Sales Growth: Enterprise sales grew by 2.7%, with U.S. Foodservice growing by 3.4% and International by 4.5%, while SYGMA declined by 3.5%.
Volume Increase: Total U.S. Foodservice volume increased by 2.9% and local volume increased by 0.4%. International local volumes were up over 4%.
Inflation and Profit Margin: Enterprise inflation was noted at 1.9%, with U.S. Broadline inflation at 1.2%. Gross profit grew to $3.6 billion, up by 5.2%, with gross margin improved to 18.6%, an increase of 44 basis points.
Net Sales and Earnings: Projected net sales for FY ‘24 to be approximately $79 billion. Adjusted operating income grew by 8.4% to $799 million, and adjusted EPS guidance is reiterated at $4.20 to $4.40.
Cash Flow and Shareholder Returns: Generated $1.4 billion in operating cash flow and $864 million in free cash flow year-to-date. Returned $753 million to shareholders via repurchases and dividends this quarter.
Cost Management: Plans to generate over $120 million of savings in FY ‘24 from cost out actions. A focus on expense management and gross profit delivery will continue.
Capital Allocation: Continues a targeted return of over $2.25 billion back to shareholders for the year. A step-up in FY ‘25 tax rate due to global minimum tax rate changes and an increase in interest expense for future capital allocation.
Free Cash Flow: Confidence in increasing free cash flow by the end of FY ‘24, maintaining the free cash flow growth trend.
Trends, Market Conditions, Sentiment
Restaurant Traffic and Consumer Behavior: Noted a slow start in January with restaurant traffic down due to various factors. Sequential improvement was observed in February and March with traffic down to low single digits. Menu prices have impacted restaurant foot traffic, indicating a need for the industry to address affordability.
Sysco’s Strategy and Market Share: Focused on securing best costs from suppliers, introducing cost-saving Sysco brand alternatives, and providing lower-cost food and ready-now options to help restaurants manage costs. Efforts in local case growth and supply chain productivity are emphasized for future growth.
International Growth: International business observed robust top and bottom line growth, indicating strong potential as a growth catalyst for Sysco.
Investment in Growth: Continued investment in supply chain capacity expansion and customer-facing technology, balanced with disciplined cost management and operational agility.
Notable Quotes
Kevin Hourican: “We are confident in our ability to profitably grow our local business, and we are working on the right things to deliver that growth consistently.”
Kenny Cheung: “As the market normalizes, we will be able to use the power of our P&L to continue to deliver accretive results.”
Market Sentiment: “Despite the softer traffic start to calendar 2024, food-away-from-home is a growth industry…We believe that is a macro trend that will have staying power for years and decades to come.”
On Operational Focus: “Our focus on high ROIC investments back into the business will be balanced and disciplined, supporting our industry-leading margin profile.”
