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    SYY
    Earnings call· Dec 2025(Q2 FY26)

    SYSCO CORP SYY

    Jan 27, 2026 Source

    Executive summary

    Sysco Q2 FY26 — Strong Volume Growth and Raised EPS Guidance

    Sysco delivered strong Q2 FY26 results, exceeding expectations with improving case volume trends across all segments and strengthening gross margins, despite a softening macroeconomic backdrop for restaurants. The company raised its full-year adjusted EPS guidance to the high end of its previously provided range, driven by company-specific initiatives like improved sales colleague retention, AI-powered selling tools, and loyalty programs, setting the stage for continued momentum in the second half.

    Highlights

    5

    • Full-year adjusted EPS guidance raised to the high end of $4.50-$4.60 range.

    • Total revenue grew 3% year-over-year to nearly $21 billion.

    • USFS local case volume improved by 140 basis points sequentially to 1.2% growth, outperforming industry trends.

    • International segment sales grew 7.3% (9.9% ex-Mexico divestiture) with 4.5% local case growth and 26% adjusted operating income growth.

    • Free cash flow grew 25% year-to-date to $413 million.

    Concerns

    4

    • Restaurant traffic per Black Box declined more than 200 basis points year-over-year.

    • National chain restaurant segment experienced volume decline year-over-year.

    • Adjusted operating expenses increased 15 basis points due to planned investments and lapping $16 million in incentive compensation.

    • Incentive compensation headwind of approximately $0.16 per share for FY26.

    Guidance & targets

    14
    CategoryTargetConfidence
    Full-year adjusted EPS
    High end of $4.50 to $4.60
    high materiality
    High
    Full-year adjusted EPS growth (ex-incentive comp headwind)
    High end of approximately 5% to 7%
    high materiality
    High
    Full-year net sales growth
    Approximately 3% to 5%
    medium materiality
    High
    Full-year inflation
    Approximately 2%
    medium materiality
    High
    Local case growth
    At least positive 2.5%
    high materiality
    High
    National contract case volume growth
    Greater than 2%
    medium materiality
    Medium
    USFS profitability
    Return to growth
    high materiality
    High
    Adjusted EPS (Q3 consensus)
    $0.94
    medium materiality
    High
    Shareholder returns (dividends)
    Approximately $1 billion
    medium materiality
    High
    Shareholder returns (share repurchase)
    Approximately $1 billion
    medium materiality
    High
    Dividend payout increase
    6% year-over-year increase
    low materiality
    High
    Net leverage ratio
    2.5x to 2.75x
    medium materiality
    High
    Adjusted D&A
    Approximately $820 million
    low materiality
    High
    Adjusted D&A (Q3 & Q4)
    Approximately $210 million
    low materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    USFS
    Local case volume improved 140 bps sequentially, outpacing industry traffic decline. National business saw strong growth in foodservice management, travel & entertainment, and healthcare, partially offset by softness in the national restaurant segment.
    Total volume growth: 0.8%Local case volume growth: 1.2%National business volume growth: 0.4%
    		————
    International
    Ninth consecutive quarter of double-digit operating income growth. Momentum fueled by expanded supply chain capacity, increased Sysco branded merchandise, increased sales headcount, and easier-to-use technology.
    Sales growth (ex-Mexico divestiture): 9.9%Local case growth: 4.5%
    		7.3% growth7.3%—Adjusted operating income growth: 25.6%
    SYGMA
    Solid results reflecting increased strength in supply chain operations. Expect more moderate results for remainder of year due to continued operating efficiencies.
    		0.5% sales growth0.5%—10.5% operating income growth

    Operational metrics

    22
    Gross profit
    $3.8 billion3.9% growth
    Q2 FY26

    Reflects strategic sourcing efforts and effective management of product cost inflation.

    Adjusted operating expenses
    $3 billion15 basis points increase
    Q2 FY26

    Increased due to planned investments in growth areas and lapping prior year's incentive compensation.

    Corporate adjusted expenses
    3.8% up
    Q2 FY26

    Reflecting continued investments and lapping incentive compensation from last year, but approximately flat excluding that impact due to cost savings.

    Adjusted operating income growth
    $807 million
    Q2 FY26

    Reflecting continued improvements in local case volumes and strong growth in the International segment.

    Adjusted EBITDA
    $1 billion3.3% versus prior year
    Q2 FY26

    Total adjusted EBITDA for the quarter.

    Total liquidity
    $2.9 billion
    Q2 FY26

    Remains well above minimum threshold, offering flexibility and optionality.

    Net debt leverage ratio
    2.86x
    Q2 FY26

    Ended the quarter at this ratio.

    Share repurchase plan
    Approximately $1 billion
    FY26

    Expected for the year, with repurchase activity resuming in Q3.

    Dividends
    Approximately $1 billion
    FY26

    Expected for the year, with a 6% year-over-year increase on a per share basis.

    USFS local case growth improvement
    140 basis pointsversus Q1
    Q2 FY26

    Sequential improvement in performance, approximately 40 basis points stronger than guided.

    International sales growth
    9.9%
    Q2 FY26

    Sales growth excluding the impact of the divested Mexico business.

    International local case growth
    4.5%
    Q2 FY26

    Local case growth in the International segment.

    SYGMA sales growth
    0.5%
    Q2 FY26

    Sales growth for the SYGMA segment.

    SYGMA operating income growth
    10.5%
    Q2 FY26

    Operating income growth for the SYGMA segment, reflecting increased strength in supply chain operations.

    Customer new vs loss ratio
    expanded solidly
    Q2 FY26

    The spread between new customer onboarding and existing customer loss widened solidly in the second quarter.

    Sysco Your Way volume growth
    mid-single-digit
    YOY

    Sysco Your Way neighborhoods continue to deliver durable growth despite being in their fourth year.

    Sales colleague retention
    at or above historical high watermark
    Q2 FY26

    Colleague retention rate in Q2 was at or above historical high watermark, fully stabilized.

    AI 360 CRM tool engagement
    95% or more
    Weekly

    Engagement with the AI 360 CRM tool remains very high, with users outperforming those who use it less often.

    Mexico business exit
    —
    Q3 FY26

    Starting in Q3 2026, the company will have fully lapped the Mexico business exit, removing a comparability impact.

    Incentive compensation headwind
    $100 million
    FY26

    Approximate headwind from lapping lower incentive compensation in fiscal 2025.

    Incentive compensation headwind
    $63 million
    Q3 FY26

    Carryover impact from incentive compensation specific to Q3.

    Incentive compensation headwind
    $11 million
    Q4 FY26

    Carryover impact from incentive compensation specific to Q4.

    Industry KPIs

    4
    MetricValueDetails
    Sg a rate14.4%% of sales
    Gross margin drivers18.3%%
    Private label own brand penetrationnominal improvement
    Category level comps and inflation deflationapproximately 2.9%%

    Deals & partnerships

    1
    Ginsberg's FoodsPremier broad line distributor in the Northeast

    Sysco completed a small tuck-in acquisition of Ginsberg's Foods at the end of the second quarter, expanding distribution capabilities in the population-dense Northeast corridor.

    Capital programs

    1
    Fleet, building expansion and sales headcount investmentsunderway

    Benefit: supporting steady business momentum

    Adjusted operating expenses increased due to planned investments in higher growth areas of the business, including fleet, building expansion, and sales headcount.

    Risks & headwinds

    3
    Softening Macro Backdrop / Declining Restaurant TrafficQ2 FY26

    Traffic to restaurants per Black Box declined more than 200 basis points year-over-year and quarter-over-quarter.

    Mitigation: Sysco-specific initiatives (SC retention/productivity, AI360, Perks 2.0, value tier focus) are driving share gains and outperformance in this environment.

    Incentive Compensation HeadwindFY26, Q3, Q4

    Approximately $100 million for FY26, roughly negative $0.16 per share for FY26, $63 million for Q3, $11 million for Q4.

    Mitigation: Not explicitly stated as mitigated, but EPS guidance is provided excluding this impact to show underlying growth in line with long-term algorithm.

    National Chain Restaurant SoftnessQ2 FY26

    Volume with national chain restaurant customers was down year-over-year.

    Mitigation: Expect case volume growth for national contract customers to be greater than 2% for the remainder of FY26 due to new customer wins and continued strength in non-restaurant business.

    What to watch in Q3 FY26

    5

    USFS Local Case Growth

    Q3 FY26
    Current1.2% (Q2 FY26)
    TargetAt least 2.5%

    Why it matters

    This is a key indicator of Sysco's ability to gain share and drive top-line growth in a challenging macro environment, crucial for meeting full-year guidance.

    More specifically, we expect reported local volume growth of at least positive 2.5% in both Q3 and Q4.

    Q&A highlights

    5

    Did local case growth vary monthly in Q2, has January accelerated, and what is the expected impact of winter storms?

    Sysco's performance relative to the industry strengthened each month of Q2, with December being the strongest, and this strength continued into January. The company's improvement is driven by Sysco-specific factors like sales consultant retention and productivity, the AI360 tool, and Perks 2.0, which are independent of foot traffic. While January had favorable weather, some of that will be given back due to recent winter storms, but the overall impact on Q3 is yet to be determined.

    “The performance Sysco relative to the industry strengthened each month of Q2. So we got better relative to the industry for each of the months consecutively. We've seen that strength continue into January.”

    asked by Mark Carden · answered by Kevin Hourican

    2 min read7 chapters

    Detailed Narrative

    01

    Q2 Performance Highlights

    Sysco reported nearly $21 billion in total revenue for Q2 FY26, a 3% increase year-over-year, with positive case growth across local, specialty, national, and international business units. USFS local case volume improved by 140 basis points sequentially to 1.2% growth, outpacing the industry's declining restaurant traffic. This improvement was approximately 40 basis points stronger than previously guided, demonstrating strengthening performance in a softening macro backdrop.

    02

    International Segment as a Growth Engine

    The International segment delivered strong performance with 7.3% sales growth (9.9% excluding the Mexico divestiture) and 4.5% local case growth. This segment achieved its ninth consecutive quarter of double-digit adjusted operating income growth (25.6%), driven by expanded supply chain capacity, increased availability of Sysco branded merchandise, increased sales headcount, and easier-to-use technology. The company expressed bullishness on the future of this segment.

    03

    Sales Force Productivity and AI-Powered Tools

    Sysco achieved historical high sales colleague retention rates and is now focused on increasing selling productivity through product and sales training. The AI 360 CRM tool, live for four months, shows high engagement with 95% or more of colleagues using it weekly. Data indicates that higher tool usage correlates with better selling performance, and new 'Swap and Save' functionality is being deployed to help consultants offer value to customers.

    04

    Customer Loyalty Programs Driving Retention

    The Sysco Your Way neighborhoods continue to deliver mid-single-digit volume growth year-over-year, demonstrating the program's durable success and customer resonance. A revamp of the Sysco Perks loyalty program is also delivering anticipated results, showing improved customer retention year-over-year and increased share of wallet with important customers.

    05

    Gross Margin Expansion and Value Tier Focus

    Gross margins expanded by 15 basis points to 18.3%, reflecting strategic sourcing efforts and effective management of product cost inflation, which continues to moderate. Sysco is actively working to increase the availability of products in its 'value tier' (Sysco Reliance) to fill assortment voids and win new lines from existing customers, emphasizing that these efforts are not intended to trade down existing premium customers.

    06

    Supply Chain Efficiency and Expense Control

    The company maintained solid expense control in the quarter, with supply chain productivity continuing to improve both quarter-over-quarter and year-over-year. This was driven by improved warehouse and driver colleague retention, leading to better execution, improved fill rates, order accuracy, and on-time deliveries, all contributing to strengthening supply chain cost performance.

    07

    Strategic Acquisition and Leadership Transition

    Sysco completed a small tuck-in acquisition of Ginsberg's Foods, a broadline distributor in the Northeast, at the end of Q2. This acquisition is expected to increase customer count, leverage Sysco's supply chain network, and unlock growth and margin expansion opportunities. Additionally, Global COO Greg Bertrand announced his retirement but will serve as a strategic adviser for the next year, focusing on developing field leaders and supporting strategic initiatives.

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