Sysco — First Quarter 2027 Earnings Summary

Financial Performance:

• Total sales increased 2.8% year-over-year to $21.7 billion.
• Gross profit increased 3.8% to $4.1 billion, with gross margin expanding 18 basis points to 18.6%.
• Operating income decreased 10.4% to $717 million, while adjusted operating income increased 3.2% to $927 million.
• Net earnings increased 10.5% to $526 million, and adjusted net earnings increased 4.2% to $574 million.
• Earnings per share (EPS) increased 10.1% to $1.09, and adjusted EPS increased 3.5% to $1.19.
• EBITDA increased 20.4% to $1.2 billion, and adjusted EBITDA increased 5.4% to $1.1 billion.
• Cash flow from operations was $278 million, and free cash flow was $230 million for the 13-week period.
• The company returned $264 million to shareholders via dividends during the quarter.
• Cash balance stood at $3.2 billion with total liquidity of $5.8 billion.
• Debt to net earnings was approximately 7.7 times, and Net Debt to adjusted EBITDA was approximately 2.4 times.

Guidance and Future Outlook:

• Sysco reiterated its full-year fiscal 2027 adjusted EPS growth guidance of 9%-11%.
• Full-year sales growth is now expected at the lower end of the 6%-7% range, reflecting a lower inflation environment.
• Local volume growth assumptions remain unchanged at approximately 2.5%.
• The company expects $100 million in net cost savings from AI technology in FY27, with benefits accelerating in the second half of the year.

Business Segments and Product Lines:

• U.S. Foodservice Operations: Sales increased 2.4% to $15.1 billion; total case volume grew 2.6% and local case volume grew 2.7%. Gross margin increased 14 basis points to 19.2%. Adjusted operating income increased 2.7% to $941 million.
• International Foodservice Operations: Sales increased 5.1% to $4.2 billion (6.0% on a constant currency basis). Gross margin increased 45 basis points to 21.3%. Adjusted operating income increased 12.2% to $165 million.
• Sysco Brand: Sysco Brand penetration rates were positive in the U.S. segment.
• Product Costs: Product cost inflation was 0.3% at the total enterprise level, primarily driven by the meat category.

Market and Competitive Landscape:

• The company faced continued softness in restaurant foot traffic and higher than expected fuel costs.
• U.S. food cost inflation was lower than expected.
• Strategic sourcing efficiencies and benefits associated with tariffs contributed to gross profit growth.

Risks and Challenges:

• Operating expenses increased 7.5% driven by acquisition-related costs, higher volumes, and investments in higher growth areas.
• The decrease in GAAP operating income was driven by acquisition costs related to the Jetro Restaurant Depot transaction.
• Foreign exchange rates decreased International Foodservice Operations sales by 0.9% and total Sysco sales by 0.2%.

Management Commentary and Tone:

• CEO Kevin Hourican described the start to fiscal 2027 as strong, noting adjusted EPS performance was in-line with expectations.
• Management highlighted three priorities: delivering with excellence, improving operating margins through AI-powered business transformation, and preparing for the anticipated closure of the Jetro Restaurant Depot transaction.
• CFO Brandon Sewell expressed confidence in delivering on adjusted EPS growth guidance and net cost savings targets.

Other Key Points:

• The company is proceeding with the planned acquisition of Jetro Restaurant Depot, which included a $234 million gain on deal contingent rate lock transactions in Q1.
• Acquisition-related costs included $56 million in acquisition and due diligence costs and $52 million of intangible amortization expense in Q1 FY27.
• Transformation initiative costs totaled $80 million, and restructuring and severance charges were $22 million in Q1 FY27.
• Capital expenditures, net of proceeds from sales of plant and equipment, were $48 million for the first 13 weeks of fiscal 2027.
• Sysco operates 333 distribution centers in 10 countries with 75,000 colleagues serving approximately 670,000 customer locations.