The companies on the Global 500 employ 70.2 million people, and their revenue represents more than one-third of the world’s GDP.

Fortune Global 500

With a combined revenue of $21 trillion and $2.1 trillion in profits, the 2026 Fortune 500 is the definitive list of America's largest companies.

Fortune 500

The 300 companies on this year’s list brought in over $12.5 trillion in revenue for the latest 12 months, with the median revenue figure at $24 billion.

America's Most Innovative Companies

The corporations on our annual list of the world's 500 largest companies combined to generate $41.7 trillion in revenue over the past year.

Almost $20 trillion in revenue—and a record-breaking $1.87 trillion in profits. Introducing the 2025 Fortune 500, the definitive list of the biggest companies in America.

The 300 companies on this year’s list brought in over $12.6 trillion in revenue for the latest 12 months, with the median revenue figure at $22 billion.

The corporations on our annual list posted aggregate revenues of $41 trillion for the second year in a row.

Industries included in the sector are diversified, electronics, and food and grocery.

Fortune Sector Leaders: Wholesalers

The Fortune 500, in its 70th year in 2024, ranks the biggest U.S. companies by revenue.

The corporations on our annual list of the world’s largest companies delivered a record $41 trillion in aggregate revenues.

The Fortune 500, in its 69th year in 2023, ranks the biggest U.S. companies by revenue.

F500-2023-056-Sysco

Sysco, a food marketer and distributor, jumped up 14 spots on the Fortune 500 and posted a 34% increase in revenue in 2022, as restaurant demand—abnormally low during the height of the pandemic—rebounded. 
<ul> 
 	<li>The majority of Sysco's sales come from operations in the U.S., but international growth outstripped domestic in 2022, partly due to the reversal of more stringent pandemic restrictions abroad.</li> 
 	<li>The company sued a slew of meat companies in 2022, alleging that they violated antitrust regulations through price fixing. Although Sysco moved to settle the lawsuits, it is now mired in a legal battle with Burford Capital, which financed Sysco’s litigation.</li> 
 	<li>The workforce for the food marketer and distributor grew 22% in size from 2021, the third largest increase among the top 100 companies in the Fortune 500.</li> 
</ul>

Aggregate sales hit $37.8 trillion last year—an increase of 19%, the highest annual growth rate in the list’s history.

This year’s Fortune 500 marks the 68th running of the list.

F500-2022-070-Sysco

Food product marketer and distributor Sysco continued its slide down the Fortune 500 this year as the pandemic kept restaurant demand largely depressed. The company dropped 10 spots on this list, its revenue decreasing 3% to $51 billion. However, it managed to more than double its profits year over year, to $524 million—a fact that reflects the gradual loosening of COVID-related restrictions throughout the year. In its fourth quarter, the company’s sales finally surpassed 2019 quarterly volume levels—another encouraging sign.

Total revenue for the world’s biggest companies fell 4.8% to $31.7 trillion this year—the first decline in half a decade.

G500-2021-199-Sysco

<span data-sheets-value="{&quot;1&quot;:2,&quot;2&quot;:&quot;The coronavirus chewed through Sysco’s core grub-supplying business as restaurants around the world shuttered last year. Revenues for Sysco, America’s biggest wholesale food distributor, fell 12% year on year to $52.9 billion, a decline that caused it to slide four places in the Fortune 500 rankings. COVID-19 took a bite out of profits, too, causing a stomach-churning 87% drop to $215 million. The Houston-based company pivoted amid pandemic-related closures to help its eatery customers offer alternative options, like takeout-meal kits and contactless menus. But Sysco’s financial prospects are mostly tied to people’s desire to dine out again as the economy reopens.&quot;}" data-sheets-userformat="{&quot;2&quot;:12673,&quot;3&quot;:{&quot;1&quot;:0},&quot;10&quot;:2,&quot;11&quot;:4,&quot;15&quot;:&quot;Calibri, Arial&quot;,&quot;16&quot;:11}" data-sheets-textstyleruns="{&quot;1&quot;:0}{&quot;1&quot;:280,&quot;2&quot;:{&quot;6&quot;:1}}{&quot;1&quot;:287}">The coronavirus chewed through Sysco’s core grub-supplying business as restaurants around the world shuttered last year. Revenues for Sysco, America’s biggest wholesale food distributor, fell 12% year on year to $52.9 billion, a decline that caused it to slide 20 places in the Global 500 rankings. COVID-19 took a bite out of profits, too, causing a stomach-churning 87% drop to $215 million. The Houston, Texas-based company pivoted amid pandemic-related closures to help its eatery customers offer alternative options, like takeout-meal kits and contactless menus. But Sysco’s financial prospects are mostly tied to people’s desire to dine out again as the economy reopens.

This year’s Fortune 500 marks the 67th running of the list.

F500-2021-60-Sysco

<span data-sheets-value="{&quot;1&quot;:2,&quot;2&quot;:&quot;The coronavirus chewed through Sysco’s core grub-supplying business as restaurants around the world shuttered last year. Revenues for Sysco, America’s biggest wholesale food distributor, fell 12% year on year to $52.9 billion, a decline that caused it to slide four places in the Fortune 500 rankings. COVID-19 took a bite out of profits, too, causing a stomach-churning 87% drop to $215 million. The Houston-based company pivoted amid pandemic-related closures to help its eatery customers offer alternative options, like takeout-meal kits and contactless menus. But Sysco’s financial prospects are mostly tied to people’s desire to dine out again as the economy reopens.&quot;}" data-sheets-userformat="{&quot;2&quot;:12673,&quot;3&quot;:{&quot;1&quot;:0},&quot;10&quot;:2,&quot;11&quot;:4,&quot;15&quot;:&quot;Calibri, Arial&quot;,&quot;16&quot;:11}" data-sheets-textstyleruns="{&quot;1&quot;:0}{&quot;1&quot;:280,&quot;2&quot;:{&quot;6&quot;:1}}{&quot;1&quot;:287}">The coronavirus chewed through Sysco’s core grub-supplying business as restaurants around the world shuttered last year. Revenues for Sysco, America’s biggest wholesale food distributor, fell 12% year on year to $52.9 billion, a decline that caused it to slide four places in the Fortune 500 rankings. COVID-19 took a bite out of profits, too, causing a stomach-churning 87% drop to $215 million. The Houston-based company pivoted amid pandemic-related closures to help its eatery customers offer alternative options, like takeout-meal kits and contactless menus. But Sysco’s financial prospects are mostly tied to people’s desire to dine out again as the economy reopens.

This year's Fortune Global 500 generated $33.3 trillion in revenues and $2.1 trillion in profits.

G500-2020-179-Sysco

Sysco is America’s biggest and most profitable wholesale food distributor. While the Houston company took in $60.1 billion in 2019, up 2.4% from the year prior, it slid seven places in the Global 500 rankings. Rising food costs, due to inflation and international tariffs, plus higher labor expenses, exacerbated by a shortage of commercial truck drivers, gnawed at the bottom line. Regardless, Sysco grew profits by 17% to $1.6 billion, partly through layoffs, subsidiary consolidation in France, and facility closures in Canada and Europe. Now, as the coronavirus pandemic shutters restaurants around the world, Sysco’s new CEO, Kevin Hourican, formerly of CVS Health, will have to figure out how to keep the business cooking.

This year's Fortune 500 marks the 66th running of the list.

F500-2020-056-Sysco

Sysco is America’s biggest and most profitable wholesale food distributor. While the Houston company took in $60.1 billion in 2019, up 2.4% from the year prior, it slid two places in the Fortune 500 rankings. Rising food costs, due to inflation and international tariffs, plus higher labor expenses, exacerbated by a shortage of commercial truck drivers, gnawed at the bottom line. Regardless, Sysco grew profits by 17% to $1.6 billion, partly through layoffs, subsidiary consolidation in France, and facility closures in Canada and Europe. Now, as the coronavirus pandemic shutters restaurants around the world, Sysco’s new CEO, Kevin Hourican, formerly of CVS Health, will have to figure out how to keep the business cooking.

This year's Fortune Global 500 generated $27.7 trillion in revenues and $1.5 trillion in profits.

This year's Fortune 500 marks the 65th running of the list.

This year's Fortune 500 marks the 64th running of the list.

This year's Fortune 500 marks the 63rd running of the list.

This year's Fortune Global 500 generated $27.6 trillion in revenues and $1.5 trillion in profits.

This year's Fortune 500 marks the 62nd running of the list.

The world's 500 largest companies generated $31.2 trillion in revenues and $1.7 trillion in profits in 2014. Together, this year's Fortune Global 500 employ 65 million people worldwide and are represented by 36 countries.

This year's Fortune 500 marks the 61st running of the list. Wal-Mart claims the top spot again. See who made the list.

Global business is back. After limping through a worldwide financial crisis and economic slowdown, the 500 largest companies ranked by revenues shattered all sorts of performance records in 2013: They racked up combined revenues of $31.1 trillion, up 2.5% from 2012, and profits soared 27% to nearly $2 trillion. China’s 95 companies (up from 89 last year) posted $5.8 trillion in revenues. The U.S. has four fewer companies on the list than last year but remains (for now) the country leader, with 128 corporations on the list—including No. 1 Wal-Mart Stores—reporting $8.6 trillion in revenues. 

Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

Sector

Strongest Dimension

Years on list

Previous rank

State

Key Financials (last Fiscal Year)

Revenues ($M)

Profits ($M)

Assets ($M)

Total Stockholder Equity ($M)

Profit Ratios

Profit as % of Revenues

Profits as % of Assets

Profits as % of Stockholder Equity

Earnings Per Share (last Fiscal Year)

Earnings Per Share ($)

EPS % Change (from prior fiscal year)

EPS % Change (5 year annual rate)

EPS % Change (10 year annual rate)

Total Return

Total Return to Investors (last year)

Total Return to Investors (5 year, annualized)

Total Return to Investors (10 year, annualized)

Sysco is a marketer and distributor of food and related products to the food service or food-away-from-home industries in the U.S., Canada, the U.K., France, and elsewhere. The company serves restaurants, hospitals and nursing facilities, schools and colleges, hotels and motels, industrial caterers, and other food service venues. Sysco was incorporated in 1969 and is headquartered in Houston.

Q4 2026

Q3 2026

Q2 2026

Q1 2026

Q4 2025

Q3 2025

Q2 2025

Sysco (SYY): Company Profile, Stock Price, News, Rankings

legacy

Sysco

sysco

Good morning, everyone. Welcome to today's Sysco second quarter fiscal year 2026 earnings conference call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question-and-answer session. To register to ask a question at any time, please press star one on your telephone. We will begin with opening remarks and introductions. At this time, I would like to turn the call over to Mr. Kevin Kim, Vice President of Investor Relations. Please go ahead, sir.

Good morning, everyone, and welcome to Sysco second quarter fiscal year 2026 earnings call. On today's call, we have Kevin Hourican, our Chair of the Board and CEO, and Kenny Cheung, our CFO. Before we begin, please note that statements made during this presentation that state the company's or management's intentions, beliefs, expectations, or predictions of the future are forward-looking statements within the meaning of the Private Securities Litigation Reform Act, and actual results could differ in a material manner. Additional information about factors that could cause results to differ from those in the forward-looking statements is contained in the company's SEC filings. This includes, but is not limited to, risk factors contained in our annual report on Form 10-K for the year ended June 28, 2025, subsequent SEC filings, and the news release issued earlier this morning.

A copy of these materials can be found in the Investors section at sysco.com. Non-GAAP financial measures are included in our comments today and in our presentation slides. The reconciliation of these non-GAAP measures to the corresponding GAAP measures is included at the end of the presentation slides and can also be found in the Investors section of our website. During the discussion today, unless otherwise stated, all results are compared to the same quarter in the prior year. To ensure we have sufficient time to answer all questions, I'd like to ask each participant to limit their time today to one question. If you have a follow-up question, please, reenter the queue. At this time, I'd like to turn the call over to Kevin Hourican.

Good morning, everyone, and thank you for joining us today. I am pleased to report that Sysco delivered strong results in the second quarter of fiscal 2026. Our results were enabled by improving case volume trends, strengthening gross margin performance, and disciplined expense management. Given the strong start to the year, we now expect full-year Adjusted EPS to be at the high end of our previously provided annual guidance range of $4.50-$4.60. We are delivering sequential improvement in our business, setting the stage for further momentum in the second half of the fiscal year. During our call today, we will share insights into the progress that we are making, provide color on each major business segment. We will discuss the external business environment, and we will highlight progress on select growth initiatives.

After my remarks, Kenny will highlight our financial results, and he will share why we are confident in our ability to deliver Adjusted EPS at the high end of our guidance range. Let's jump into our business results, starting on Slide 4. Our Q2 performance exceeded our previously communicated targets for USFS Local volume and adjusted earnings per share. Sysco delivered nearly $21 billion of total revenue, a growth rate of 3% versus the prior year. Importantly, we delivered positive case growth in our Local, Specialty, National, and International business units. USFS Local case volume was up 1.2% in the quarter, an improvement of 140 basis points versus Q1. This improvement in performance was approximately 40 basis points stronger than what we had guided on our last call. The improvement in our performance can be seen on Slide 8.

Sysco's 140 basis points of Local case growth improvement was delivered in an environment where traffic to restaurants or Black Box declined more than 200 basis points year-over-year and a similar decline quarter-over-quarter. We are strengthening our performance at Sysco in a softening macro backdrop. Our improvement gives us the conviction in our ability to gain share profitably in the current market, market conditions. We are pleased with the positive momentum in Local volumes over each of the last three quarters in the US, as seen on Slide number 8. We are now solidly in positive volume growth territory, and we expect continued positive momentum for the second half of the year. More specifically, we expect reported Local volume growth of at least positive 2.5% in both Q3 and Q4.

To double-click into that 2.5% back half growth, we expect at least 2.1% to come from organic Local case growth, representing a 100 basis points improvement versus Q2, with approximately 50 basis points additional contribution from M&A activity recently completed. Turning the page to our National contract business, during our second quarter, our National business generated volume growth of 0.4%. Unpacking this segment further, we saw strong growth in our food service management business, solid growth in travel and entertainment, and positive and strengthening volume growth in our healthcare business. The positive growth from these business units was partially offset by softness in our National restaurant segment.

The declining foot traffic to restaurants per Black Box has negatively impacted our National chain restaurant customers, as can be seen in our results, as volume with these customers was down year-over-year. For the remainder of fiscal year, we expect case volume growth for National contract customers in total to be greater than 2% due to the onboarding of net new customer wins in the National restaurant customer business and continued strength in our non-restaurant business. Having covered top-line results, I will now transition to the middle of our P&L and highlight our expanded gross margins year-over-year. Our buying and merchandising teams are doing a solid job of ensuring best price in our procurement efforts, and partnering with our sales teams to highlight that value to our customers.

As I have mentioned on previous earnings calls, we are working extensively to increase the availability of products in what we call the value tier of a Good, Better, Best product hierarchy. Sysco currently under-penetrates in the value tier, and there is an opportunity for improvement, especially in an environment where restaurants are seeking ways to save money. Historically, Sysco has had a strong position in the premium or Better, Best segments of the business, and our merchandising focus on the value tier is intended to supplement our existing assortment. Doing so will enable us to win net new lines from existing customers. The development of a stronger value assortment is actively underway and will progress constructively over the next calendar year. I want to be very clear that these efforts are not intended to trade customers down from Better to Good.

This is about filling voids in the Sysco product assortment, meeting the customer where they are, and growing our business profitably with existing customers. Sysco delivered solid expense control in the quarter, with supply chain productivity continuing to improve quarter-over-quarter and year-over-year. Warehouse and driver colleague retention improved in the quarter, driving improvement in productivity. We are delivering strong service to our customers and improving our supply chain cost performance. Turning to our International segment, we are extremely pleased with the performance being delivered by our International team. During the quarter, we delivered sales growth of 7.3% on a reported basis and up 9.9% when excluding the divestiture of Mexico. Starting in Q3 2026, we will have fully lapped our Mexico business exit. The momentum in our International business was fueled by every International geography.

To that end, Local case growth in our International segment was up 4.5% in the period. This growth is being generated by expanded supply chain capacity, increased availability of Sysco-branded merchandise, increased sales headcount, and easier-to-use technology. The 4.5% Local case growth, coupled with disciplined expense management, delivered Adjusted Operating Income growth of nearly 26%. This represents the ninth consecutive quarter of double-digit operating income growth and highlights the reality that Sysco International is a growth engine within the company. I am proud of the progress that we have made in International, and we are very bullish on our future in this segment. I'd now like to transition into a brief update on select growth initiatives that are driving our positive U.S. Local case growth. First off, I would like to provide an update on sales colleague retention and productivity.

As was the case in Q1, our colleague retention rate in Q2 was at or above our historical high-water mark. We have fully stabilized sales colleague retention, and we are now focused on increasing selling productivity. Due to the higher-than-normal percentage of sales colleagues that are newer to role, we are focused on product and selling training. We have full confidence that these training efforts are improving selling effectiveness. In Q2, we can see the improvement through important internal sales metrics. We continue to onboard net new customers at a high level, and we have made meaningful progress in improving customer retention. The spread between new customer onboarding and existing customer loss is measured in a new versus loss ratio. That ratio expanded solidly in the second quarter. To assist all colleagues, we have deployed tools to improve selling productivity.

Most notable is our AI 360 CRM tool, which is now 4 months live in production. Engagement with AI 360 remains very high, with 95% or more of our colleagues using the tool weekly. More importantly, we can track utilization and selling performance through AI 360. Across all sales colleague tenures, those that are using the tool more often are outperforming those that use it less often. The math is very clear: If you use the tool, you sell more. Our goal in the second half of the year is to ensure all of our sales reps are actively engaging with the selling suggestions that come from AI 360. To that end, we have new functionality being deployed to the tool on a regular basis. Coming soon will be something that we call Swap and Save suggestions for our sales consultants to introduce to customers.

With the click of one button, the sales consultant will have access to prioritized suggestions of products that can save a customer money. These suggestions are cuisine specific to the restaurant and are generated by our internal data science team. The key is in the data, knowing which items are acceptable solutions and substitutions. We are able to identify which of the item substitutions will save the customer money, will help Sysco make more money, and importantly, make our sales reps more money, too. The suggestions that will be prompted will be those that check each of these three boxes, a win, win, win. AI 360 will enable our sales teams to put more of these swap and save opportunities in front of our customers more often. Lastly, I'd like to provide a quick update on Sysco Your Way and Perks Loyalty Program performance.

Sysco Your Way neighborhoods continue to deliver mid-single-digit volume growth year-over-year, despite being in the fourth year of existence. That durable growth success proves that the program resonates well with customers. We are growing our customer count and the lines purchased per existing customers within Sysco Your Way neighborhoods. The revamp of Sysco Perks is delivering results as we had anticipated. We are seeing improved customer retention year-over-year, and we are seeing increased share of wallet with these important customers. Our Local business is now growing as a result of improved colleague productivity and the sales-driving programs that I just mentioned. We are confident we will continue to make progress, and therefore, we are confident in the projection that we will improve Local volumes to at least 2.5% in the second half of fiscal 2026.

As I wrap up my prepared remarks, I would like to provide an update on two miscellaneous topics from the quarter. First is to communicate that we completed a small tuck-in acquisition at the end of the second quarter. We are pleased to welcome Ginsberg's Foods, a premier broadline distributor in the Northeast, to the Sysco family. This transaction increases our customer count in a high-value region of the country and helps Sysco's leverage its supply chain network more completely. We are excited to create additional scale and growth potential in the geography as we welcome the Ginsberg's colleagues and customers to Sysco. Over time, we are positioned to unlock additional top-line growth and margin expansion opportunities as we introduce Sysco's buying programs and product assortment to the expanded customer set. Lastly, I want to acknowledge the retirement transition of our Chief Operating Officer, Greg Bertrand.

Greg began his Sysco journey in 1991 and quickly advanced through the ranks, serving as our Global COO since September of 2023. Greg will be missed personally and professionally, and we thank him for his substantial contributions to Sysco across his 35-year career. Over the next year, Greg will serve as a strategic advisor in a part-time capacity. Greg will focus his time and efforts on helping develop newer Sysco field leaders and will support me directly on select strategic initiatives like the Ginsberg's acquisition that I just mentioned. We expect a smooth transition over the next year, as we have a strong depth of experienced leadership talent in our field organization. In closing, I want to reiterate that we are encouraged by our strengthening results and that we are confident in our business momentum as we head into the second half of the year.

We expect improved productivity from our sales colleagues, driven by strong retention and improved selling effectiveness by leveraging our selling tools and from leaning into select growth initiatives, all backstopped by a supply chain that is performing at exceptionally high levels of service. It is these factors that give me, Kenny, and our leadership team the confidence that we will deliver 2.5%+ Local case growth in the second half and Adjusted EPS results at the high end of our guidance range. With that, I'd now like to turn the call over to Kenny. Kenny, over to you.

Thank you, Kevin, and good morning, everyone. Our Q2 results were strong, with sales growth of 3% and Adjusted EPS growth of 6.5%. Our financial results this quarter also demonstrated high quality of earnings as free cash flow grew by 25% year-to-date. Our balanced portfolio of business and keen focus on operations enabled us to deliver continued momentum versus last quarter, with results coming in ahead of our previously communicated expectations, despite the choppy macroeconomic environment. We entered the fiscal year detailing how company-specific initiatives would help us deliver on our external commitments, with a focus on the key inputs of retention and productivity across our sales and supply chain organization. During the quarter, these were material drivers that enabled us to deliver on our expectations for the first half of the year.

Looking ahead, our continued focus on go-to-market and operational excellence is expected to drive our second half results. As Kevin highlighted, we are creating structural improvements, and we are confident in raising our FY 2026 guidance to the high end of the Adjusted EPS range. Our Adjusted EPS growth in Q2 included continued tailwinds from our strategic sourcing efforts, aiding in the delivery of 3.9% growth in gross profit and translating to 15 basis points of gross margin expansion year-over-year. The increase in dollar and rate reflects the carryover benefit from structural improvements that we expect to continue in our third quarter. Our stabilized sales colleague retention rates, paired with ongoing productivity improvements, drove sequential volume growth across our USFS Local business.

During the quarter, our supply chain continued to perform at a very high level as a result of productivity enhancements stemming from improved tenure and strengthened operational execution. This, in turn, helped to improve execution of the basics and are supporting improved fill rates and order accuracy while strengthening safety and enabling on-time deliveries. These efforts, alongside continued investments in both sales, headcount, and capacity, supported steady business momentum and enabled Adjusted EPS growth of 6.5% in the quarter. As Kevin noted, we also recently expanded our distribution capabilities in the population-dense Northeast Corridor in late December, with the successful acquisition of Ginsberg's Foods, one of the nation's leading regional wholesale distribution companies. This is a compelling strategic and financial fit for Sysco that is accretive to our portfolio.

We are excited about the opportunity to unlock incremental growth as we complement our unique Specialty capabilities with the addition of this top-tier broad line organization. Looking ahead, we expect our positive momentum to continue as we drive growth across the region. Turning to International, this segment remains a great case study in the power of the Sysco playbook. The positive momentum over the past few years continued in Q2, with sales growth of 7.3%, including Local case growth of 4.5%, gross profit growth of 9.5%, and Adjusted Operating Income growth of 25.6%. Our strategy is driving results across all geographies, underscoring the significant operational advantages enabled by our size and scale. Now let's discuss our performance and the financial drivers for the quarter. Starting on Slide 12.

For the second quarter, our enterprise sales grew 3% on an as-reported basis, driven by U.S. Foodservice, International, and SYGMA. Excluding the impact of our divested Mexico business, sales grew 3.5%. Total U.S. Foodservice volume increased 0.8%, while Local volume increased 1.2% in the quarter. These results were sequential improvements as compared to Q1. For our USFS Local business, this represents a sequential volume improvement of 140 basis points, outpacing the industry's -230 basis points of sequential traffic decline for the quarter. We are encouraged by the meaningful acceleration in our Local volume performance, even as the industry decelerated throughout the quarter. The continued momentum in our performance drove a widening gap of outperformance over the course of the quarter.

Although it remains early in our fiscal third quarter, I am encouraged to share that we are seeing continued year-over-year momentum in volume growth rates during the month of January. As Kevin highlighted, the benefits from our stabilized colleague population are fueling our performance as newer sales professionals continue to work up the productivity curve. This momentum is just getting started and serves to strengthen our confidence in delivering our FY 2026 guidance. Additionally, SYGMA results this quarter were solid, reflecting 0.5% sales growth and 10.5% operating income growth, reflecting increased strength in our supply chain operations. For the remainder of the year, we expect more moderate results, reflecting the follow-through on our efforts to drive continued operating efficiencies. Sysco produced $3.8 billion in gross profit, up 3.9%.

Gross margins expansions of 15 basis points to 18.3%, and improved gross profit per case performance. This notable margin improvement reflects strategic sourcing efforts and effective management of product cost inflation across our baskets, which continue to moderate, including categories that were deflationary in Q2. Inflation rates for the enterprise were approximately 2.9%, and the USBL were approximately 1.4%. This rate moderated slightly on a sequential basis, which we believe will help the affordability across the industry. Importantly, just as we deliver in the first half, we continue to expect our disciplined actions to generate strong gross profit dollars per case and margins in this backdrop.

Overall, Adjusted Operating Expenses were $3 billion for the quarter, or 14.4% of sales, a 15 basis points increase from the prior year, reflecting planned investments in higher growth areas of the business with fleet, building expansion, and sales headcount, along with the lapping of $16 million in incentive compensation from the second quarter of the prior year. The incentive compensation lap negatively impacted Adjusted Operating Expenses by approximately 60 basis points and Adjusted EPS growth by approximately 270 basis points. As I mentioned earlier, our operations expense this quarter included benefits from supply chain productivity enhancements stemming from improved tenure and strengthened operational execution. Corporate adjusted expenses were up 3.8% from the prior year, reflecting continued investments, lapping incentive compensation from last year, and other costs.

Excluding the impact of incentive compensation from the prior year, corporate expenses were approximately flat year-over-year, reflecting cost savings and efficiencies effort over the past few years. Overall, Adjusted Operating Income grew to $807 million for the quarter, reflecting continued improvements in our Local case volumes along with strong growth in our International segment. For the quarter, Adjusted EBITDA of $1 billion was up 3.3% versus the prior year. Let's now turn to our corporate balance sheet and cash flow. Our investment-grade balance sheet remains robust and reflects a healthy financial profile. Our $2.9 billion in total liquidity remains well above our minimum threshold and offers flexibility and optionality. We ended the quarter at a 2.86x net debt leverage ratio.

Turning to our cash flow year to date, our free cash flow was $413 million, up 25%, highlighting strong quality of earnings and reflecting both typical seasonality and timing of CapEx. Now, I would like to share with you our expectations for FY 2026. We are pleased today to announce a raise to our FY 2026 Adjusted EPS guidance. We now expect full year 2026 EPS to be at the high end of our prior range of $4.50-$4.60. Keep in mind that this continues to include an approximate $100 million headwind from lapping lower incentive compensation in fiscal 2025, an impact of roughly -$0.16 per share.

Excluding the negative impact of the incentive compensation on 2026, our outlook for Adjusted EPS growth in FY 2026 will deliver at the high end of approximately 5%-7%, which is in line with our long-term growth algorithm. Now, at the halfway point for the year, we remain confident in our Sysco-specific initiatives, delivering results in the second half of the year. Our teams expect a similar macro and industry traffic backdrop for the remainder of this fiscal year. Guidance also includes continued expectations for net sales growth of approximately 3%-5% to approximately $84 billion-$85 billion, driven by inflation of approximately 2%, volume growth, and contributions from M&A.

Transitioning to our expectations for the second half, we have now fully lapped both the headwind from the intentional FreshPoint business exit in the U.S. and the year-over-year comparability impact related to the exit of our Mexico JV for International. Specific to volumes, we expect to deliver year-over-year Local case growth of at least 2.5% in Q3 and Q4. By segment, we continue to expect positive Adjusted Operating Income growth across USFS, International, and SYGMA segment for the rest of the year. More specifically, we expect USFS profitability to return to growth in Q3 and Q4, driven by volume growth and continued discipline around margin management, coupled with continued focus on ROIC. To help with the phasing for Adjusted EPS, for Q3, we are comfortable with the current consensus estimate of $0.94.

As outlined on Slide 18, this includes the carryover impact from the incentive compensation specific to Q3 is $63 million, and Q4 is $11 million. Excluding the negative impact of the incentive compensation on 2026, our outlook for the second half Adjusted EPS growth is in line with our long-term growth algorithm. We are proud of our strong track record of dividend growth and Dividend Aristocrat status. For FY 2026, we remain on target for shareholder returns through approximately $1 billion in dividends and approximately $1 billion in share repurchase plan for the year. As we've said before, this is all based on our current expectations and economic conditions that could flex based on M&A activity for the year. Specific to our share repurchase, we expect to resume repurchase activity starting in Q3.

Specific to our dividend, our expected payout for FY 2026 equates to 6% year-over-year increase on a per share basis. In terms of leverage, we continue to target a net leverage ratio of 2.5x-2.75x and maintain our investment grade balance sheet. Specific to our Adjusted D&A, we now expect approximately $820 million for the year. This includes approximately $210 million in both Q3 and Q4. This updated outlook reflects the combined benefit from our ongoing efforts on drive returns on invested capital and marginally lower capital expenditures for the year.

All other modeling items previously outlined on our Q1 call, including interest expense, other expense, tax rate, and CapEx remains unchanged. Looking ahead, we are confident in our position and remain focused on leveraging our strength as the industry leader to drive customer growth while continuing to create value for our shareholders. With that, we'll turn the call back to Kevin for closing remarks.

Thank you, Kenny. Q2 was a quarter displaying momentum and progress at Sysco in a macro backdrop with soft traffic to restaurants. We are confident that our internal progress will continue, and we will plan to deliver Local case growth of at least 2.5% in the second half. There is still much progress to be made and work to be done, but we are pleased with the improvement we are delivering and the momentum that is building within the company. Importantly, the improved U.S. Local volume we are delivering will enable the stellar performance in our International division to shine through more clearly. We are excited for the progress that we are making, and we are committed to strong execution in the second half of the year to deliver these outcomes. With that, operator, we now turn it over for questions.

Thank you, Mr. Hourican. Ladies and gentlemen, at this time, if you would like to ask a question, press star one on your telephone. To leave the queue at any time, you can press star two. Once again, that is star one to ask a question. We'll go first today to Mark Carden of UBS. Please go ahead.

Good morning. Thanks so much for taking our question. So you put together the 140 basis points sequential Local case growth improvement against a pretty tough restaurant backdrop, industry wide. Sounds like a lot's coming together. Did you guys see much variation in Local case growth on a monthly basis? And then is it safe to assume that January's accelerated even further, given your momentum comment? And then finally, are you expecting to see much of a headwind related to the recent winter storms? Thanks.

Good morning, Mark. It's Kevin. Thanks for the question. I'll start with the factual component. The performance of Sysco, relative to the industry, strengthened each month of Q2, so it got better relative to the industry for each of the months consecutively. We've seen that strength continue into January. I'll come back to January in just a moment. As we step back and think about, well, why? Why is this performance, you know, happening? What are the drivers? Maybe I'll just, you know, go there for a few minutes. We have three new things, if you will, year-over-year. As I mentioned, the most important by far is SC retention, sales consultant retention, SC productivity, up meaningfully year-over-year, both of those things, retention and productivity. We launched our AI 360 selling tool approximately 90 days ago. We're getting traction from that tool.

We launched Perks 2.0, which is a revamp of our loyalty program. We say internally, "Be the best for our best customers." We're seeing increased customer retention and improved penetration rates with those existing customers. Each of these three things that I just said have nothing to do with foot traffic. They're 100% Sysco specific, and we're making tangible, measurable progress. We can measure it by new rate customer wins versus loss rate of customer departures. The spread between that ratio widened in the quarter. And then penetration, which is an incredibly important topic, which is sales to existing customers, also is improving. And when you put that against a softening macro backdrop, it's clear, solid evidence of the progress that we're making at Sysco. Specific to Q3, the quarter we're now in, we had a strong January.

January is out of the gate strong. To your point on weather, this week, we saw favorability in weather in January versus prior year. We're going to give some of that back this week for obvious reasons, given the huge swath of the U.S. impacted. We don't talk about weather, if you will, on the forward. Now, we'll find out at the end of the quarter if there was a positive or negative contribution from weather, but January is off to a strong start on the controllables that I just mentioned. Kenny, anything you'd like to add?

Yeah. Thanks, Kevin. Hey, Mark, you know, three things for me. Just to double click on the kind of the phasing of the month. So if you look at between October through December, the industry, i.e., foot traffic, softened. So the starting point in October was down 2%, and the ending point from a foot traffic standpoint was down over 3%. The good news is our inflection versus the market strengthened throughout the quarter, as Kevin said, with December being the strongest, so very strong exit rate. That's point number one.

Point number two is from a Sysco standpoint, as relates to Local, as Kevin mentioned, we are encouraged to see that numerous geographies already hitting our growth expectations driven by, as Kevin mentioned, the SC adds, improved retention, and that's carrying over into Q3, which is why we are confident we can deliver at least another 100 basis points organically in Q3, coupled with the M&A, which is roughly 50 basis points. That totals you up to roughly at least 2.5% growth, for the back half of the year, Q3 and Q4.

The last thing I'd say, Mark, is I know there's a lot of eyes on foot traffic, but remember, Sysco has proven we can grow in any environment. If you think about our portfolio, two-thirds of our natural footprint is actually non-restaurants, and we're doing really well there. And then if you think about even the restaurant side, we are very diversified across, you know, QSRs, all the way up to fine dining. And let's not forget, we also have an International segment which serves as a strategic counterbalance, enhancing the resiliency and stability of our overall portfolio.

Thank you. We go next now to Jeffrey Bernstein of Barclays. Please go ahead. Your line is open.

Great. Thank you very much. Just another question on the sales growth, you know, for the second half of fiscal 2026, your U.S. Local guide, you mentioned how you've been strengthening in a softening macro. I know you've repeated at least 2.5% growth in U.S. Local in both the third quarter and the fourth quarter, but just looking back from a comparison standpoint, it does look like the compares are much easier. So is it correct to assume you're really assuming no change in trend from where you were running in the second quarter, but rather stability from current levels? Or perhaps we're underappreciating the quote, unquote, "at least" that you mentioned. And I'm just curious, do you share the broader industry's optimism for coming months?

Seems like there's talk of easing compares for the industry, lower gas prices, increased tax refunds, newfound government stimulus, especially with the benefit from increased value offers, which, Kevin, I know you've often encouraged. So just curious, again, your assumption for the back half of the year when you factor in the year-over-year compares, and then your thoughts on the broader industry optimism that we're hearing a lot about for restaurants. Thank you.

Morning, Jeff. Thank you. A good question. Lot, lot to unpack, you know, in your question. I think my most clear way of answering your question is we anticipate two-year stack improvements in the second half versus the first half. You are right that Q3, in particular, has softer compares for the industry. That's included in what we shared today, which means we're gonna be stepping up throughout the second half, where Q4, we're actually up against, you know, better numbers than Q3, and we're gonna deliver, as Kenny said, at least 2.5% in Q4 as well. So the two-year stack will improve in the second half of the year. Let me jump to the last part of your question, which is, do I share some optimism for the industry? The answer is yes.

I believe that restaurant operators, particularly independent restaurant operators, have leaned into the consumer need for value. They've been more nimble, they've adjusted menu prices, they've looked at things like portion sizes, they've looked at alternative proteins that can save the customer money, and independents in the industry are doing better than National chains. Often it's written the National chains are gonna continue to succeed at a higher rate than independents. This is not the case. Independents are outperforming National chains, and as you well know, that's very good for our business. So, we see National chains leaning now into the value tier themselves. They're the value menu, the protein bowl. There's a host of things that National chains are doing to improve their value perception with end consumers, and I do think it will make a difference, Jeff.

I believe that restaurant operators are leaning into the need to provide value to customers, which should help foot traffic, which helps case volume. I know we talk about Local a lot on these calls. I did say on today's call, we anticipate an improvement in our National business. We were up 0.4 in National. We anticipate our National business in total, which includes non-restaurants, to be 2%+ in the second half of the year, which means our restaurant portion of that business will improve on the year to go. We also have potential for the favorability in, you know, tax refund checks year-over-year. This time last year, consumer confidence was really low, be it because of tariffs, be it because of the stock market, be it because of any number of host of issues.

We believe that the end consumer confidence is higher than a year ago as we look at the second half of this year, which could and should be a tailwind to the overall industry. But the guidance that we've communicated today is about Sysco. It's about the efforts and the initiatives that we put forth. The three things I mentioned in Mark's question, SC retention and productivity, AI 360, Perks 2.0. And on the year to go, we're leaning in hard to Sysco Brand improvement, and we're leaning in hard to merchandising efforts to improve our value proposition to our customers. And it's those five things in aggregate that give us the confidence to accelerate our organic performance by at least 100 basis points additional year to go. Kenny, anything to add?

Yeah. Hey, Jeff, Kenny. So, just to, you know, to your specific question around the 2.5%, so let me give a bit more color, just make sure it's super clear to everybody. So for Q2, Local case growth was up 1.2%. If you bifurcate between organic and Ginsberg's, organic was 1.1%, and Ginsberg's was only 10 bps because of the fact we did it at the tail end of the fiscal quarter. For the go forward in the back half, Q3 and Q4, you are right, Kevin and I said at least 2.5%. So the 1.1% that we saw in Q2 goes to at least 2.1%, and Ginsberg's goes to 50 bps in the back half. That's how you bridge the 1.2% to the at least 2.5% in the back half of the year.

We'll go next now to Lauren Silberman of Deutsche Bank. Please go ahead, your line is open.

Thank you. Nice quarter. I have a follow-up and then a question. A follow-up on the Local case growth side, how much of the growth is coming from new account wins relative to expanding penetration with your existing accounts? And then any additional color you can provide on the spread between new versus loss accounts this quarter? And then I wanted to ask you on the sales force side, how is the growth in the sales force tracking in fiscal 2026? Are you seeing any change in the potential new hires and where you're seeing them come from? Thank you.

Lauren, good morning. It's Kevin. I'll start, and then, you know, Kenny can talk about the sales colleague workforce. You know, we've not unpacked the 140 basis points of improvement on contribution from the elements that you described. The good news is the improvement is coming from all of the elements that you described. So new customer win rates for Sysco in Q2 remains at all-time highs from an onboarding perspective. So we've sustained and maintained the success of onboarding net new customers. What improved nicely in Q2 versus prior year was our customer loss rate, and that can be directly attributed back to our improved colleague retention.

The improved colleague retention is driving improved customer retention, and the most notable thing that occurred in Q2 was the spread between new and lost widened in the quarter versus the prior quarter and also versus the prior year. That's the most notable of our improvements, but we also improved penetration. I'm frankly most proud of the penetration improvement because it's in the backdrop of traffic to restaurants being down.

The fact that our cases per operator is going up quarter-over-quarter in an environment where traffic to restaurants is going down is proof positive on the productivity of our sales force, that we're doing a better job doing what we call selling around the room and getting more cases on the Sysco truck. So I know I didn't break the 140 basis points down into each of the three components, but we saw solid health improvement in all three. I'll toss to Kenny for comments on the sales colleague workforce. Kenny, over to you.

Yeah. Hey, Lauren, just a couple plus ups. So in terms of Kevin's mentioning, the growth came from all three sides, NLNP, new loss and penetration. Super excited about this one. We had the highest growth of new and the lowest level of loss in the past 12 months. So you can tell it's from both sides of the house, and to Kevin's point, penetration also improved as well and went up actually, despite a negative backdrop, because of the fact that on day one, you don't win all the cases on day one, so that's a nice tailwind for us on the forward. In terms of, you know, the Local sales headcount professional, you know, we're committed to growing our headcount in 2026, and we will be disciplined on pacing to volume expectations and market conditions.

Kevin and I, we are deliberate in terms of when and where we add, meaning investing in high growth markets to ensure awesome return on investment. Now, remember, as Kevin mentioned, we now have tools in place, AI 360, and at the same time, improved our training program to be to reduce lead time and optimize with various higher mix in terms of experience, which could lead to more productivity, and this could have an impact on the hiring levels on the forward, without impacting growth rates on the forward as well. So to summarize, we like what we're seeing on the productivity side with the SCs, and there's still more runway to be had. Therefore, you know, we are very, very optimistic with the outlook of our growth in the back half of the year.

We go next now to Jake Bartlett of Truist Securities. Please go ahead. Your line is open.

Great. Thank you so much for taking the question. Mine was on the 2026 guidance and the increased EPS. And I just wanted to make sure I understand what's driving that, whether, you know, you expect to be at the higher end of the range, for instance, for sales. It feels like it may be, you know, simply just the EBITDA, the Adjusted EBITDA being lower, that is driving the increase, but just wanted to make sure I understood that.

And then I had a follow-up, and I know it's been asked in a number of ways. I just want to kind of ask one more way here. In the third quarter for Local case growth, you know, given the easy compares, given some of the near-term drivers, should we not expect the growth to be faster in the third quarter than the fourth? Seems like that'd be the logical conclusion, but I just wanna make sure I understand maybe why not. Thank you.

Hey, Jake, it's Kenny. So I'll start first. So, the improvement, the increase of EPS is actually not driven of D&A. If you think about first quarter, we beat by $0.03. This quarter, we beat by $0.01. So we're having the $0.04 flow through, given the concept that we have in the rest of the fiscal year. As you think about, you know, I think the question behind the question is almost the confidence, if you will, in the back half of the year, as you think about the guide. You know, it's not D&A. Let me talk about some of the levers we have in our P&L that contributes to the high end of the EPS range.

Number one is, from a top-line perspective, we continue to see a lot of momentum in Local case growth, as Kevin mentioned earlier. The SCs, the retention, tools like AI 360, every period, we're widening the new loss spread. That's what contributes to the fact that, you know, it's a lot of things within our controls, right? We are not expecting the macro environment to be any better. If anything, we expect it to be same as today. All of the growth in the back half will come from self-help, things under control. That's the reason why we're confident on that side. On the CMU side, National business side of the house, again, two-thirds of our business is non-restaurants. That's going really well. You know, really inflecting versus the marketplace.

For us, on the restaurant side, you know, Kevin and I and the team are working closely together to ensure the pipeline is robust, and the pipeline is robust. We're seeing nice wins across the board that have start ship dates in the outer periods of this fiscal year. The other benefit that we expect in the back half of the year is gross profit. As you think about gross profit, Jake, there is quite a few levers we have in our bag, right? One is the fact that Local continue to grow faster clip. That's a nice, nice mixed benefit. The second piece is the strategic sourcing efforts we've done in the past period has nice carryover benefit into this period, and the team isn't stopping.

We have a whole list identified and suppliers that we're partnering with to drive further accretion on the GP side. Third is Specialty. Specialty has momentum. As I mentioned on the prepared remarks, we have lapped the intentional FreshPoint exit, and on the back, on the back end of the year, we expect accretion on the Specialty side. And then in terms of our supply chain, all of this volume, momentum, GP momentum, is sitting on top of a healthy supply chain ecosystem as well, and we do expect further volume leverage on that piece. So that's the reason why across those three buckets, we're seeing nice progress and momentum, which contributes to the high end of the raise to the, to the EPS range.

Okay, Kenny, very clear. Thank you, Jake. The second part of your question was Q3 versus Q4. The best way for us to answer this is the Q4 two-year stack will be stronger than the Q3 stack, Q3 two-year stack because of the easier compares in Q3. That's the answer to your question. Is there upside in Q3, I believe, is what you're really asking relative to the 2.5+. So let's just unpack what happened in Q3 last year, and I'll be honest that we can't predict the future from a weather perspective, so let's lean in. In January last year, we had the wildfires in California. In January last year, we had significantly abnormal behavior, and in the late February, March timeframe, we had the tariff disruptions and the impact on consumer confidence in the stock market.

Will these three things repeat themselves in Q3 of this year? It's not possible for me to predict. What we can say is January is off to a very strong start, you know, at Sysco and in the industry. Foot traffic to restaurants improved in January versus Q2, quite notably. Given this week's weather, some of that favorability will be given back, and who the heck knows what weather is gonna be over the next, you know, two-plus months? I can't predict that. If there is year-over-year favorability from weather in Q3, I said if... We'll be able to talk about that on the Q3 call. We'll be transparent about that. We'll unpack it, and we'll be able to represent the contribution from that.

Will we or will we not see, back to Jeff, you know, at Barclays question, favorability from a consumer confidence perspective and higher tax refund checks and restaurants leaning into lower menu prices through value meal deals? We'll see, if those things occur, that's why we said 2.5%+. We're confident in our ability to deliver 100 basis points of organic improvement in Local through activities that are inherent within Sysco, and the macro will determine what the macro will be, and we'll be able to talk about that on our Q3 call.

We'll go next now to John Heinbockel of Guggenheim. Please go ahead. Your line is open.

Hey, Kevin. A couple of things. Local drop size, is that still? It improved, I know, but is that still modestly in negative territory? One. Two, you know, when I think about the loss ratio, I think you're still a couple of hundred basis points above the best performance you've had in the last several years. Is that fair? And then can you touch on SC capacity? And I'm not talking about the new SCs, I'm talking about, you know, guys that are more seasoned. How much capacity is there from where they are today? And I guess AI, you know, helps that to some degree.

John, good questions. All three, I'll be concise in my response. Yes, penetration with existing customers is modestly down year-over-year, but improved versus Q2. We are making solid progress and more progress to be made year to go, and that's mostly driven through foot traffic, is what's causing the cases per operator customer slightly down. Our loss ratio, yes, is still up versus, I'll call it our, you know, historical best level, and we are tremendously focused on that topic. Our supply chain is focused on improving on-time deliveries, improving fill rates. You know, customers don't like substitutions, and when you have to do a substitution, they get irritated by that, and they seek a backup supplier. So massive focus on supply chain and merchandising excellence and execution to improve on-time rates, to improve fill rates, to drive reduction in customer loss.

We're really pleased with the progress that we're making. Kenny highlighted that. Significant progress in Q2 on loss, with more work still to be done, which is why we're saying we're going to improve by another 100 basis points in the second half. The momentum that's coming from those good efforts, coupled with improved sales consultant retention, will result in an improvement in our loss rate in the going forward. The last question of your three, which is SC capacity. All of our SCs, from most tenured to brand new, have capacity, because of the primary reason that you just described.

A lot of planning and preparation work used to have to be done analog, you know, at a laptop. You know, they visit a large number of customers every week. The amount of planning that has to go into visits is greatly reduced, which increases their ability to spend more time out on the street in front of customers, which de facto therefore increases capacity. We're not going to use that to, quote, "reduce headcount." We're going to use that to drive increased sales consultant productivity, and it's something that we're bullish about, for the going forward.

Hey, John, just one thing to add. You know, we bucketize our SCs by tenure, and we're seeing retention improvement in every sales bucket, right? So this speaks to the stabilization of the broader sales team, not just our new hires. I think that's a really important point. You know, as you know, more tenured SCs across all levels leads to higher productivity, and that includes the SCs who've been at Sysco for decades, right? So as Kevin said, they use AI 360 as an example, they get more productive as well. So again, the new account that we saw in Q2 wasn't growth, that wasn't just in U.S. It was across the board, across our sales base.

Go next now to Alex Slagle of Jefferies. Please go ahead. Your line is open.

Hey, thanks. Good morning. Question on the Sysco Brand mix. I know that's still trending down year-over-year, and you talked about some of the work on expanding the value tier. If you could kind of dig into that a little and what the path looks like to see that slip more positively and just how important that is to driving the tailwinds towards your earnings down the line in the future.

Yeah. Good morning, Alex. Good question. We saw a nominal improvement in Sysco Brand Q1 versus Q2, still down to prior year, but we're beginning to make progress on Sysco Brand. We'll make meaningfully more progress in the second half of fiscal 2026 on Sysco Brand penetration. It comes from three things: merchandising, having the right items, pricing architecture, having the right price, and from sales force focus. Of the three, one of them takes longer than the other two, so let me just unpack each of these three things. So merchandising, having the right items, is what you were just alluding to, which is the value tier. In my prepared remarks, I talked about Sysco historically has focused on the Better, Best portion of, the consumer, you know, product, purchases. Sysco product is a premium product.

You know, the specs of our product, the quality of our suppliers, the integrity behind what's in the box. We can stand behind those items. They are as good, if not oftentimes better than National brand equivalents. So we've built this company off of that, selling Better, Best products, and we will continue to be great in those products. And given food cost inflation over the past three years, end consumers are looking for lower menu prices, and therefore, restaurants are looking to lower their food costs. And we have some voids in our value tier. We call it Sysco Reliance. That's the segment that is our value tier. We under indexed in Sysco Reliance, and we actually have some gaps, some voids in our assortment. As you know, that work takes time. We have to find suppliers who meet our needs. We have to audit their facilities.

We have to get the items cut into our facilities. That's why in my prepared remarks, I said that work will happen constructively over this calendar year of 2026. With kind of incremental progress being made over time. Merchandising is important to driving Sysco Brand, and we are deeply focused on excellence in that space. Topic two, though, can happen quicker, which is price architecture, leveraging our technology to ensure that Sysco Brand always is a value for the end customer. Sounds easy, does hard. The National brand suppliers are changing their prices on the regular. We need to make sure that Sysco Brand prices are moving in harmony with National brand, so that all times, 24/7, especially in a digital environment, customers see value in Sysco Brand. That's pick and shovel work. That's devils in the details work.

We're using AI tools to get better at the item matching process to ensure that Sysco Brand has inherent value to the customer. The team's doing great work in that regard. Last but not least, and this one can happen quicker, is sales force focus. Forever and a day, Sysco sales reps have been great at putting key items in front of customers. We say why we love this item. You know, we train them at a monthly meeting. They taste the product, they go out and introduce that product to all of their customers, again, through the spirit of why we love this item. Getting back to excellence and execution within our sales team, with meaningful focus on presenting on every customer visit, at least one Sysco Brand product that we want them to consider. Historically, they were called conversions.

We're now calling them Swap and Saves, 'cause we're putting the WIIFM in for the customer. What's in it for them? We're providing the customer value. We're showing them how much money we can save them. We're doing a tasting with the customer to show them that the product quality is equal to or better than what they're buying today. Getting more intentional in our time allocation on that work is something we're deeply committed to. In fact, we had all of our sales reps, leadership in the company, last week at a sales meeting where we were skilling them up on this work focus.

And Alex, that's what gives me the confidence that we will be in the second half, positive year-over-year in Sysco Brand, in the second half, as we think about that from an exit velocity. So we're minus what we are today. By the time we get through the end of this second half, we'll be in positive penetration year-over-year. Kenny, anything you want to add?

Yeah, just hey, Alex. Just one thing to add is, keep in mind, the Sysco Brand is over $20 billion the top line, and we—as Kevin says, we do expect penetration rates to continue to stabilize and improve, towards the back half of the fiscal year, especially as we grow our Local business, right? As you know, Alex, Local business has roughly a 50% penetration with Sysco Brand. I think the last point I would say is that I think it's important to call out that as you think about profitability and GP, gross profit, we leverage our sourcing, not just for Sysco Brand, but also non-Sysco Brand. That is a reason why this quarter and going forward, we do expect GP margin expansion from a rate and dollar standpoint.

We'll go next now to John Ivankoe of JPMorgan. Please go ahead. Your line is open.

Hi, thank you very much. This is a related two-parter, and, you know, if I'm assuming this correctly, Sysco would be a very big prize for, you know, various AI, you know, service technology providers and also those involved in the automation business. Certainly, I understand AI 360, but that's just one part of a broader business. So I wanted to see, you know, what kind of conversations and opportunities might be arising in your conversation with various providers, specifically around warehouse distribution, maybe further optimization on the SKU perspective is kind of the first part. And then secondly, you know, as you kind of think about the Sysco of the future from an automation perspective, if we're any closer to, you know, perhaps piloting or even implementing, various solutions that might be Sysco specific at scale. Thank you so much.

John, thank you. Good morning. Appreciate the question. Let me do automation first. I'll do AI second, toss to Kenny for any forward-facing comments that he'd like to make about, you know, our future relative to these two things. Material handling automation is what John's asking about in our warehouses. As he knows, and many of you know, our facilities there are mostly analog, mostly manual. You know, whereas an Amazon pick, pack and ship facility is highly automated with tilt-tray sorters and shoe diverters and the like. Our products are big, bulky, heavy, and we don't have a ton of people working in our warehouses, which has limited ROI on large engineering projects in our warehouses. With that said, with labor costs rising over time, with labor availability becoming more challenged over time, think about 10 years from now.

Think about our workers down in the evening hours, in very cold temperatures in our buildings. We know that physical automation is something that we need to be investing in, and we are. In fact, John, just yesterday, we had a presentation from top engineering firms from around the world on engineering solutions that can help Sysco be more efficient within our supply chain. Most likely, John, where that will show up is in our next net new facility and/or next building expansion. And given our strong balance sheet and the growth of our business, we have those opportunities on a regular basis. So we're meaningfully invested in that space from a time allocation, intellectual curiosity, and Kenny will always help us bring a strong ROI behind the decisions that we make in that space from a material handling.

To AI, how we're using agentic tools to be more efficient, we call it, better, faster, cheaper. How do we leverage these tools? And to your point, we've met with everybody. We've met with all the service providers, we've met with the tech companies, we've met with the consulting firms. You know, how can we leverage these types of capabilities, agentic tools, to reduce the administrative burden on work we do, to reduce costs, get the work done faster and frankly, do it better. We are meaningfully focused. AI 360 is just an example, the tip of the spear, if you will, on the sales side of increasing productivity. But we're looking at this in every single function. HR, within merchandising, within Kenny's back office finance. It impacts every part of our company. I'll toss to Kenny for anything he'd like to say about that. Kenny, over to you.

Sysco (SYY) Q2 2026 Earnings Call Transcript

Company Participants