Henry Schein (HSIC) Q1 FY26 earnings call: guidance and Q&A

Asked about the drivers of Q1 gross margin expansion, if value creation benefits are already showing, and how rising oil prices (freight/COGS) are being mitigated, including guidance assumptions for oil.

Ron South attributed gross margin improvement to early value creation benefits (dynamic pricing, own brand growth), strategic benefits, and supplier collaboration. He noted they are watching crude oil prices, taking measures to protect margins, and currently believe they can mitigate cost increases, with guidance assuming this mitigation.

“we are able to mitigate any related cost increases.”

asked by Jason Bednar · answered by Ronald South

Asked about the expected cadence of specialty growth for the year, considering Q1 results, and Fred Lowery's biggest positives and surprises since becoming CEO.

Ron South stated Q1 specialty results were in line with expectations, with some timing impacts, and improved growth is expected. Fred Lowery highlighted the confirmation of Henry Schein's assets being critical to customers and the ecosystem's value proposition as a positive. He was encouraged by employee and customer feedback, and supplier relationships.

“the biggest positive to me... has been the confirmation that the set of assets that Henry Schein owns... are incredibly important to customers.”

asked by Elizabeth Anderson · answered by Ronald South

Asked how Henry Schein plans to achieve stronger, sustainable earnings growth without episodic restructurings, focusing on building continuous improvement and muscle memory.

Fred Lowery clarified that value creation initiatives are building lasting capabilities (e.g., gross profit programs). He emphasized developing a continuous improvement process to streamline operations, reinvesting savings into growth areas like AI, and leveraging faster growth in high-margin products to drive margin expansion.

“We're building real capability that will stay with us over a long period of time.”

asked by Jeffrey Johnson · answered by Frederick Lowery

Asked about the approach to implementing price increases or surcharges to offset macro pressures (like oil), and how to manage these conversations to avoid damaging customer relationships.

Fred Lowery stated they take appropriate pricing actions (fuel surcharges, product price increases) and have direct conversations with customers, providing visibility into drivers. They also offer alternatives to help customers manage costs.

“We also will offer customers alternatives. That's part of what makes us a really great partner.”

asked by Michael Cherny · answered by Frederick Lowery

Asked how much of the dental strength is due to market improvement versus share gains, and visibility into sustainability.

Ron South indicated that U.S. dental strength is primarily due to market share gains, with modest procedure growth and stable patient traffic. He noted better growth in own brands and continued momentum from prior promotional activities. International growth was strong in specific regions like Brazil and Canada.

“our data indicates that we are taking market share there.”

asked by Matthew Miksic · answered by Ronald South

Asked for the cadence of the cost savings program, specifically Q1 impact, breakeven point, and how it contributes to the back-half weighting of earnings.

Ron South explained that the G&A portion of savings was nominal in Q1 due to incurred costs but will accelerate in Q2, Q3, and Q4, driving better earnings in the back half of the year. Gross profit optimization benefits also started in Q1 and are expected to grow throughout the year.

“we expect to see better earnings in the back half of the year than the first half of the year because it will be largely driven by some of those G&A cost reductions.”

asked by Kevin Caliendo · answered by Ronald South