Sysco Q1 Sales Rise 2.8% as Lower Inflation Weighs on FY2027 Outlook

Sysco Corporation (NYSE: SYY) reported higher fiscal first-quarter sales and adjusted earnings as local customer volumes strengthened, but lower-than-expected food-cost inflation limited revenue growth. The foodservice distributor now expects fiscal 2027 sales growth to be at the lower end of its 6% to 7% guidance range while maintaining its forecast for adjusted earnings-per-share growth of 9% to 11%.

For the 13 weeks ended Sept. 26, 2026, net sales increased 2.8% year over year to $21.74 billion. Gross profit rose 3.8% to $4.05 billion, and gross margin expanded 18 basis points to 18.63%. Sysco attributed the gross-profit increase to local-volume growth, greater penetration of Sysco-branded products, strategic sourcing efficiencies and tariff-related benefits.

Adjusted operating income increased 3.2% to $927 million, while adjusted EBITDA rose 5.4% to $1.13 billion. Adjusted diluted earnings per share advanced 3.5% to $1.19.

Results differed on a GAAP basis because of restructuring and transformation expenses, acquisition-related costs and items connected with the planned acquisition of Jetro Restaurant Depot. GAAP operating income fell 10.4% to $717 million, while GAAP net earnings increased 10.5% to $526 million. GAAP diluted EPS rose 10.1% to $1.09.

Local volumes support U.S. business

U.S. Foodservice Operations sales increased 2.4% to $15.14 billion. Total case volume grew 2.6%, while local case volume rose 2.7%, representing a 130-basis-point sequential improvement on a two-year stacked basis.

The segment’s gross profit increased 3.2% to $2.91 billion, supported by volume growth, brand penetration and margin management. Adjusted operating income rose 2.7% to $941 million, while GAAP operating income increased 1.6% to $894 million.

Sysco expects local case growth of about 2.5% for fiscal 2027 on a comparable 52-week basis. The company said food-away-from-home spending continues to benefit from demand for convenience and experiences, though higher menu inflation relative to grocery prices and improved prepared-meal offerings at grocery stores remain counterweights.

International Foodservice Operations delivered stronger profit growth. Revenue increased 5.1% to $4.17 billion, or 6.0% in constant currency. Gross profit rose 7.4% to $887 million and increased 8.1% in constant currency. Adjusted operating income advanced 12.2% to $165 million, or 12.9% in constant currency, although GAAP operating income declined 28.1% to $82 million amid higher restructuring, transformation and acquisition-related expenses.

SYGMA sales increased 1.1% to $2.15 billion despite what Sysco described as continued challenged foot traffic for chain customers. The segment’s gross profit declined 1.8%, and operating income fell 16% to $21 million.

Lower inflation shapes fiscal 2027 outlook

Enterprise inflation was 0.3% in the first quarter, below Sysco’s 1.4% expectation. The company recorded 0.3% deflation in its U.S. Broadline business and low-single-digit inflation in Europe. Sysco said higher poultry and dairy supply, along with comparison against prior-year avian-flu effects, contributed to the lower inflation rate.

Management now expects fiscal 2027 inflation of approximately 1.0% to 1.5%, compared with its previous expectation of 1.5% to 2.0%. The reduced inflation assumption led the company to place expected sales growth at the lower end of its existing 6% to 7% range. That forecast includes volume growth and an approximately two-percentage-point contribution from a 53rd week.

Sysco retained its target of 9% to 11% adjusted EPS growth for the year. The outlook incorporates approximately $100 million of cost reductions, U.S. Foodservice segment profit growth and double-digit profit growth from the international segment.

The company is pursuing a $500 million annualized efficiency program supported by artificial intelligence, covering supply-chain productivity, indirect spending, customer experience and back-office simplification, and merchandising and procurement automation. Sysco expects $100 million of savings from the program in fiscal 2027, an amount already included in its guidance.

Restaurant Depot transaction and capital priorities

Sysco continues to plan for its proposed acquisition of Jetro Restaurant Depot, a U.S. cash-and-carry wholesaler with about $16 billion in revenue and 170 locations. Based on trailing results through June 2026 and including $250 million of annualized net cost synergies, the presentation showed a pro forma combined adjusted EBITDA margin of 6.8% and free-cash-flow conversion of about 90%.

Management projects mid- to high-single-digit adjusted EPS accretion in the first year and low- to mid-teens accretion in the second year. It expects the $250 million of net cost synergies to be fully realized in year three. These estimates remain dependent on completion and successful integration of the transaction.

Sysco ended the quarter with a net debt-to-adjusted EBITDA ratio of 2.4. The company expects leverage to rise to an estimated 4.5 times at the transaction’s close and has committed to reducing net leverage by about one turn within 24 months afterward. Its long-term target remains 2.75 times, and management said it does not plan additional large-scale acquisitions until that target is reached.

The company returned $264 million to shareholders through dividends during the quarter and expects to distribute $1 billion in dividends during fiscal 2027.

Sysco identified several uncertainties that could affect its results, including inflation or deflation, changes in customer traffic and eating habits, tariffs and global trade policies, supply disruptions, geopolitical developments, adverse weather and execution of its transformation initiatives. The Restaurant Depot transaction also remains subject to regulatory approvals and other closing conditions, and its projected benefits and synergies may not be realized within the expected period or at all.