Sysco FY 4Q15 Earnings Call Notes

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$1B FCF on $49B in revenue

“For the year, we achieved record sales of $49 billion, an increase of 5%. We grew our adjusted operating income and earnings per share by 3% and 5%, respectively. We generated $1 billion in free cash flow. We earned a return on invested capital of 13% on an adjusted basis. We increased our dividend for the 46th time in our history and distributed nearly $700 million in dividends to our shareholders.”

Food Service Operators confidence has slipped somewhat in the summer months

“Moving to market and economic trends, as I speak to you today, the data is mixed. Consumer confidence and the outlook of food service operators are at historically high levels, but have slipped somewhat in the summer months. Fuel prices at the pump remain at historically attractive levels, which should support higher consumer spending moving forward. Restaurant spend is up, but traffic is generally flat.”

2-3% inflation is the best zone for us

“we have for years said and truly believe that the optimal range of inflation for our customers, and for us, is probably in the 2% to maybe 3% range. That’s a level that typically our customers can pass on and do pass on, and generally that’s a level that the consumer will accept. So, when we’re in those levels we’re able to have the best of both worlds, if you will, in terms of a little bit of a tailwind on inflation at the same time. It doesn’t hurt demand to any large extent. We very seldom find ourselves in that zone, and right now, we find ourselves in a zone where there’s little to no inflation”

Tough to raise price with costs in 5-6% inflation environment

“when we have inflation, let’s say higher than normal inflation like we saw, particularly in the first half of the year, that’s where it’s very difficult to – and at times not even appropriate – to raise your prices as fast as your costs are going up. And so, when you have an inflation environment of 5% or 6%, it’s highly unlikely that your gross margin is going to keep pace on a year-over-year basis there.”

Growing local cases is very very important

“Growing local cases is very, very important in this business. I don’t think I can say that enough.”