The operator introduces the participants of the conference call and reminds them that the call is being recorded. Kevin Kim, Vice President of Investor Relations, welcomes everyone and introduces the CEO, Kevin Hourican, and CFO, Kenny Cheung. He also mentions that statements made during the call may be forward-looking and directs listeners to the Company's SEC filings for more information. Non-GAAP financial measures will be discussed and compared to the previous year. Kevin Hourican then begins the call and outlines the topics that will be covered.

In the second paragraph, the article discusses the performance of Sysco in the food away from home industry. It mentions that Sysco's revenue grew by 3.3% in fiscal 2024, driven by volume growth and inflation. The company also took market share and delivered above the midpoint of their initial guidance for the year. The article then provides an update on the health of the industry, stating that foot traffic to restaurants was down 3% for the quarter. However, Sysco was still able to grow their volume by 3.5% and take market share. For the full year, they grew their business more than 1.75 times the market.

In the third paragraph, the writer discusses how Sysco's performance exceeded their stated goal for the year, with a growth of 1.75 times the market. They attribute this success to several factors, including winning with their specialty platforms, recent acquisitions, and strong national sales. However, they acknowledge that they are not satisfied with their growth in the local segment and have plans to improve in fiscal 2025. The fourth quarter also saw positive growth in national accounts and local cases, as well as a reversal of negative trends in SYGMA. The writer notes that Sysco has a well-balanced business with strong market share in the non-restaurant space.

Sysco's non-restaurant sectors, such as healthcare and foodservice management, are not heavily affected by consumer confidence in restaurant foot traffic. This, combined with their strong international segment and efficient expense management, led to a 6.4% increase in operating income year-over-year. The company also hired 450 new sales professionals in fiscal 2024, which will contribute to increased profitable local case volume in fiscal 2025 as they become more knowledgeable about the company's products.

Sysco plans to hire 450 new sales professionals in fiscal 2025, with the expectation that they will positively impact fiscal 2026 results. They are investing in training and support for these new colleagues and have introduced a new compensation program to incentivize behavior that will benefit the company. The total team selling program is also progressing well, with partnerships between sales consultants and specialists improving. This was discussed as a growth opportunity at the Investor Day in May.

The Sysco company is focused on expanding its specialty business, which has proven to be a successful and profitable venture. They plan to continue growing their specialty capabilities through acquisitions and new ventures. Their international segment has also shown strong growth, thanks to new programs and technology. The company is also working on improving their supply chain to ensure timely and complete deliveries to their customers.

Sysco has made significant improvements in their on-time delivery rates and first-time fill rates, resulting in increased customer satisfaction and improved NPS scores. They have also focused on increasing colleague retention, which has led to improved safety metrics, reduced product shrink, and increased productivity. The opening of a new DC fold-out in Allentown, Pennsylvania will help Sysco better serve the Northeast corridor and lower their costs. Overall, Sysco has had a strong year and thanks their team for their hard work.

In the fourth quarter, the company exceeded its EPS guidance and grew its business more than 1.75 times the overall market, with industry-leading profitability metrics. They also made progress in areas such as technology and customer programs. The focus for fiscal 2025 and beyond is on the most important factors for success. The CFO then discussed the quarter's financial details, highlighting their ability to deliver solid performance despite a softer macro environment. The company's focus on operational discipline and cost management has helped them achieve positive sales and volume growth, as well as consecutive quarters of positive operating leverage. This has resulted in growth in adjusted operating income and EPS, with the full year exceeding the midpoint of the guidance range by $0.01.

In the fourth quarter, the company saw a 4.2% increase in sales, driven by growth in all segments. They were able to improve gross profit by 4.2% through effective pricing and sourcing strategies. Operating expenses were also reduced by 10%, allowing for profit growth and reinvestment in the business. The company returned over $2.2 billion to shareholders in FY '24. In terms of volume, U.S. Foodservice saw a 3.5% increase in total volume and a 0.7% increase in local volume. Gross profit was $3.8 billion, with margins remaining flat due to mix. The company was able to effectively manage product inflation and saw improvement from their strategic sourcing efforts. Sysco brand penetration rates decreased, but the company has plans to improve this over the course of the year.

In the third quarter, adjusted operating expenses for the company were $2.8 billion, representing 13.4% of sales and a 12 bps improvement from the previous year. Adjusted operating income was $1.1 billion, with a 5.3% margin. For the year, adjusted operating income increased by 8.4%, driven by growth in the International segment and SYGMA. Adjusted EBITDA also saw a 5.4% increase. The company's balance sheet remained strong, with a net debt leverage ratio of 2.7 times and $3.5 billion in total liquidity. The company generated $3 billion in operating cash flow and $2.2 billion in free cash flow, a new record. Over $2.2 billion was returned to shareholders through share repurchases and dividends.

The company is confident that they will continue to see growth in both sales and adjusted EPS in FY '25, in line with their financial algorithm. They expect net sales to grow by 4-5%, with a slight benefit from M&A. Adjusted EPS is expected to grow by 6-7%, but may be impacted by non-operational below-the-line items. They anticipate similar traffic trends in Q1, with improvements in the back-half of the year. The company will continue to focus on improving local case performance and will be disciplined in their hiring and expenses.

Sysco expects to see improvements in operating leverage through process improvements and strong cash flow conversion rates. They plan to distribute most of their free cash flow to shareholders, maintain their dividend aristocrat status, and target $1 billion in share repurchases. They will also operate within their stated target for net leverage and provide guidance on other modeling elements such as tax rate, interest expense, and CapEx. The company will prioritize investments that drive both growth and ROIC, with a focus on margin dollars and rate growth. Overall, Sysco is pleased with their quarterly performance and sees potential for growth as the industry leader in a growing market.

The paragraph discusses Sysco's strong operating model and how it allows them to continually enhance their competitive advantages in the market. Sysco's scale advantages, diversification, and strong financial position give them a structural advantage and access to capital for growth opportunities. The company's international segment is also proving to be a profitable growth engine. The speaker is confident in the company's position for success and is ready for questions. The first question is about the impact of trade down and trade out on a broader customer demographic and the potential impact of election uncertainty on food away from on-demand in the future.

The speaker discusses the impact of the current macroeconomic climate on the restaurant industry, noting consistent declines in traffic across all types of restaurants. They anticipate some improvement in the second half of fiscal year 2025, but believe the current decline in traffic is due to cumulative inflation over the past three years. They also mention their successful performance in non-restaurant segments and their plans to improve in the local market. In response to a follow-up question, they mention being satisfied with their new sales force hires and their plans for improving retention in the challenging macroeconomic environment.

The company tracks retention of employees and has not seen any significant turnover. The focus for success in 2025 will be on ramping up the productivity of new sales colleagues and providing them with necessary training. The company introduced a new compensation model that will be closely monitored for its impact on retention and overall results. The new model includes a more variable incentive plan that matches expenses with cash inflows, helping with working capital.

The speaker discusses how their plan rewards growth and profit, and how it is a win-win for both sales professionals and the company. They also mention the challenging promotional environment in the restaurant industry and how it affects their gross margin, but they remain disciplined in their pricing strategies to maintain profitability. The speaker then passes the question to another person for further comment on gross margin.

Kenny Cheung and Lauren Silberman discuss gross margins and profit for the quarter. The key driver of margins being slightly down year-on-year is due to the mix, as they continue to grow and take share in the CMU space. They also have plans to drive Sysco brand penetration and increase product innovation. When asked about case growth, Kevin Hourican states that macro environmental conditions for Q1 are similar to the exit velocity of Q4, which has been factored into their guidance.

Sysco has the opportunity to grow their business profitably and expects improvement in the second half of the fiscal year. They are focusing on new customer prospecting and have a substantial opportunity to increase their customer count. The new compensation model also incentivizes new customer acquisition. The sales force investments will start to see financial benefits in the back half of the fiscal year. There has not been a significant change in retention, alleviating concerns of potential disruption and loss of customers to competitors.

Kevin Hourican, CEO of Sysco, explains the reasoning behind the company's decision to hire 450 new sales colleagues. He states that the company's territory sizes have grown too large and they want their sales colleagues to have more face-to-face interactions with customers. This may cause some short-term disruption, as existing sales colleagues may have to give up one customer to the new hire, but the company expects them to backfill and grow their business. The main goal of the new colleagues is to acquire new customers for Sysco.

The disruption caused by the changes in compensation at Sysco is manageable and the majority of the company's growth is attributed to winning new customers. The compensation change went into effect on July 1 and involves lowering base pay and increasing incentives. This change will benefit top performers and encourage lower performers to improve their outcomes through coaching and resources. The sales leadership team is focused on helping the lower performing colleagues adapt to the new model. The company will closely monitor the change management process.

In the paragraph, Kevin Hourican and Kenny Cheung discuss the impact of the comp model change on the company's performance in the second half of the year. They mention that the sales hires are ROIC positive and that there may be some timing issues with the return on investment. They also mention that there were some declines in the U.S. gross margin due to customer and product mix, but they are confident in their guide and expect a rebound in the back half of the year.

The company has seen improvements in their profitability and growth in their national CMU business. However, their local business needs improvement and they plan to do so responsibly and profitably. The slight decrease in Sysco brand sales was due to improved fill rates from national brand suppliers, which is ultimately a positive for the company and their operations. They are confident that they can increase Sysco brand penetration.

Kenny and Kevin discuss the modeling for 2025, with Kenny explaining that they expect GP dollar per case to expand due to sales consultants' investments, new compensation models, and the growth of the Sysco brand and specialty business. John asks about the opportunity to improve existing account wallet share and Kevin responds that they have set a target for local case growth to reach 2-3% by the end of fiscal 2025.

The two main opportunities for improving case penetration with existing customers are total team selling and Sysco Your Way neighborhoods. Total team selling involves bringing in specialty produce and protein experts from other Sysco businesses, resulting in higher spending and more cases per customer. The Sysco Your Way neighborhoods initiative aims to increase market share in urban areas where Sysco historically has been underrepresented. Both of these opportunities have been successful so far and are a top priority for the company.

The company is excited about the potential for growth in both Sysco Your Way and total team selling. They expect low single-digit growth in local volume for the year, and are confident in their guidance for the first quarter and full year. The guidance falls within the range discussed on Investor Day. The cadence and phasing of the forecast were also discussed.

The company expects a modest improvement in industry traffic in the back half of the year, as well as benefits from investments and a new compensation model. They also anticipate continued productivity throughout the year, with a focus on supply chain improvements. In terms of international sales, the company remains optimistic despite the current macroeconomic climate and expects continued growth in 2025.

The improvement in performance and growth year-over-year for the company is not solely due to macro factors, but also due to self-help activities and productivity improvements in the supply chain. The introduction of the Sysco brand in new countries, increased focus on local sales and customer retention, and a global operating model have all contributed to the success of the company's international markets, with all markets in Europe and the Americas seeing double-digit growth in operating income. This trend is expected to continue into 2025.

Kenny Cheung and Kevin Hourican discuss the company's performance in the third quarter and their expectations for the future. They mention that the company has seen a per-base benefit across the board and they expect this trend to continue in 2025. They also mention that they have taken actions to reduce corporate costs and plan to continue doing so. They highlight the success of these efforts in international markets and their focus on structural cost improvement. Finally, they mention that the company's 2% inflation outlook is expected to remain even throughout the year, with ups and downs in different categories.

Sysco expects approximately 2% growth in the industry, and they have already reached that level. They anticipate this growth to continue throughout the year. Sysco is focused on helping their customers by providing them with cost-effective purchasing options and Sysco brand products. They have seen some movement in the QSR sector, with increased value menu activity. For other restaurant types, Sysco believes the quality of their products and in-restaurant experience will drive growth.

The paragraph discusses Sysco's expectations for the year, including moderate improvement in consumer confidence due to lower interest rates. The company believes it can profitably grow its business in these market conditions through acquiring new customers and taking advantage of penetration opportunities. The decline in private label penetration is attributed to an improvement in national supplier fill rates, which is seen as a positive for the industry.

The speaker discusses the short-term impact of Sysco brand on their percent of cases, but expresses confidence in its long-term growth. They mention working on trade management deals and increasing the importance of Sysco brand penetration for their performance objectives in fiscal 2025. The question-and-answer session is then concluded due to time constraints.

This summary was generated with AI and may contain some inaccuracies.