Sysco Corporation (SYY) Earnings Call Transcript & Summary

Great. Good afternoon, everyone. Thank you for joining us. My name is Jeff Bernstein, and I'm the Restaurant and Foodservice Distribution Analyst here at Barclays. I'm pleased to introduce our next presenting company, Sysco Corporation. With us this afternoon from what appears to be sunny Houston, Texas, we have Kevin Hourican, President and CEO; Joel Grade, currently EVP and CFO; and Neil Russell, VP of Corporate Affairs. By way of background, for those not familiar, Sysco is a global leader in selling, marketing and distributing food products to restaurants and others. Sysco serves 650,000-plus customer locations from 320 distribution facilities generating north of $50 billion in annual sales. With that said, under their new CEO, there is lots of excitement. And to share more detail before we go into the fireside chat, I'm going to turn it over to Kevin to walk through several big picture slides, and then we will continue with the fireside afterwards. So with that, I'll turn it over to Kevin.

Okay. Great. Jeff, I just want to do a quick sound check. Am I coming through okay from a sound perspective?

Loud and clear.

All right. Great. Okay. Excellent. As Jeff said, I just have a few slides that we'll walk through. And those that have been following us at earnings calls, will see some similar content in the information that we'll cover, but we also have some new things that we want to talk about today, and we want to be able to get to questions in the same way that you do. So Neil, if you could advance to the next slide, please. So this first slide just talks about why Sysco from an investment community perspective. And what I would want you to know is that we're not just managing a crisis and managing our P&L, we are managing for the long-term while also managing successfully in this short term. So we're not just managing a COVID crisis. We are substantially transforming our company for the better. And that's what Jeff was referring to a moment ago on our goals to improve how we serve our customers, which will also simultaneously differentiate Sysco from those that we compete with. We also delivered profitable adjusted operating income in our Q1 and substantial free cash flow despite a 23% drop in sales. So while none of us like that sales decline, we are pleased with the profit performance in Q1. We'll talk more about that in a little bit. We do have a pretty substantial amount of liquidity on our balance sheet. We have over $8 billion of cash and available liquidity to ensure that we are in the driver seat and that we have financial flexibility for the duration of this crisis no matter how long that it takes. We have options available to us, and we will be in the driver seat to be able to decide what to do with that liquidity. Neil, if you could please go to the next slide. So I would like to bring the group up to speed on where we are with our business transformation from back in February when I joined the company. And then as COVID crisis hit, we talked about these things pretty consistently from the beginning of this year and the beginning of the crisis. These 4 transformation items are the 4 things that we are leaning into to improve how we serve our customers and to drive future business outcomes. Today, instead of explaining what they are, I thought I would more importantly update the group on where we are because we're making a ton of progress year-to-date. First and foremost is the advancing our customer-facing digital tools, and there are 3 of them. First is our website that we use with our customers called Sysco Shop. The second is our sales force tool called Sysco 360. And the third is a pricing software that we have purchased that we are in the process of deploying. So if I could just provide the group a quick update on each of those things. Sysco Shop, we've fully converted to what we -- the agile development methodology that is the buzzword in the industry, but we are literally live with agile-in-shop development. Why that matters is that we are bringing new code and new functionality to our customers every 2 weeks in this space, things like accepting credit cards, things like we are now onboarding a new customer in less than 24 hours, things like we've improved the navigation and shopability within the site itself. Things like improved suggested orders. Kind of every 2 weeks kind of in rhythm, we are bringing forward new functionality. And that will be a continuous development pipeline. 10 years from now, you'll hear us talking about the latest capabilities and features that are being brought forward to that customer-facing tool. Empirically, however, we've also significantly increased the percentage of our customer orders that are flowing through Sysco Shop. It's now north of 60% of our customer orders are flowing through Sysco Shop and the customer satisfaction levels tied to those customers is meeting or exceeding our expectations. I'll save our sales force tool development for another day for time's sake, and I will talk about our pricing tool today. We are now live with our first region on our new pricing software, which is a sophisticated best-in-breed tool to optimize price so that we can simultaneously drive improved sales growth and optimize margin management. It's a complicated formula of understanding inflation, deflation, competitive dynamics, customer cuisine types and the like to give our sales force a recommended price from which they will sell. They still have the ability to negotiate locally, but it's a recommended guided price. We're live with our new suite, first region, our pilot's going well and we intend to bring that software nationwide in calendar 2021. So we're definitely on track with our customer-facing tools. Topic 2 is our sales transformation. You've heard us talk about several things in this portfolio of work. First and foremost is we've revised our sales consultant compensation to a more dynamic model that drives customer acquisition and profit growth for our company. We're on track that work is mostly done. The changes are implemented, and we're now just optimizing our communication programs, the reporting and communication with our sales associates. So they're driving the right business outcomes. Topic 2, we previously called the team-based selling, which is to bring together our sales force, which is: a, the largest in the industry; and b, the largest portion of differentiation between us and our competitors per our Net Promoter Score surveys. We're bringing our specialists, our new business developers and our local sales consultant relationships together as a team to be able to increase penetration of existing customers. We also spoke at our last earnings call about something brand new in that effort, which is developing a customer-centric pod, focused on a specific cuisine type to improve even further how we can penetrate within that cuisine. We haven't yet publicly communicated which cuisine type for competitive reasons but we're on track with our sales transformation. Regionalization is actually complete. It is in the done column. It might not sound like a big deal from outside the company, but from with inside the company, it is a big deal. We converted from over 76 previous operating companies that were each mostly managed independently to a central-led company strategy that's executed on locally in 31 regions. We placed our top talent from the 76 into the 31 and we changed the focus of their job. Their job in the future is about strategic execution of a centrally led business plan versus the somewhat autonomous and independent method by which we've run in the past. Why that matters is we will be a more agile company. We will be a leaner company and we'll be more strategically aligned on what matters most, and it was a meaningful cost savings, which is complete and in the done column. And it's going well. And we actually are experiencing wins, quick wins early in the gate tied to our top talent into these larger roles. Structural cost takeout, I'm sure we'll get questions about this during fireside chat. But we've communicated publicly that we're on track to meet or need the $350 million worth of structural permanent cost being taken out of our business, which has allowed us to actually lower our breakeven rate to roughly 30% to 2019 levels. And as we return back to pre-COVID volumes, that $350 million of cost does not come back into the business. That cost is permanently gone from the business, which means when we get back to pre-COVID sales, we will be that much more profitable as a company. Neil, if you wouldn't mind going to the next page, please? How we will win as a company is winning more new customers and increasing share of wallet with the customers we serve. The 2 pieces of data that we use most prevalently to make this point is we serve roughly half of the independent street customers that are available in the marketplace. There is still meaningful growth available to Sysco as we increase our penetration of the actual environment of the business by winning more customers. We also have a meaningful growth opportunity with the existing customers we serve. We've said before, we have roughly 30% share of wallet at that local independent street level. The biggest financial lever we have is to increase, and we desire to increase meaningfully, that local share of wallet. How we will do it is on the bottom of this slide, by being thoroughly transparent with our price and our product offering with the broadest and widest available inventory in the industry, from basic products, frozen products, fresh products, fresh produce, the finest proteins, European imports and the like. No one can match the breadth of our assortment and we will deliver that product in an agile supply chain that meets or exceeds the customer's expectations. So we will be right on price. We will have the broadest inventory in the industry, delivered in an agile and transparent way from an agile supply chain, coupled and supported and driven by the industry's largest and highest trained and, therefore, say, best sales force in the industry that are foodie experts. So if I can go to the next slide, I can talk about it for a while, but we've just said this several times. We at Sysco are doing more than anyone in this industry to help our restaurant customers be successful during this crisis, and I'd like to run a short video that explains one of our latest arrows in the quiver on how we're doing that. So Neil, if you could run the video, please. [Presentation]

Great. Thank you, Neil, if you could bounce to the next slide, please. So we've said this a few times, and I just want to bring it to life with this slide that our success at Sysco is driven by the success that our customers have. And we can, with confidence say that we are doing more than anyone in this industry to help ensure the success of our customers. Facts matter. So let's put a couple of key facts on the table, and then let's talk about how. Our restaurant closure rate is less than 10% at the current time, and I believe that is much better than most had predicted. Those customers that engage with Sysco on the activities that I'm about to describe are performing 20% better to prior year than those that are not. 0.3, the Net Promoter Score of Sysco to the customers that we serve has increased substantially during this difficult restaurant crisis that we are all experiencing. These 3 things together give me confidence that: a, we're working on the right things; and b, as we help our customers succeed through this crisis, they will reward us with their business for the long term. We can't overprice. We need to be right on price, but we will differentiate from the others in this business through the capabilities that we're bringing to these customers because their success is ours. So why the little clip that we just showed you? One of the points of friction that we know we have heard from our customers during this time of volatility is the choppiness of their restaurant demand. They've got a good week happening in sales. Great. No problem. We can handle it. We can ship anything they need. A lower volume week, the industry standard has been, we have order volume minimums. And the truth is why this is good for Sysco is that they could not meet those minimums, they didn't round up. They just didn't order from us. They would leak out of the network and go to other channels and go to other places. So by our making an investment in our customers by eliminating order minimums, we've completely removed that challenge from the table, and it has been remarkably, remarkably well received from our customers. But to be clear and to be frank, that no order minimum is simply an entry way into what we call Restaurants Rising, which is an overall toolkit for how our sales consultants can help those customers be successful. As I mentioned earlier, our upgraded and new Sysco Shop tool can onboard a net new customer in under 24 hours, and we can accept credit cards, which for many smaller customers is a big deal. Our consultative sales force leans forward to help those restaurants optimize their menu, reduce the number of SKUs, focus on best sellers. We can convert their paper-based menu to a digital version of the menu that works on a mobile phone with navigation. To think about customer a that just takes their menu and does it as a PDF upload to the web, and it's 18 pages of a customer scrolling to a mobile phone on what that experience looks like versus customer B where Sysco has actually converted their menu to an actual website that's usable on a mobile phone with navigation, breakfast, lunch, dinner, apps, drinks, top sellers sorted in top to bottom. We do that for our customers. Most people don't know that's what Sysco does. They think of us as a trucking company and a food company. We are those things in stage, but much, much more. We are experts in running restaurants, and our sales force, the largest in the industry. What's different, you might be asking me? We're going literally customer-by-customer by customer, one by one, converting them to these programs, including extending the outdoor patio season, which many of you have asked me about, impact of cold weather. That's just one of the many items that we sell. That's a little dome that can go on an outdoor patio to allow colder weather climate restaurants to keep running, and we've got all kinds of versions of those outdoor dining capabilities. When you put all of that together with the last piece, we can also help that customer with their own marketing plan, how do they advertise their takeout capabilities? How do they advertise their delivery capabilities and the fact that they're open for business, even in a place like Chicago, which is currently banning on-prem dining. That's our goal, to take a place like Chicago and have those restaurants succeed during a time of very difficult operating conditions. If we could go to the next page, and it's my last slide, Jeff, I'll repeat the key points that I however, just covered. Those customers that activate with us on the topics that I just covered, 20% better to 2019 volume than those that do not. Our mission is to get many, many more of our customers engaged in those services because we know they matter, and we know they make a difference. And we've rolled that out to our entire sales force 2 weeks ago through Restaurants Rising, through the no order minimums and we're making meaningful progress in short order, again, helping those customers succeed. So last but not least, let's just wrap up with the following. Why is Sysco prepared to be successful during a winter of increasing customer restrictions or COVID wave 2, as we all call it in our daily lives? The first point is that we're more prepared than we were back in the spring. The second point is our customers and the industry is more prepared. It does not mean it will be easy. It does not mean it's going to be fun but we are definitely more prepared. So the points on the Sysco side are the following: inventory management, specifically perishable inventory. If a worst-case scenario were to occur, where global lockdown were to happen, we are much more prepared than we were back in the spring to manage inventory shrink, to manage our perishable inventory; point two, the great work Joel has done on our liquidity and cash flow. We have the strength to weather the storm; point three, we've delivered strong expense management, exceeding both internal and external expectations on expense control from the beginning of this crisis, and we're doing a better-than-modeled expected job on collecting from our customers by managing our accounts receivable line through predictive analytics and partnership programs with those customers to help keep them paying their bills. Last but not least, as I said earlier, due to structural costs we've taken out, we've lowered our breakeven point to roughly 30%, and there's more opportunities for us to take out costs even beyond that. On the right-hand side, I'll just keep it simple so I can wrap up. Our customers are prepared to succeed in a takeout and delivery model in a way that they were not prepared to do so back in the spring. Many restaurants, when we all got that text that said, "go home, don't leave your house," restaurants did the same thing. They went home. They didn't leave their house. And that's just different now. Many of them are proving to be quite successful in takeout and delivery. And our job, as I said earlier, is to help even more of them be prepared to succeed in that environment. It does not mean it will be easy, but it is going to be very different than what we experienced back in the spring. So with that, Jeff, I'm going to toss it over to you. And hopefully, there are ample -- is ample time for substantial questions. So over to you, Jeff.

Great. Thank you very much, and thank you for the thorough walk through. For the 20 minutes we have remaining, I definitely have a handful of questions for you. As we think about the industry, I think investors look at the Foodservice Distribution segment as kind of an ongoing roll-up type, market share type story with the big 3 players still having relatively small market share when you think about it. As you think about your new role and obviously going through a difficult pandemic, but what do you expect the market share trend over the next number of years, and whether or not you incorporate acquisitions into that, maybe what inhibitors there might be to grow in that market share more significantly than you have today?

Yes, Jeff. I mean, definitively, we -- Sysco will accelerate our market share capture over the future quarters into years, definitively. It's why I was hired as our CEO. It's why I have asked Joel to go into his new job. And that's why we have Aaron joining us on Monday as our new CFO. And Joel can talk in a minute on ideas we have on growth that I'll toss to him in just a moment. So he'll back clean up with comments about growth. As it relates to the core of our business, it's those 2 data points that I shared earlier. We serve less than half of the independent customers in the United States, and we have roughly 30% share of wallet for the customers that we do serve. We know we can do a better job of prospecting new customers. We could scale up our sales force to do a better job of doing it. We can financially incent them to do so. And you've heard me talking about us making progress there. Jeff, we're making meaningful progress at winning new customers, actually winning more net new local customers than at any other time in this company's history. The reason it's not visible on our top line sales yet, is because the overall volume per restaurant is down because of the restrictions that are being placed upon them. But as we remove restrictions from the restaurant operators and their volume recovers, the fact that we're serving thousands of additional, independent local customers than we were pre-COVID is going to be a tailwind for this company. That helps us accelerate share. That's point one. Point two is this customer-focused pod selling strategy that I referenced earlier. There are cuisine types that I prefer not to mention the specific customer type, where we underindex at Sysco versus the average customer type we serve. And there's no reason for that to be true because we have the ability to optimize the assortment, the pricing, the marketing and the bundle of products and services for that cuisine type to make meaningful progress. And it's not a small customer type, it is a very large customer type. So even if we were just to get that cuisine type to our company average, its meaningful market share growth for our company. And as we take cost out of our company, which we're doing and we will continue to do, we can invest those savings back into growth-driving enablers. And we look forward to telling you more about that at our Investor Day next spring, including some supply chain enablers that we've not yet spoken to you all about. Last thing before I toss to Joel, that's all at the local level. But we're also winning meaningfully at the national level. So we posted some substantial wins since the beginning of COVID, as I've mentioned on our public earnings calls. And even in the quarter that we're currently in, and we'll talk about it in February, we continue to post incremental wins at the national level, and we don't see that slowing down. And those wins are not coming at margin rates that are below historical averages. So we're accelerating growth at the national level, and we are absolutely accelerating growth at the local level. How that's going to shake out over time with the capabilities that we're building is increased market share. And then as you said at the beginning of the call, Jeff, Joel's just moved into or will be soon moving into a brand-new job. And Joel, maybe you can tell the group about your new role, please. Hey Joel, I think you're on mute on your phone, maybe?

I apologize, is the sound coming through better at this point? Great. Thank you. Sorry about that. As Kevin has said and as you heard just now, I'll now be taking a new role with the company moving forward. And so just as one quick comment, it will be my last investor conference with all of you as CFO. And so I want to, first of all, thank you for the wonderful interactions we've had over the past several years and really look forward to continuing our relationship with all of you in my new role. The role itself, I think, is really an exciting one. And I think Kevin has talked about this idea of growth. Jeff, your question of is the growth be including the work that we'll be doing in the M&A space? The answer is yes. We'll certainly be focusing on both organic and inorganic growth. From the inorganic growth perspective on the M&A side, we certainly see plenty of opportunities to move forward in this way. And some of them -- I group it into a couple of different categories. First of all, I would start with things that you've seen us do in the past. Things that are more, what I'll call, our core space, folded tuck-in deals or bringing in specialty businesses and making investments in capabilities, product selection, expertise that we do not, again, have as much of today, that is certainly something we'll continue to enhance. As we also think about entrants into new markets, we've done this in the past as well. We've taken companies and then our recent ones, we were in places like Hawaii. And we actually added capabilities in a place that was completely open space for us. And certainly, obviously, over the years, we have done so in other markets, in other countries. This is something certainly over time and strategically and thoughtfully, we'll also look to continue to do. The third area is what I would call adjacencies or are areas that are complementary to our business that ultimately enhance how we go-to-market as an organization. And so we certainly see opportunities in all those areas, again, over time. And frankly, this is an incredibly exciting time to be a part of this. I'm incredibly excited to go into this role. To help that this organization continue to accelerate our growth and our transformation during this time. And so I'll toss it back to you for any further questions, or Kevin, anything else you'd like to add to that?

Yes. I'll just put one more just bow around it. Joel being able to focus full-time on those efforts, whereas in the past, I likened this when Joel and I first started talking about this as CFO, he's spinning 14 plates, and this was one of them. So now we have someone with Joel's capability, his operations experience, his finance experience who can dedicate at full-time on new vectors of growth for this company. I wouldn't have asked Joel to do this if I didn't have high confidence in him as a leader. And in the fact that the big sites are meaningful. Think about an oil exploration, there are meaningful big sites available for this company to grow in, let's call it, new areas. And Joel is the right person for the job, and we're excited about that. Jeff, back over to you.

Well, when I think about the -- whether it be the independent restaurants or the smaller distributors, it would seem like both are more challenged today than the larger chain restaurants or the larger distributors like yourself. So I'm just wondering, are you seeing more significant closures? I know you mentioned maybe closures that you're seeing of your restaurant customers. But seeing more significant closures with the restaurant customers or maybe of the smaller, maybe independently operated foodservice distributors thus far? Or is that something you would anticipate more so of in coming quarters?

I'll do restaurants first, and then I'll do distributors second, if I could. I think on the restaurant side, Jeff, I probably, too, would have speculated 9, 10 months ago that the independent customer population would have been more at risk. The facts are, we're not seeing that. The facts are that we're actually seeing that the independent restaurant customer type is performing well to prior year. And they're staying in business at a rate that is exceeding our expectations and certainly exceeding what's been publicly speculated. And we've gone public, and I know some of our competitors have as well, saying that our closure rate is less than 10% for that customer type. It is true though that QSR is doing incredibly well. We all know that. Anything with a drive-through on it is doing incredibly well. But there are a lot of restaurants between QSR and local independent restaurants. And what we see in our data is that in-between zone is the restaurant type, and I prefer not to name names of companies, we understand that, is who's getting hurt the most. And then the other sector that's getting here pretty hard is fine dining and [ herbing ] centers. I think that business comes back eventually when business travel begins to return, and people start going back into places like Manhattan, but that's going to be a slower recovery. So what we're really focused right now is kind of on the 2 ends of the spectrum. We're winning meaningfully more business in QSR. We know we're winning meaningfully more business at that local independent restaurant, which is proving to be pretty resilient. In that group in the middle, we're modeling a longer recovery curve for them. We're prepared to help them be successful just like everyone else but we're expecting a slower recovery rate. But in aggregate, I think the predictions of doomsday for the local independent operator were slightly exaggerated. On the distributor side, and again I say this all the time, we don't wish ill upon anyone. We don't desire for anyone to have adversity. But I do think you're seeing something different in the distributor space. I do think it is fair to say and it is accurate to say that market share is being donated by the smaller distributors, probably because they have different financial pressures than a local independent restaurant. They have capital. They have high fixed costs. Their volume has come down significantly, and now they're struggling with managing cash flow, whereas Joel has done great work as the CFO of this company to ensure we have the liquidity, to ensure we can invest to grow. So Jeff, I would expect the stronger are going to get stronger in the distributor space, and that will accelerate in these coming quarters in 2 years. As you said...

Hey, Jeff.

That the big 3 combined are a reasonably small percentage of the business in total. Sorry, I didn't mean to be long-winded. Joel, over to you.

No worries. Jeff, I think the other thing I would just add, that in and of itself does create both organic and inorganic growth opportunities for this organization. On the organic side, the ability that we have to have product availability, they have continuity of service and not be pulling back service days and not doing those types of -- those are really important areas wherein we have the opportunity to actually add organic growth. And again, as Kevin said, not wishing ill on anyone. We certainly think, over time, that it may create opportunities for us inorganically as well.

And Jeff, I'm sorry, we're giving you a long-winded answer, but I think this is one of the most important points of the Sysco thesis. During this crisis, when others are fighting just to survive, we're investing in a pricing software. We're making meaningful improvements to our customer ordering platform. We're investing in new selling skills for our largest-in-industry sales force. We haven't spoken about it yet, but we're making plans, and soon investments, in our supply chain to improve the offering of our product to customers in a more timely manner. And we're funding these investments by taking meaningful costs out of our business. So that's what I view as happening over these next quarters into years is we're going to separate ourselves from others in this space from the capabilities that we can bring to those customers, but do so in a way, both at the national level and at the local level. There aren't too many companies that can do that to the degree that we can. Jeff, back to you.

Yes. As we think about -- I know you guys are a fiscal June company, and I'm sure we'll get a lot more color at what you've discussed in terms of a potential Spring Investor Day. But as we look to calendar '21, it just seems like it's a tremendous challenge for people to think about how to model or how to project the financial performance of companies like yourself. So how do you think about, obviously, not giving calendar '21 guidance, but just directionally, your business as we lap what was normalcy for the first couple of months of calendar '20 and a tremendous falloff and then a nice recovery. Are there any puts and takes you would highlight if someone was building that model from scratch, just to think about all the laps that you'll be going through over the next 12 months?

Yes. It's a good question. It's a hard one to answer without building the model and sharing some things externally that we've not obviously quoted. I think Joel has done a nice job, and Neil's team can work offline with any investor that wants a little more insight into how we view it. The structural cost that's come out of the business is a key component that can be built into the model. I think, Joel, at your last call, you were even more aggressive when we said 80%-ish of the $350 million is permanently out. The delta is invested back into the business. Those are the types of color, commentary pieces that Neil can work with anyone individually on. But I actually -- I have optimism for -- let's call it, fiscal 2022 for us or July 1 through June 30 of that following year. But it's going to really -- Jeff, the speed of the recovery is going to come back to the progress on vaccine. Having just come from health care and I have active dialogue with the people that are actually going to be doing the immunizations, they're feeling really good about the progress that's being made by the pharma companies. And I think you saw one of the airlines is already flying millions of doses of immunizations around the world. Well, the Walmarts, the Walgreens, the CVSs and the grocers of the world, they're meaningfully gearing up to do hundreds of millions of immunization doses in the first half of calendar 2021. And I believe -- most believe that we're on track for that. The at-risk population will be late December into early January, more broad-based immunizations in the February through May time frame. So here's my hope, Jeff, but hopes on an action plan, so I got to be crystal on that. My hope is, by July 1, the restrictions on our customers have been substantially removed. So then it's up to the consumer if they're ready to go out to eat and eat away from home. What we're seeing in our data is that they are absolutely ready to do so when those restrictions are removed. So that gives me optimism. We have one sector, one segment, which is the travel and hospitality segment that worries me more. I believe that the recovery in that sector is going to take longer because business travel will be down as evidenced by meetings like this. And it will take longer for people to be comfortable to get on planes and fly all over the world. So we're going to model that out. So as it relates to the speed and pace of sales recovery, I have optimism for that next fiscal year. And when you combine it with the market share wins that we are experiencing, and we believe we'll accelerate, we're reasonably confident. With all of that said, even internally for our financial modeling, we're working on a plan A and a plan B: a plan A, where we have a more traditional budget because we have a baseline that is solid that we can model off of; and we will develop a plan B, which is more key operational metrics that we can finally sign up for, be accountable to and drive and deliver, which is what we've just had to do this year. But what I would say is that program is working this year. New customer growth, warehouse productivity, transportation, productivity, these are core internal metrics that drive our profit equation that we're holding our leaders accountable to, from the most senior leaders down to the frontline leadership. So I would say it's working. For this year, I would desire for the next full fiscal year to be on a more normal plan. But we're working on 2 versions, depending upon the recovery in the health care landscape. Joel, I'll toss it to you if there's anything more specific you wanted to add to the modeling side.

No. I think all I would add, Kevin, is just as you talked about, as we talk about the fact that there is the speed of the top line recovery is really going to be based on easing of restrictions and all, as Kevin has talked about, I think from a margin perspective, you've seen some of the impact that from a margin perspective that we have, that includes things like -- that increased -- a combination of the increase in PP&E products. That's been a positive contributor to margins. You've seen things like a over-indexing in our local business. Kevin talked about that being extremely resilient. And with some of the offsets we've had in hospitality and in some of the foodservice management space, we've actually again increased our local business, which is a good thing for margins. And so there's a lot of puts and takes on that, that have kept our margins where I think you've seen them over the last quarter or so. And on the expense side, to Kevin's point, we continue to find the opportunities to aggressively take costs out. And as we talked about in the last call, that's going to be both where we take bottom line profits. We talked about around 80% or so to the bottom line of the $350 million. But as we continue to evolve our model, we'll continue to have some combination of things where we're taking dollars to the bottom line and in addition to that, making reinvestments ultimately to grow. So just a few other points that I would add to Kevin's. And I'll turn it back over to you.

It's in the final 2 minutes just because time flies, but I did just want to follow-up on one point, which I think most people think -- most investors think about growth coming from maybe Joel's new role of M&A and acquisition and inorganic growth. But we think just as much the opportunity, Kevin, to your point earlier, is the fact that you only have 30% penetration to some of the independents. So I'm wondering: one, what you think that could go to? And what's the comparable number for your bigger chain restaurants that you're working with? I would assume that you have a much larger penetration of wallet from the bigger chain. So where are you with the bigger chains? And where could both those numbers go over the next number of years?

Sure. It's a good question, and I'll be as clear as I can be. I don't think we've quoted the percentage of share of wallet for large national customers. So I probably shouldn't do that on this call. But we have that, obviously, and to your point, it's much higher with the larger national customers. At our Investor Day in the spring, we are going to lay out a growth algorithm, a multiyear outlook for what our size of the prize looks like, Jeff, for these key transformation initiatives. So the reason we delayed it is not because we don't have our plan. It's because the baseline on which that plan will ladder off of has been doing this over this COVID period of time. So we're optimistic. The reason why we're saying spring and not a specific month is, we would like for COVID to be more predictable and more clear as a baseline, so that we can bring forward because we know what you're interested in. We know you want to know the size of the prize of the sales transformation, size of the prize of our supply chain transformation, et cetera, et cetera. We've done that work. We do have an internal goal, Jeff, for what we can increase that share of wallet to, and it's meaningful. It's a substantial increase in sales and it is such that it will help us leverage our fixed costs in a robust way. It will help us buy more product, which helps fuel improved COGS efficiencies, which then goes right back to the beginning and a value that can be brought back to our customers, which then will increase the share of wallet, on and on. So we have a virtuous cycle that we're bullish on. And I would say this: we've done good work as Sysco, leveraging our scale advantage. And as an outsider coming in, what I can say is there's even more good work to be done. We're not yet sufficiently leveraging our scale in our purchasing economies. We are doing good work there. But there are several tactics and levers available to us to be pulled upon. And our supply chain, while robust and capable, it's unmatched in its breadth and scale, has efficiency opportunities that we are going to drive. And when we do that, we can then pass value on to our customers or grow without having to add more warehouses. So as Joel goes in helps win us new business, we will be more productive with our space utilization and throughput utilization so that we don't have to make as many capital investments as we would have in the past. So Jeff, these are all reasons to have optimism and confidence. But yes, there are meaningful growth opportunities in the world that Joel is going to lead for us. What will we invest in, and I'll toss it to him for a final word, there are capabilities that we don't have for cuisine types that we might go out and procure. There are geographies where we underindex, where there are people in that space physically that are capable where you could procure. To this point, that could be domestic, that could be international. And then there's just completely the adjacent businesses that we will evaluate closely to determine, should we be in them or not? What rate do we have to win in those spaces and make some thoughtful and strategic moves in that regard? Joel, I'll toss to you for a final word. And then, Jeff, I know we're out of time.

Yes. I think, I would summarize this as a tremendously exciting time to be a part of Sysco. Kevin came into this organization. The one thing you said that was the most clear thing would be the number of growth vectors that are available to this organization is really significant, and that's on both an organic and an inorganic basis. And I look forward to working with this team and with this company and be a part of driving this transformation and accelerating this opportunity for us moving forward. So again, very excited about the road ahead. Great time to be part of Sysco.

Not surprisingly, we've run out of time. So there's a lot more questions, but I know you've got a couple more meetings this afternoon. And otherwise, we wanted to thank Kevin, Joel and Neil for joining us this afternoon. And Sysco more broadly, we really appreciate it, and look forward to the Investor Day in the spring and hopefully being face-to-face one day sometime soon. Thank you very much.

Absolutely. Okay. Thank you.