Company Overview and History

Sysco Corporation, the global leader in foodservice distribution, has long been a bellwether of the industry, known for its unparalleled scale, extensive supply chain capabilities, and customer-centric approach. As the world emerges from the challenges of the past few years, Sysco has demonstrated its resilience and ability to adapt, positioning itself for continued success in the years ahead.

Founded in 1969 and headquartered in Houston, Texas, Sysco's storied history spans over five decades. The company started when a group of food distributors came together to create a national foodservice distribution company, beginning with just 17 companies. Through a series of strategic acquisitions and organic growth, it has transformed into a global powerhouse, serving over 730,000 customer locations across 10 countries. By the late 1970s, Sysco had become one of the largest foodservice distributors in the United States. The company continued its expansion throughout the 1980s and 1990s, facing and overcoming antitrust concerns related to some of its acquisitions. In the early 2000s, Sysco increased its international presence by acquiring foodservice distributors in Europe and other regions, helping to diversify its customer base and revenue streams. Today, Sysco operates a network of 340 distribution centers, employing a workforce of 76,000 dedicated professionals.

Financials

Sysco's financial performance has been impressive, even in the face of industry headwinds. In the fiscal year ended June 30, 2024, the company reported revenue of $78.84 billion, a 3.3% increase from the prior year. Net income for the period stood at $1.96 billion, with a net profit margin of 2.4%. Annual operating cash flow reached $2.99 billion, while annual free cash flow amounted to $2.16 billion.

In the most recent quarter (Q2 2025), Sysco reported revenue of $20.15 billion, representing a 4.5% year-over-year increase. This growth was driven by a 1.4% volume growth in U.S. Foodservice Operations and 2.1% inflation. Net income for the quarter was $406 million, while quarterly free cash flow stood at $331 million.

Sysco's balance sheet remains robust, with a net debt leverage ratio of 2.76x as of June 30, 2024, providing the company with ample financial flexibility to navigate the landscape.

Liquidity

Sysco's strong financial position is further evidenced by its liquidity. As of December 2024, the company reported cash and cash equivalents of $793 million. Sysco maintains a $3 billion revolving credit facility, with $498 million in commercial paper outstanding. The company's debt-to-equity ratio stands at 6.80, while its current ratio is 1.20 and quick ratio is 0.68. This balance sheet strength and cash flow generation capability provide Sysco with significant financial flexibility to pursue growth opportunities and weather potential economic challenges.

Diversified Customer Base

One of Sysco's key strengths is its diversified customer base, which includes restaurants, healthcare facilities, educational institutions, and other foodservice operators. This diversification has helped the company weather various economic cycles and industry challenges. In the most recent quarter, ended December 28, 2024, Sysco reported a 4.5% year-over-year increase in total revenue, driven by strong performance across its U.S. Foodservice, International Foodservice, and SYGMA segments.

International Success

Notably, Sysco's International Foodservice operations have been a standout, with the segment posting a 26.5% increase in adjusted operating income during the second quarter. The company's success in international markets can be attributed to its ability to replicate its winning formula of scale, operational efficiency, and customer-centric strategies in overseas markets. The International Foodservice Operations segment, which includes operations in Canada, Bahamas, Costa Rica, Panama, the United Kingdom, France, Ireland, and Sweden, accounted for 18.5% of total sales in Q2 2025.

Product Segments and Performance

Sysco's operations are organized into several key segments:

1. U.S. Foodservice Operations: This segment includes Sysco's U.S. Broadline operations and U.S. Specialty operations. In Q2 2025, sales increased 4.1% year-over-year, driven by higher inflation and volume growth, including benefits from acquisitions. Gross profit grew by 2.9%, while operating income declined slightly by 0.6% due to increased operating expenses.

2. International Foodservice Operations: This segment covers Sysco's operations outside the U.S. In Q2 2025, sales grew 3.6% year-over-year, with gross profit up 7.3% and operating income increasing by 14.5%. The improvement was attributed to volume growth, supply chain efficiencies, and productivity improvements.

3. SYGMA: This segment focuses on U.S. customized distribution operations serving quick-service chain restaurant customer locations. SYGMA reported strong performance in Q2 2025, with sales up 10.6%, gross profit increasing 7.9%, and operating income rising 11.8%.

4. Other: This segment primarily includes Sysco's hotel supply operations, Guest Worldwide.

Sustainability Initiatives

Another area of focus for Sysco has been its sustainability initiatives. In 2024, the company launched its "One Planet One Table" assortment, a comprehensive portfolio of over 3,500 responsibly sourced, eco-focused, and waste-reducing products. This program underscores Sysco's commitment to supporting the growing demand for sustainable food solutions among its customer base.

Future Outlook and Guidance

Looking ahead, Sysco remains confident in its ability to deliver on its financial targets. For the 2025 fiscal year, the company has reiterated its previous guidance:

• Net sales growth of 4% to 5%, including continued inflation of approximately 2%, positive volume growth of low single digits, and contributions from M&A.

• Adjusted EPS growth of 6% to 7%, in line with their financial algorithm range.
• A stronger rate of adjusted EPS growth in the second half of the fiscal year, growing at a positive high single-digit growth rate, with similar growth rates across Q3 and Q4.
• $100 million in annualized savings to improve gross profit dollars and operating expenses, starting in the second half of the fiscal year.
• Plans to return over $2.25 billion to shareholders in FY2025 through $1 billion in dividends and $1.25 billion in share repurchases.
• An adjusted tax rate ranging from 24.5% to 25%, slightly lower than the initial view.
• Adjusted depreciation and amortization of approximately $800 million for the year.

This guidance reflects the company's belief in its ability to continue driving operational improvements, leveraging its scale advantages, and capitalizing on industry trends.

Industry Trends and Competition

The foodservice distribution industry is expected to grow at a CAGR of 4-6% over the next 3 years, driven by recovery in food-away-from-home consumption. However, Sysco is not without its challenges. The company must navigate a dynamic macroeconomic landscape, characterized by inflationary pressures, labor shortages, and evolving consumer preferences. Additionally, the foodservice industry remains highly competitive, with Sysco facing stiff competition from regional and specialized distributors.

Despite these headwinds, Sysco's management team has demonstrated its ability to adapt and execute. The company's strategic investments in sales force expansion, supply chain optimization, and sustainability initiatives position it well to capitalize on the industry's long-term growth potential.

Conclusion

In conclusion, Sysco Corporation's enduring legacy, financial strength, and commitment to innovation make it a compelling investment opportunity in the dynamic foodservice distribution landscape. With a diverse product portfolio spanning foodservice distribution, specialty products, and equipment/supplies, Sysco continues to drive solid financial performance while navigating inflationary pressures and focusing on operational initiatives to drive profitability across its business segments. As the company continues to leverage its scale, operational expertise, and sustainability focus, it is poised to deliver value for its shareholders in the years to come.