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    SYY
    Earnings call· Mar 2026(Q3 FY26)

    SYSCO Q3 FY26 earnings call SYY

    Apr 28, 2026 Source

    Executive summary

    Sysco Q3 FY26 — Strong Local Volume Growth and Strategic Restaurant Depot Acquisition

    Sysco delivered strong Q3 FY26 results, driven by accelerating local volume growth and robust International performance, despite a challenging restaurant traffic environment. The company remains confident in its full-year adjusted EPS guidance and is strategically expanding its market reach through the planned acquisition of Jetro Restaurant Depot, aiming for increased profitability and shareholder value.

    Highlights

    5

    • U.S. local volume growth of 3.3%, a 210 basis point improvement versus prior quarter and strongest in 3 years.

    • Total revenue grew 4.7% to nearly $21 billion.

    • Gross profit increased 6.5% year-over-year, with 31 basis points of gross margin expansion to 18.6%.

    • International segment delivered its tenth consecutive quarter of double-digit adjusted operating income growth, up nearly 13%.

    • Free cash flow grew 19% year-to-date to $1.1 billion.

    Concerns

    4

    • Adjusted EPS of $0.94 was impacted by a $63 million ($0.10 per share) headwind from lapping lower incentive compensation in the prior year.

    • Overall foot traffic to restaurants was down approximately 1.9% in the quarter, per Black Box.

    • National restaurant segment volume was down year-over-year due to declining foot traffic.

    • Net debt leverage ratio of 2.80x is expected to rise to approximately 4.5 turns post-acquisition, requiring rapid deleveraging.

    Guidance & targets

    24
    CategoryTargetConfidence
    Full-year adjusted EPS
    at the high end of our annual guidance range of $4.50 to $4.60
    high materiality
    High
    Q4 local volume growth
    at least 2.5%
    medium materiality
    High
    National contract case volume growth
    improve versus Q3
    low materiality
    Medium
    Full year 2026 net sales growth
    approximately 3% to 5%
    high materiality
    High
    Full year 2026 inflation
    approximately 2%
    medium materiality
    High
    Q4 adjusted EPS
    approximately $1.51
    high materiality
    High
    Full year 2026 dividends
    approximately $1 billion
    medium materiality
    High
    FY27 quarterly dividend
    $0.55 per share
    medium materiality
    High
    Q4 adjusted interest expense
    approximately $175 million to $180 million
    low materiality
    High
    Full year adjusted interest expense
    $690 million
    low materiality
    High
    Q4 adjusted other expense
    approximately $10 million
    low materiality
    High
    Full year adjusted other expense
    $55 million
    low materiality
    High
    Q4 tax rate
    approximately 24%
    low materiality
    High
    Full year tax rate
    23% to 23.5%
    low materiality
    High
    Q4 adjusted depreciation and amortization
    approximately $210 million
    low materiality
    High
    Full year adjusted depreciation and amortization
    approximately $820 million
    low materiality
    High
    Net leverage post-acquisition
    approximately 4.5 turns
    high materiality
    High
    Net leverage reduction target
    to approximately 3.5 turns
    high materiality
    High
    Long-term net leverage target
    to return to 2.75 turns net leverage
    high materiality
    High
    Restaurant Depot acquisition close
    by approximately Q3 of fiscal 2027
    high materiality
    High
    Restaurant Depot new store openings
    5 to 6 net new stores per year
    medium materiality
    High
    Restaurant Depot cost synergies
    $250 million of net cost synergies
    high materiality
    High
    Restaurant Depot EPS accretion Year 1
    mid to high single-digit
    high materiality
    High
    Restaurant Depot EPS accretion Year 2
    low to mid-teens
    high materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    U.S. Foodservice (USFS)
    Strongest local case performance since Q1 2023, driven by sales colleague retention and productivity, AI360, and customer programs. National restaurant segment volume was down year-over-year due to traffic declines, offset by growth in healthcare, travel, hospitality, and foodservice management.
    Local volume growth: 3.3%Local volume growth improvement: 210 basis points versus prior quarterStrongest local volume growth in 3 yearsNational business case volume growth: 1.4%
    		nearly $21 billion (total company)4.7% (total company)—5.1% (adjusted operating income growth)
    International
    Momentum fueled by every international geography, expanded supply chain capacity, increased Sysco Brand availability, increased sales headcount, and easier-to-use technology.
    Local case growth: 3.8%Tenth consecutive quarter of double-digit operating income growth
    		—12.4% (sales growth)—nearly 13% (adjusted operating income growth)
    SYGMA
    Solid results reflecting increased strength in supply chain operations.
    		—2.5% (sales growth)—5.9% (operating income growth)

    Operational metrics

    24
    Adjusted EPS
    $0.94in line with expectations
    Q3 FY26

    Inclusive of $63 million headwind related to lapping lower incentive compensation in prior year.

    Total revenue
    $21B4.7% YoY growth
    Q3 FY26

    Reflects positive and accelerating case growth across local, specialty, national and international business units.

    Gross profit
    $3.8B6.5% YoY growth
    Q3 FY26

    Reflects strategic sourcing initiatives, favorable mix benefits, and improved Sysco Brand penetration.

    Adjusted operating expenses
    $3B51 bps increase as % of sales
    Q3 FY26

    Reflecting lapping of $63 million in incentive compensation from prior year and planned investments in sales headcount, fleet, and building expansions.

    Adjusted operating income
    $768M
    Q3 FY26

    Overall adjusted operating income for the quarter.

    Adjusted EBITDA
    $970M0.1% YoY growth
    Q3 FY26

    Overall adjusted EBITDA for the quarter.

    Net debt leverage ratio
    2.80x
    Q3 FY26 end

    Investment-grade balance sheet.

    Enterprise inflation rate
    2.8%moderated slightly sequentially
    Q3 FY26

    Across the enterprise, helping with product affordability.

    USPL inflation rate
    0.5%moderated slightly sequentially
    Q3 FY26

    For U.S. Broadline, helping with product affordability.

    Incentive compensation headwind
    $63M
    Q3 FY26

    Lapping lower incentive compensation from the prior year.

    Corporate adjusted expenses
    31.1%
    Q3 FY26

    Primarily driven by the previously disclosed incentive compensation from last year.

    Share repurchase suspension
    $800M
    remainder of FY26

    In preparation for the Restaurant Depot transaction, included in reiterated EPS guidance.

    Run rate cost savings
    $60M
    annualized

    From organization-wide spending optimization and efficiency activities, incremental update.

    Restaurant Depot revenue
    $16B
    CY25

    Generated by the business.

    Restaurant Depot EBITDA
    $2B
    CY25

    Significantly above foodservice industry averages.

    Restaurant Depot CapEx
    <1% of sales
    annual

    Includes both maintenance and growth CapEx.

    Combined company revenue increase (pro forma)
    20%
    pro forma

    Increase for Sysco.

    Combined company adjusted EBITDA increase (pro forma)
    45%
    pro forma

    Increase for Sysco.

    Combined company EBITDA margin (pro forma)
    6.7%150 bps expansion
    pro forma

    Inclusive of annualized net cost synergies.

    Acquisition value
    $29.1B
    announced

    Funded through cash and approximately 91.5 million shares of Sysco stock.

    FY26 dividend payout
    6% increase YoY
    FY26

    On a per share basis.

    Restaurant traffic (Black Box)
    -1.9%
    Q3 FY26

    Overall foot traffic to restaurants remains challenged.

    Warehouse productivity
    nearing 2019 levels
    Q3 FY26

    Across supply chain, with expected further positive momentum.

    Restaurant Depot volume growth
    4%
    most recently completed calendar quarter

    Advised by Restaurant Depot, with operating margins in line with expectations.

    Industry KPIs

    6
    MetricValueDetails
    Sg a rate14.8%% of sales
    Gross margin drivers18.6%%
    Warehouse store club count5 to 6 net new stores per yearstores
    Comparable same store sales3.3%%
    Private label own brand penetrationdown year-over-yearnot stated
    Category level comps and inflation deflation2.8%%

    Deals & partnerships

    1
    Jetro Restaurant Depotacquisition$29.1B

    Acquisition of the leading cash-and-carry foodservice supplier in the United States. Will be run as a stand-alone segment by its existing leadership team. Funded through a combination of cash and approximately 91.5 million shares of Sysco stock.

    Capital programs

    1
    Restaurant Depot new store openingsplanned

    Benefit: 125+ net new geographies

    Sysco is confident in the ability to open 5 to 6 net new stores per year for the next 25 years, bringing the low-cost leader format to more communities.

    Risks & headwinds

    5
    Integration risks for Jetro Restaurant Depot acquisitionpost-acquisition

    not stated

    Mitigation: Carefully managed through a talented Integration Management Office; Restaurant Depot will be run as a stand-alone segment by its existing leadership team; limited technology integration.

    Challenged restaurant foot trafficQ3 FY26

    down approximately 1.9% in the quarter (per Black Box)

    Mitigation: Sysco's improved performance generated by increased sales colleague retention and productivity, new customer win rates, and sales enablement tools like AI360.

    Declining national restaurant segment volumeQ3 FY26

    down year-over-year

    Mitigation: Expected to improve in Q4 driven by continued strength in non-restaurant business and onboarding of net new customer wins in the national restaurant customer business.

    Incentive compensation headwindQ3 FY26 and full year FY26

    $63 million ($0.10 per share) in Q3 FY26, $100 million ($0.16 per share) for full year FY26

    Mitigation: Included in adjusted EPS guidance, offset by identified $60 million run-rate cost savings and strong underlying business performance.

    Increased net leverage post-acquisitionpost-acquisition

    approximately 4.5 turns post-close

    Mitigation: Commitment to rapid deleveraging to 3.5 turns within 24 months, and eventually to 2.75 turns; suspension of share repurchases and disciplined capital expenditures to preserve cash.

    Q&A highlights

    6

    Why are investors cautious about the RD acquisition, given the positive underlying fundamentals of Sysco? What are the primary drivers of concern (e.g., integration risk, unknown entity, purchase price)?

    Management acknowledged concerns about RD being an unknown entity and the large purchase price. They expressed confidence that increased investor education and visibility into RD's 30-year track record of profitability and growth will alleviate these concerns. They highlighted RD's strong Q1 calendar performance (4% volume growth, profit in line) and reiterated commitment to rapid deleveraging post-acquisition.

    “What we've heard from investors over the past 3 weeks... is the more they get to know the asset of Restaurant Depot, the more excited they are about the acquisition.”

    asked by Jeffrey Bernstein · answered by Kevin Hourican

    2 min read6 chapters

    Detailed Narrative

    01

    Core Business Momentum

    Sysco's core business shows positive momentum, with U.S. Foodservice local case volume growing 3.3%, the strongest in three years. This improvement is attributed to internal initiatives like increased sales colleague retention and productivity, new selling tools (AI360), and customer programs (Sysco Your Way, Perks 2.0), rather than an improving macro environment. The company is confident in delivering at least 2.5% local volume growth in Q4, representing a 120 basis point acceleration on a 2-year stack basis.

    02

    International Segment Strength

    The International segment continues to be a growth engine, achieving its tenth consecutive quarter of double-digit adjusted operating income growth, up nearly 13%. This robust performance is driven by expanded supply chain capacity, increased Sysco Brand availability, higher sales headcount, and improved technology across all international geographies, demonstrating the effectiveness of the 'Sysco playbook' globally.

    03

    Jetro Restaurant Depot Strategic Rationale

    The planned acquisition of Jetro Restaurant Depot is positioned as a transformative move, creating a combined entity expected to grow faster, be more profitable, and return more value to shareholders. It provides Sysco access to the resilient $60B-$70B cash-and-carry market, which is 100% local and has minimal customer overlap with Sysco's delivery model. This entry into the cash-and-carry channel is expected to increase Sysco's local revenue by 1.5x and enhance enterprise margins.

    04

    Synergy and Growth Opportunities with RD

    The acquisition is expected to generate $250 million in net cost synergies primarily from purchasing efficiencies, without headcount reductions. Beyond this, significant revenue synergies are anticipated from opening 125+ new RD stores over 25 years, cross-selling product assortments (e.g., value-tier products from RD to Sysco customers), and addressing 'needed now' customer scenarios through click-and-collect or same-day delivery from RD locations. These additional growth vectors are not included in the deal's initial accretion targets.

    05

    Financial Impact and Deleveraging Plan

    The transaction, valued at $29.1 billion, is expected to be immediately accretive to EPS (mid-to-high single-digit in Year 1, low-to-mid teens in Year 2). Sysco plans to fund it with cash and stock, resulting in a pro forma net leverage of approximately 4.5 turns post-close. A rapid deleveraging plan aims to reduce this to 3.5 turns within 24 months and eventually to 2.75 turns, supported by $3 billion of term loans and $1 billion of upcoming debt maturities.

    06

    Q4 Outlook and Cost Savings

    Sysco reiterated its full-year adjusted EPS guidance at the high end of $4.50-$4.60, despite suspending share repurchases. The company expects at least 2.5% local case growth in Q4 and has identified $60 million in run-rate cost savings from organization-wide spending optimization, which will begin in Q4 and carry over into FY27. These savings help offset the impact of lower share repurchase plans for the year.

    AI-generated summary of the company’s earnings call. Not investment advice.