Sysco Corporation (SYY) Earnings Call Transcript & Summary

Good afternoon. Welcome back from the break. It's now my pleasure to introduce Sysco Corporation. The leading global distributor of fresh food and related products to the food-away-from-home industry. Sysco generated about $81 billion in sales in fiscal '25 and serves roughly 730,000 customer locations with a business that is well balanced across customers and geographies. Many of us know Sysco best from seeing their trucks outside our favorite local restaurants, which make up 60% of sales, while the other 40% is built around recession-resistant categories, including government, education, health care and large campuses and office complexes, where Sysco also enjoys leading share positions. I'm excited to turn the conference over to Kevin Hourican, President, CEO and Chairman; and Kenny Cheung, CFO, to dive deeper into the story and discuss the company's specific initiatives that are driving structural improvements currently unlocking durable and compounding performance and supporting the company's commitment to a steady return of capital to shareholders. Before turning it over to Kevin, please join me in thanking Sysco for sponsoring dinner tonight. Kevin, thanks again, and over to you.

Thank you, everyone. It's great to be back at CAGNY. We have the pleasure of being able to update you on our Sysco story, and it's also our pleasure to be able to host you all for dinner tonight. I really do hope you have a chance to come join us. Our Sysco chefs will be here in force delivering the best of Buckhead Meat, FreshPoint produce, our Italian cuisine business, our Asian foods business and even charcuterie from our European imports business. So hopefully, you'll have a chance to come join us. And Kenny and I, Kevin and Josh and Nelson will be roaming the room, and we're happy to continue the conversation with all of you tonight. So we look forward to that. So let's jump in. Most of you in the room know Sysco, you know who we are. Our goal for today is to provide you an update on what we're working on, progress that we're making and where we're headed as a company. Before I start, you know us to be the largest in this space from a broadline distribution perspective, #1 market share and the most profitable in our space. We are also the #1 specialty foods distributor with multiple specialty brands doing more than $1 billion per year and a portfolio of specialty businesses that does over $10 billion per year. We have #1 market share in restaurants, travel, hospitality, education and entertainment sectors of the food-away-from-home business. And we're #2 in health care with a growing and profitable health care business. As was just said a moment ago, everyone knows us for the restaurants that we serve, hundreds of thousands of them. 60% of our business, to be clear, is restaurant, but 40% of our business is what we call noncommercial, which is outside of that restaurant space. It's important to note this business because it is more insulated from the ebbs and the flows of the economy. These are places like schools and hospitals that are more recession resilient. It's great to have those profitable and growing businesses a part of the Sysco portfolio. We are the largest player from a global foodservice distribution perspective in the food away-from-home space. I love this chart for several reasons. thing one, it shows you where we compete and where we operate. We have 10 businesses around the world or I should say, 10 countries around the world, where we have physical field operations. What does that mean? Warehouses, trucks, sales colleagues on the ground calling on restaurants, knocking on doors. We do business in 80 additional countries around the world through an export business that we own. But for today, let's focus on the green countries or the 10 that we operate within. We are growing our market share in each and every one of the markets that we compete with around the world, taking market share in each and every one. Sysco's international footprint is a burgeoning strength, a growing importance within our company, and I will talk more about it in a moment. But for now, I will say, nine consecutive quarters of double-digit profit growth in our international business. And you can see the total addressable market from each of the countries around the world that we own and operate businesses within. It is not a small TAM. This might be my favorite chart in the deck. It shows, of course, the impact of food-away-from-home over time. That's the green line going up. And the blue line going down is the grocery share of spend or some say share of wallet. It is a durable and consistent trend that food-away-from-home home win share from the grocery channel each and every year with the exception, of course, of COVID when we were told to go home, stay home and not leave their homes. That was a tough period. But outside of that period, food-away-from-home takes share every single year. What is important to note back to the international comment, international is about 10 years behind the U.S., but following this exact same curve, which gives tailwind at our back tied to the industry. So why is this? Why is this happening? We talk about this at this conference. Number one, time starved parents, people that have 3-day parts per day to be able to feed their family, feed their children and people are busy. Number two, quality of food innovation. Chefs and professional chefs bring forward interesting, unique flavors, interesting and unique foods, and it is an experience to be able to go out to eat. Number three, it was boosted through COVID, the to-go experience has meaningfully improved. The quality of the food, the quality of it as it transports back to your home, the ease of use with the digital app to be able to order ahead such that when you do get to the restaurant to pick it up, it's convenient, it's available and that high-quality professional meal being able to be eaten at your home, taking share from grocery each and every year, which is then what feeds this chart, our total addressable market. This is just the U.S. business, $377 billion. Look back to the left, it has grown substantially over the past 10 years. And again, with the exception of COVID, it's grown every year. Sysco has taken share each of the last 6 years from within the TAM. We're now at approximately 18% market share in this very large, successful and growing U.S. business. It's important to note, oftentimes, we're pitched one company against another in our space. The big three in our industry together have less than 40% share of wallet in the food-away-from-home space. As an investor, that's actually a very compelling thing. Each of the big 3 has an opportunity to meaningfully take share because we strongly believe in this industry, size and scale matter, purchasing scale, fulfillment scale, the ability to invest in technology, which we'll talk more about while we're here today. We just want for our share of that to grow faster than the overall market and most importantly, to grow profitably through our strategy, which we will chat about. So let's talk about our growth. We consistently grow our sales. We consistently grow our dividend at Sysco. To be clear, we have grown our dividend for 56 consecutive years. You'll hear about that more from Kenny in a moment. And we have grown our sales 54 out of 57 years. The '08, '09 financial crisis and COVID were the only periods in our 57 years of history that we did not grow our business. And we have a terrific opportunity to continue to grow. Our specialty platform, which is today $10 billion, has at least the opportunity to grow another $10 billion. Our international business, growing our market share in each country we operate around the world to match our U.S. growth and our U.S. penetration is again a $10 billion-plus growth opportunity, and that's just in the countries that we're currently operating in around the world. And our broadline business will continue to grow as well. Yes, we have a much higher share of our total business in broadline. We can grow our broadline business faster than the overall market, and we can do so profitably So let's talk a little bit about the how. How is the growth happening? How are we performing for today while also transforming for tomorrow. Let me start first and foremost with international, as I said a moment ago. Nine quarters consecutive of double-digit profit growth from our international business. In a second, I'll talk a little bit more detail on the how, but it's about expanding our fulfillment capacity, increasing the assortment of products that are made available, investing in improved technology and investing in incremental sales head count. The combination of those things in international is driving durable consistent growth. I talked about the non-restaurant business of Sysco a moment ago. We call that our noncommercial segment. We're doing extremely well at Sysco in our noncommercial segment, growing at faster than restaurants, while simultaneously improving profitability. These are two partners in the food service management space and also to direct business with, again, hospitals and hotels and the like. Our local business, and I'll double click in a second on local has inflected positive. We've meaningfully turned the corner. We've strengthened our progress in local. We're building momentum. We're getting our mojo back, if you will, in the sales organization on the street at Sysco, and I'll elaborate in a moment. Our growth is being fueled by improved colleague retention, improved colleague productivity, sales initiatives like Sysco, your way and total team selling that are really having a positive impact. All encapsulated with a support system in our supply chain and the technology that we use to run our business that's getting smarter, stronger and faster every day. Momentum is building, progress is being made, and the confidence in our sales organization is meaningfully improved. And all of that comes to fruition on this chart. We were not satisfied or pleased with our local business performance this time last year, and I talked about that on stage at this very meeting last year. We've leaned in hard on things that needed to improve, things that we needed to strengthen and look at the progress that we're making as a company. The blue bars are our growth versus prior year by quarter. The most recent quarter, we posted a plus 1.2% volume growth. That was 140 basis points better than the quarter directly adjacent. And that dotted black line was the performance of the overall market as measured by foot traffic to restaurants. So while traffic to restaurants decelerated by 200 basis points, we accelerated by 140 basis points with a meaningful step forward in our relative performance, and we are not done. On our earnings call a couple of weeks ago, Kenny and I called her shot, and we said for the second half of this year, which we're in right now, our fiscal year. We are going to grow by at least an additional 100 basis points, which then therefore, will equal a 2.5-plus percent local volume growth in the second half of this year. And that is agnostic to what may or may not occur in the macro backdrop. And why I say that is the improvement is from initiatives that are directly within our control. We are not assuming any improvement in the end macro market to be able to deliver this improvement and to be even more clear, approximately 50 basis points of the growth is from the tuck-in acquisition that we have already completed. We completed it back in December. So 100-plus basis points of incremental improvement in our core plus approximately 50 basis points of improvement through the M&A transaction puts to 2.5 points of volume growth in the second half, and that is a significant improvement from where we have been. Confidence, momentum, selling on the street, to win new customers, retain the customers we have and penetrate more with those customers that we serve. In each of these quarters, our 2-year stack will improve versus the prior quarter. So let's talk a little bit more about international, having segue out of our U.S. local business. We couldn't be more pleased with our international business. As I said, a second ago, nine quarters of double-digit profit growth. How and why is worth talking about. We've expanded our footprint of distribution centers to create a robust fulfillment network in Europe. By doing that, we've been able to significantly expand the unique product offering available to our customers including fresh produce, fresh proteins. Broadening our assortment includes adding a Sysco brand product in each and every country around the world that we compete within, good, better, best pricing architecture within Sysco brand. We're deploying Cisco's suite of technology tools. So that's a modern warehouse management system, modern routing tools for our trucks, a CRM to help fuel the productivity and effectiveness of our sales force. These are Sysco's core suite of tech applications and they're being deployed in every country around the world. We're leveraging our best practices as a company like Sysco -- your Way in Perks, which is our loyalty program for our best customers to drive engagement, to drive retention and drive sales. Net-net, what is the outcome? Mid-single-digit volume growth, double-digit profit growth, doing it consistently and durably quarter after quarter. My favorite of these charts is the one on the right-hand side. When I joined the company, this is my seventh presentation at CAGNY. When I joined this company back in 2020, we were at -- it was actually even earlier than this chart. Look at the profit improvement. We have doubled the profit rate improvement in our International segment in 3 short years. And what Kenny and I have said publicly and repeatedly, and there's absolutely no false ceiling to our profitability in international. We will get our international division to equal our company total. There's nothing that will prevent it from being achieved. Let's talk about where we have opportunities for additional growth, additional progress, the additional opportunities for improvement. starts and ends with our sales consultant population. Our sales consultants, we have more new people working for us today than what would be our normal average. So why behind that is we've done a lot of hiring, and we had excess turnover over a year ago. So we've absorbed a lot of new people into the sales organization. We're focused significantly on retaining those colleagues, motivating them through compensation and training, training and training to increase their effectiveness. We're also providing them selling tools so that they can be even more effective in how they sell through something we call AI360, which is in the palm of their hand, a selling tool that gives them prompted suggestions on what can be sold to that individual specific customer who they're visiting in that moment. By giving them suggested prompted leads, their close rate goes up, their confidence in their selling goes up, they make more money, which is a self-reinforcing loop. And we are just getting started with AI360. I said on our earnings call back on our Q2 call, we have a gap in our product assortment. It's on the bottom left of the chart called value tier offering. We've typically been best-in-class at the better, best parts of product assortment, which are more premium products -- and we are missing products in the value tier section. I want to be very clear because we've gotten questions from investors about this. This is not about lowering our selling prices on existing products. This is about bringing products into our assortment that we do not currently carry and they're not buying the category from Sysco. This is not trade down, this is not water dilution. This is incremental cases on our truck, and we can sell these products profitably. It's about getting the assortment on to our truck and selling it with conviction. It's a slower burn process because we need to identify the suppliers. We need to certify them to our human rights standards and the like, that this work is well underway. It will be constructively managed over the next approximately a year. AI-based selling tools, we're bullish, but we're also focusing on our supply chain. Working with global leaders in material handling equipment to take some of the labor out of our facilities over time at an appropriate ROIC. M&A will continue to be an important part of our work over time. There are plenty of opportunities for us to inorganically grow our business, doing so fiscally responsibly. And last but not least, we're really leaning into our merchandising division, and I'm going to talk about that more on my last slide. So I'd love to talk about where we are with merchandising. I go back to 2020, we were a fully decentralized organization. All of our decisions about product assortment, relationships with suppliers and the like were done out fully in the field. And there were some good with that, a lot of good from that. But we left a lot on the table because of that fully decentralized model. The left-hand side of this chart talks about the things that we have strengthened since 2020 through development of a center-led strategy for merchandising. So think about like weight lifting, we've strengthened the left arm, the left-hand side of this chart. The types of things that we do substantially better than we were doing back in 2020, negotiating the best possible cost with our key suppliers. We've taken hundreds of millions of dollars of cost out of our procurement straight through to our P&L. We have added best sellers to all sites. Believe it or not, some of our best-selling SKUs weren't stocked in Key OpCos because it was a decision made at that local level times each OpCos. It was complex. 150,000 SKUs were available as a part of an assortment and managing to the effectiveness of the optimal assortment left money on the table. We've strengthened the optimal assortment. Last but not least, we've secured vendor funding for growth programs. We lean in with the vendor supplier partners and say, we want to take your product nationwide as a new product launch or to really lean into a category and grow with that supplier. Back in the day, they would have to have sold that around the country. Now they have one desk, one voice, one decision maker. These things have meaningfully improved the company. And the right-hand side of the page needs focus. By accident, I offer to you with humility, we've slightly reduced the effectiveness of our field merchandising organization. And this is a new topic for me to talk about with all of you. Here's the great news. We can get that strength back on the right-hand side of this page, and we're leaning in very hard to strengthen a local field merchandising function at Sysco. These people still exist. The jobs still exist. We did not reduce SG&A as a part of the past years. It's in the process of strengthening the center-led strategy, by accident, some lack of returning of authority the field has occurred. I want to be clear about the bullets that are on the right-hand side of the page, and that will be done. The top bullet as we've said all along, they can carry whatever product they want to carry at their local level, and we've actually not reduced our effectiveness in that regard. Think seafood. In Florida, it's Grouper. In the Northeast, it's a different good fish on the West Coast, it's a different fish. They can carry whatever they want to meet the needs of those local customers, hard stop. We've not lost ground there. Where we have by accident lost ground is the second and the third bucket and on the right-hand side of the page. We have a preferred supplier of frozen french fries coast to coast. I won't tell you who it is, but we have a preferred supplier. That preferred supplier has an issue in their plant. They therefore are not able to allocate to us the amount of inventory we expect. Power in knowing that and getting the local field team to now act upon that to go find alternative products so that they can stay in stock for our customers is the opportunity for improvement. By strengthening that national relationship, we have lost a little bit of that ability at the local level to flex when they need product. And we can get this back and we're leaning in hard right now to do that. So again, we've got that preferred supplier, and they are going to be who we buy from, when they're in stock, but if they have an issue. Immediately, our entire field organization needs to move on a time, act, get product local, so we can support customer demand. And when the national product comes back in stock, you've got a reverse debt action because you want to be buying from the preferred supplier. Does that make sense? We need to strengthen this muscle. We are doing it as we speak. Even more important, though, and the devils in the details is the bottom right bullet. There are unique times and unique places. We're buying from a local supplier who can meet the spec and need of the national supplier actually is the most fiscally appropriate and responsible thing to do. Think about right now, we're in the peninsula. Let's say, the national suppliers in the Pacific Northwest. You got a rail car freight, the product all the way across the country. There are instances where it actually makes more sense to buy locally, and we are working with data technology AI to optimize this equation, and we buy from the right place all of the time. We at Sysco have an opportunity to do both of these things better than who we compete with. We strengthen the left, we need to get the strength back on the right. It's going to make a difference. It will make a difference in our ability to profitably grow our market share. So I wrap up with the following chart. This is our confidence in our year to go, our confidence in our second half. We are committing to delivering local volume growth of at least 2.5%. We are well on our way to be able to do that. And how are the things that are on the right, improved retention of our sales colleagues, which is improving our retention of our customers, increasing the productivity of those sales colleagues through technology and training, leveraging sales programs like Sysco. Your Way, Total Team Selling, Perks and AI360, when you bundle all of these things together, it results in our volume growth. Confidence is increasing by the day. momentum is increasing on the street with our sales organizations. And if you know anything about salespeople, it becomes like a self-reinforcing flywheel, and we are confident in our ability to deliver what is on this page. So with that, I'm going to wrap up. I'm going to bring my partner, Kenny Cheung, a terrific CFO on stage, who's going to talk to us in more detail about our financials. Kenny, over to you.

Thanks, Kevin. Hello, everyone. It is great to be here with all of you today. Thank you for your continued interest in the Sysco story. Kevin talked about a few exciting items. Number one, our leadership position in attractive growing space. Number two, our strong track record of growth. and number three, how our competitive advantage positions Sysco to deliver on our outlook for accelerating momentum. So during my presentation, I'll take those 3 items and dimensionalize them and talk about how they fit into the income statement, the balance sheet, the cash flow and ROIC. So let's start with the key piece of information. Yes, we are officially reiterating our guidance for FY '26 across sales and EPS. And let me remind everybody what that is. So sales growth top line, 3% to 5% adjusted EPS growth at the high end of our range of 1% to 3%, and we're going to normalize that for the management incentive carryover. It's roughly organically 5% to 7% growth, which is the 7% is the high end. The high end of 7% is at the middle point of our growth algorithm. As seen on this slide in front of you, we achieved strong financial performance in each of the past 4 years. This is across top line and bottom line, and we are on track to have another record year in FY '26. Taking a step back, from 2022, our efforts have yielded CAGRs on the top line 5%, and on the bottom line, roughly 9%. Sysco has proven to be resilient and able to grow across various market conditions. One of the things I'm proud of is, along with our growth, we are seeing nice positive operating leverage as well, which is gross profit growing faster than operating expenses. This attractive return profile includes #1 market share in a growing industry. Importantly, as Kevin and I always say, size and scale matters. And the reason why is because it renders five industry-leading dynamics, right? Number one, industry-leading sales. Number two, industry-leading margins. Number three, industry-leading free cash flow; number four, industry-leading ROIC and last certainly not least, the only IG-rated balance sheet within our industry. These industry metrics are positioned of strength and helps demonstrate and illustrate a high quality of earnings within Sysco. As Kevin noted earlier, Sysco holds the position as the global market leader with a diverse portfolio of operations covering to span the food-away-from-home. Restaurants, as Kevin mentioned, represents roughly 60% of our total revenue mix and grew 4% CAGR in the past few years. We are encouraged by our momentum in this channel, especially within our local business. Local is a high-margin business, and we grew both in the U.S. and international this very past quarter. Looking beyond restaurants, our other channels include travel and leisure, education and government business, which we are #1 player in those three sectors. And we also have a health care as well. Across these four sectors we grew roughly mid-single digits on a CAGR basis in the past few years. We are encouraged to see our growth being both margin and dollar accretive for our enterprise and we have multiyear contracts in place as well. And why is that important? The reason why that's important is this is exposure to sticky business across other verticals within the food-away-from-home sectors. And we believe these are most generally recession-resilient sectors as well. During our last earnings call, we highlighted strong growth across FSM through service management, travel and leisure, healthier sectors despite a softening of the traffic of the macro environment. This is one of the reasons why the chart Kevin showed earlier, we have grown 54 of the past 57 years. More specifically, as you think about our results relative to the core industry peers, you can clearly see there is a meaningful spread. Let's first talk about the income statement. I'll read along with you. If you look at the chart in front of you, starting from the left, from a GP standpoint, last year, we generated 18.4% gross margins. That's roughly 1.3x higher than the average core peer. As I said, size and scale matters. Turning to operating margins. You can see on the page, 4.3% operating income margins last year. That is 1.4x higher than the average industry peers. Our superior profit is really driven by Sysco-specific levers across GP, for example, strategic sourcing, leveraging our size and scale, leveraging total team selling, higher -- selling a higher-margin specialty products and driving international growth, as Kevin showed, which comes with higher gross margin attachment rate. But we're not stopping there. We also remain focused on the middle part of the P&L as well, such as operating expense levers with supply chain efficiencies across retention and productivity, structural cost out as well as optimization within our corporate expense bucket. These are meaningful structural advantages that shows up across our P&L, driving strong operating leverage. On the IG balance sheet side, we are the entry leader in terms of cash conversion from EBITDA. Our EBITDA to operating cash flow conversion is roughly 60%. Our EBITDA conversion down to FCF, free cash flow is roughly 40%. As you can see on the right side of the page, Sysco generated a robust cash flow of approximately $1.8 billion last year. This is roughly 2x higher than the average core peer, which demonstrates strong quality of earnings. Given our robust cash generation profile, we could do both. Invest in the business and reward our shareholders today, tomorrow, and for decades to come. Our track record of superior performance and visibility into our current momentum supports our confidence in our financial algorithm over the long term. I will dive into greater details on each of these elements, but let me level set the conversation first. We continue to have confidence in our ability to deliver net sales growth of top line 4% to 6% adjusted EPS growth of 6% to 8% and when you combine our 3% dividend yield, it renders a TSR of 9% to 11% per year over the long term. For the next three slides, I will dissect the individual levers of these targets and provide several compelling proof points today and how this positions Sysco to lead from a position of strength for the long term. Let's start with sales. Top line again, 4% to 6%. Let's do some double clicking. So 1.5% to 3.5% case volume growth across both national and local customers across the U.S. We also expect continued outsized growth from an international segment. On inflation, we are targeting 2% annually. This is the historical rates across the industry, and we have proven our ability to effectively manage through dynamic environments. Protecting and growing gross profit dollars and margins. Our toolbox includes, one, strategic sourcing, two, pricing tools, and third, merchandising capabilities, as Kevin mentioned. Lastly, to round out the algo, as we think about M&A, we will not king and build. We will buy the right asset at the right price. We target roughly 50 basis points of contributions from M&A on average Let's move on to the growth of the P&L. EPS guidance for the algo is 6% to 8%. These three drivers are GP, supply chain and corporate expense. So on the GP side, strategic sourcing efforts supporting our industry-leading gross margins as evidenced in our recent earnings call, growing gross margin dollars and margins. Over the past 4 years, '22 to '25, we expanded gross margins from 18.1% to 18.4% and gross margins grew each and every year. At this point is really important. If you think back, 2022, we had hyper inflation. 2023, we had this inflation. In the first half of 2024, we had deflation. We, at Sysco, were able to successfully grow GP dollars and rate in each of these dynamic backdrop. We have been improving retention rates on the supply chain side as our employees climb up the productivity curve over the past few years. In supply chain, we've never been healthier in the past few years. And there's still more room to go. The good things about productivity and retention is the fact that it is a gift that keeps on giving. There is a basket of benefits when this occurs. Example only, think about lower hiring costs, lower training costs, improved productivity, lower levels of product shrink, improved safety metrics, as example, and enhanced customer service, which, by the way, it's an early indicator of future growth. So supply chain, really, really healthy. As it relates to corporate expense, we leverage a variety of tools and strategies that allow us to target corporate expense as roughly 1% of sales. We remain diligent with cost controls as appropriate with corporate expense down year-over-year for the past 3 years as a percent of sales. Again, these are structural savings that stick with the business. Example only, in my shop, we are investing in markets like Costa Rica for the shared service model, which allows us to have great talent and scale as well across our P&L. Again, these savings are here to stay. One of the things as you think about SG&A is it's not just belt tightening, it's not just headcount, Kevin and myself are also exploring and looking at technology deployment, agentic tools, automation, which helps drive cost savings, facilitate elevated efficiencies and execution and overall optimizes the overall enterprise as well as both U.S. and international. Each of these elements positively impacts our P&L and improvement drops straight through to the bottom line. These efforts create the foundation of our target total shareholder return of 9% to 11%, which factors in our stable growing dividend of roughly 2.5% yield currently. Important with this approach to capital allocation is ROIC growth mindset. Kevin and I bring ROIC mindset day in and day out to everything we do across the enterprise. So when you couple that with the IG balance sheet, it is a true differentiator within our industry as the combination proves to be very powerful and allow us to do four things. Number one, execute against our plan. Number two, invest in the long term. Number three, weather any instability or storm that may pass through. And number four, it's really important, reward all of you, our shareholders, really important. Our approach is disciplined, yet flexible but they focus on key activities that support our long-term algorithm. ROIC, in our view, is not just about maximizing returns. It's also about strategically reallocating capital to higher performing assets, higher-performing business that renders a higher-performing return overall for the enterprise. Sysco's financial leadership and strong ROIC is industry-leading. As you think about the consumer staples company, we are 400 basis points higher than the average of the consumer staples sector and 2x of our average core peers. Looking forward, our plan is very simple, is to maintain our best-in-class ROIC and layer in incremental growth on a compounding basis. Over time, you can expect dividends to grow at the same rate of our adjusted EPS. This supports our goal of delivering TSR of 9% to 11% per year. Annually, we target dividend of approximately $1 billion. And annually, we target share repo of approximately $1 billion as well with room to flex up depending on M&A during the year. Disciplined growth investments are a key element supporting our ability to deliver against our long-term 9% to 11% TSR. We are a very cash-generative business and deployed approximately $10 million in the past few years. Approximately 1/3 of the capital was focused on CapEx. This includes growth-oriented long-term assets. Example only 10 new facilities, seven in the U.S., three international. Investing for future growth is as important to our strategy as growing for today. And why is that? As the #1 player in our space, these investments in capacity expansion help ensure sustainable future growth by supporting our ability to unlock new and penetration opportunities. Approximately 10% of the investment support profitable growth through M&A across our broadline specialty business. This picture is worth a thousand words. Since 2015, as seen on this slide, Sysco is on track to cumulatively returned approximately $21.5 million cash back to shareholders via dividends and share depot. This is a meaningful number, it represents more than of our current market cap. This remains as an important piece of the Sysco investment thesis. Our commitment to this practice is evidenced by the fact that we have started a share repo of the $1 billion in Q3. On the dividend side, we are committed to the long-term growth of our dividends. We are proud to be part of the dividend Aristocrat Club, growing our payments for the past 56 years. Although the physician ultimately revised with the Board, the notion, the idea of continued dividend growth is fair and reasonable as it relates to our historical cadence of our April dividend raise. Within our growth algo, we have spotlight the dividend payout ratio as a proxy of 40% to 50% of EPS. As such, I would naturally expect dividend to grow commensurate with EPS growth as we maintain our target payout ratio. Again, at Sysco, we can deliver today, build for tomorrow, all while unlocking value for shareholders. Here's another view of Sysco versus consumer peers. So our superior performance, as I said earlier, really drives meaningful spreads versus the consumer staples peers. Let's start first from the left, I'll guide you drives along with you, and then we'll work our way to the right. If you look at the first chart on the page, from a revenue growth perspective, Sysco has generated approximately 9% CAGR growth over 5 years, and that is roughly 1.6x higher than the average consumer staples peer, reflecting industry-leading positions and sales generation capabilities. Turning to the second chart, adjusted EPS growth of 17% CAGR over the 5 years, that is roughly 5x higher than the average consumer staples peer. Size and scale matters in our industry, and we have the strongest gross margin and operating margins across the industry. Our base is strong and robust, and we expect our structural advantages to continue to deliver long-term results across our P&L. From the perspective of capital return, our near 2.5% dividend yield stands in good company along with our consumer staples peers. Our investors and our team value our dividend risk status, which is a unique element within our industry space. So considering the first three box, our PE multiple still remains below our historical range and below our consumer staples peers as well. So from our perspective, Sysco is a compelling investment opportunity. But this is my last page, just to wrap things up. We like our position. I'll say differently, we love our position. We are the industry leader in an industry that is growing. We are driving momentum across the U.S. local business, and we have line of sight to continued runway for growth. We have a balanced and diversified portfolio across geographies, channels and product mixes, providing and yielding multiple vectors of growth. This supports our industry-leading margin profile and our ongoing focus on driving structural improvements to our business further supporting high faulty of earnings. Our steady and consistent international business, which has now delivered nine straight double-digit growth really underscores the power of the Sysco playbook. Our balanced capital allocation and strong ROIC are supported by our robust media profile and our IG balance sheet. We have a really, really strong and consistent track record of dividend growth and share repo as well with this year, approximately $2 billion will be given back in terms of value to our shareholders. This is a compelling profile that allows Sysco to deliver at the spot and play the long game on the forward. So therefore, we believe whether you are a value investor, an income investor, a growth investor, Sysco provides a really compelling opportunity. So I will end with where I started, which is we are excited about our performance. We are excited about our momentum. We are confident in our FY '26 guidance. We have the right leadership team in place that will focus on these initiatives and execute our plans. We are focused on consistent delivery of the results that will compound over time. This is a great time to be at Sysco. Our future is bright, and we are positioned to win. Thank you all today for your time. Appreciate it.

And we have time for one question. Why don't we take that?

Great. Let's go with Lauren over here at Deutsche Bank.

So nice to see you guys reiterating the 2.5% local case growth in the second half. During earnings, you talked about strength into January. I know there's noise from weather. So anything you can share about what you're seeing quarter-to-date and perhaps trends coming out of the winter storm.

Lot of weather last year in the winter. There's been a lot this year as well. But what I'd say to be constructive is the following. January was a very strong month for Sysco on a year-over-year basis, gives us meaningful confidence in our ability to hit the 2.5-plus percent volume. First 2 weeks of February were rough. I think many people in this room are probably impacted by that. I have a daughter is a teacher in school that schools the entire week. I've got a daughter in law as a school teacher in another state, school is full. So you understand the first 2 weeks of February were tough. What's important to note is last week, which was a clean from a year-over-year perspective, again, very strong. So if I do the bookings before and after last week Valentine's the second restaurant day of the year, Mother's Day is the first. It was a really good strong week for us, gives us confidence in the 2.5%.

Just one thing to add. Even with the weather, we're seeing continued quarter-over-quarter sequential improvement on local case growth. And that's the reason why based on what we're seeing, we're super confident with our 100 basis points of organic improvement on local case growth, coupled with the M&A of 50 basis points as well. So that gets to at least 2.25%. And at the same time, we're also seeing improvement in our national business as well, both local and national, both are improving. We expect both businesses to be within the algorithm of volume in the back half of the year.

Thanks so much, Sysco, and thank you again for dinner tonight and for the presentation.

Great. Thank you.

Thank you.