in the fourth quarter. Sales of the company’s value-tier items grew four times faster than its overall business, which Hourican said represented new cases from customers previously purchasing comparable products from competitors.

National contract case volume also rose 2.6%, supported by growth in healthcare, travel and hospitality, and foodservice management. That growth was partly offset by industrywide softness in national restaurant traffic. Sysco said it expects positive national contract volume growth in fiscal 2027, despite continued pressure on restaurant foot traffic.

International local case volume grew 4.5%, while international sales increased 6.7%, gross profit rose 7.3% and adjusted operating income increased 15.7%. The quarter marked Sysco’s 11th consecutive quarter of double-digit adjusted operating-income growth in its international segment.

Profit Growth and Supply-Chain Productivity

Quarterly gross profit increased 3.7% to $4.1 billion, although gross margin declined 17 basis points to 18.7%. Interim Chief Financial Officer Brandon Sewell said gross-margin comparisons were affected by unusually large strategic-sourcing benefits in the prior-year fourth quarter and higher fuel costs during the latest period.

Adjusted operating expenses grew 3.6%, slower than gross profit and revenue. Adjusted operating income increased 4.1% to $1.1 billion, and adjusted EBITDA rose 4.7% to $1.3 billion.

The company said warehouse and delivery operations achieved their productivity targets for the year. On-time delivery performance improved by 10 percentage points versus customer promise windows during the fourth quarter, while routing initiatives lowered cost to serve. Sysco also reported its third consecutive year of reducing miles driven and improving pieces per mile.

For fiscal 2026, free cash flow rose 16.3% to $2.1 billion. Sysco ended the quarter with a net debt leverage ratio of 2.7 times. The company paid $1 billion in dividends during the year and repurchased $200 million in shares before suspending annual repurchases in connection with its planned Restaurant Depot transaction.

Fiscal 2027 Outlook Includes Extra Week and Cost Savings

Sysco’s fiscal 2027 outlook is based on the standalone business and includes a 53rd week. The company expects net sales growth of approximately 6% to 7%, reaching roughly $90 billion, including about 1.5% to 2% inflation and roughly 2% growth from the additional week.

• USFS local case growth of approximately 2.5%.
• Adjusted EPS growth of 9% to 11%, or approximately $5.02 to $5.12 per share.
• First-quarter adjusted EPS of approximately $1.18 to $1.20.
• Approximately $100 million of in-year cost savings, representing about $160 million on a run-rate basis.
• About $1 billion in dividends and continued double-digit profit growth in the international segment.

Management said the cost-savings program includes AI-enabled projects across sales, merchandising, supply chain and back-office operations. Sewell said savings will begin toward the end of the first quarter and be weighted toward the second half of the year, with a greater contribution from USFS.

Hourican said the company’s work includes upgraded routing software, improved inventory forecasting, technology tools for indirect procurement and AI-assisted contract management. He said the initiatives are intended to improve customer service while reducing administrative work and structural operating costs.

Restaurant Depot Deal Remains Targeted for Third Quarter

Sysco reiterated that it expects to close its acquisition of Restaurant Depot by the third quarter of fiscal 2027. The company received a second request from the Federal Trade Commission during the quarter, which Hourican said was expected.

Management said the transaction is expected to produce $250 million of cost synergies through procurement and expand the Restaurant Depot format to more than 125 new geographies over time. Sysco also said it does not intend to raise prices at Restaurant Depot stores and believes combined purchasing and supply-chain capabilities could strengthen the retailer’s value offering.

Restaurant Depot leadership told Sysco that sales grew approximately 4% in its most recently completed calendar quarter, with operating margins in line with expectations, according to Hourican.

Sysco said it remains focused on preserving cash, improving working capital and reducing debt after the transaction. In June, the company added $2 billion of interest-rate hedges related to transaction financing. Management said excess cash flow generated through efficiency improvements will be directed toward faster deleveraging.

About Sysco (NYSE:SYY)

Sysco Corporation NYSE: SYY is a global foodservice distribution company that supplies a broad range of food and related products to restaurants, healthcare and educational facilities, lodging establishments, and other foodservice customers. Its core business is the procurement, warehousing and delivery of fresh, frozen and dry food products, complemented by non-food items such as paper goods, kitchen equipment, cleaning supplies and tabletop products. Sysco serves customers through an extensive network of distribution centers and dedicated delivery fleets, positioning itself as a one-stop supplier for operators of all sizes.

Founded in 1969 and headquartered in Houston, Texas, Sysco has grown through both organic expansion and acquisitions.

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