Sysco Corp. opened its 2026 fiscal year with modest but broad-based gains, reporting higher sales and an early rebound in its U.S. local foodservice business. The company said the quarter reflected stronger operating discipline, improved supply-chain performance, and growing use of new digital tools among its sales teams.
For the quarter ending Sept. 28, Sysco reported net sales of $20.7 billion, up 3.2% from $20.05 billion in the same period a year earlier. Excluding the impact of its Mexico divestiture, sales increased 3.8% year over year. Gross profit rose 3.9% to $3.9 billion, and the company’s gross margin improved 13 basis points to 18.5%.
CEO Kevin Hourican said Sysco’s U.S. Broadline local business “inflected positive” for the first time in several quarters, posting 0.4% volume growth. That growth rate was more than double the industry’s overall restaurant-traffic improvement, which rose about 0.6% in the same period, according to Black Box Intelligence. Hourican said the gains built steadily through the quarter, with September marking the strongest month of growth.
The company’s broader U.S. Foodservice (USFS) operation saw total volume up 0.1%, while local case volume declined 0.2%. Excluding the ongoing wind-down of certain FreshPoint produce accounts, USFS local volume would have increased 0.3%. Hourican said the company expects to build on that progress in the second.
Sysco’s International segment continued to outperform its U.S. business. Sales rose 4.5% to $3.6 billion, or 7.9% when excluding the Mexico divestiture, while local case volumes increased about 5%. Adjusted operating income for the segment jumped 13.1%, marking the eighth consecutive quarter of double-digit profit growth. Hourican said every region in Sysco’s international portfolio delivered gains and noted that over the past three years the company has doubled the profit-margin rate of its overseas operations.
CFO Kenny Cheung said the results “represent a continuation of improved operational momentum” and reflect balanced growth across the company’s customer segments. Sysco generated approximately $86 million in operating cash flow, up 62% from a year earlier, driven by working-capital improvements. Free cash flow was a negative $15 million, which Cheung said is typical for the first quarter given seasonal capital expenditures.
Cheung highlighted stronger productivity and expense management in the supply chain as a key driver. Operating income rose to $898 million, and adjusted EBITDA held at $1.1 billion. The company’s net-debt leverage ratio stood at 2.9 times, within its long-term target range.
Hourican credited Sysco’s supply-chain organization for “the strongest quarter from a service and cost perspective” in his six-year tenure. On-time and in-full delivery rates improved, product shrinkage declined, and workplace accidents fell both in warehouses and on the road. “These gains will help us win new business and strengthen customer retention,” he said.
Sysco also pointed to progress on new growth initiatives:
- AI360, a generative-AI-powered sales platform, is now used by 90% of sales consultants. The system automates administrative tasks and provides data-driven recommendations to improve customer conversations and order accuracy.
- The Perks 2.0 loyalty program, aimed at high-value local-street customers, has been fully rolled out. Early results show higher retention and greater line penetration compared with Sysco’s broader customer base.
- Employee retention within the sales organization improved meaningfully compared with last year, creating what the company called a more stable and productive workforce.
Sysco reaffirmed its full-year fiscal 2026 outlook, projecting net-sales growth of 3% to 5%, or $84 billion to $85 billion.
While food-away-from-home demand remains uneven, Hourican said Sysco’s recent progress is being driven by factors within its control—execution, technology adoption, and disciplined cost management—rather than relying on a macroeconomic rebound. He added that Sysco’s diversified model, which includes leading positions in non-commercial sectors such as education, healthcare, and hospitality, provides insulation in a mixed economy.
“Food-away-from-home continues to gain share from grocery,” Hourican said. “The pie is getting bigger, and Sysco intends to take a bigger slice.”
With its local-business inflection, international momentum, and supply-chain improvements, Sysco enters the rest of fiscal 2026 with cautious optimism—seeking to prove that the early uptick in local growth can translate into sustained gains across its global network.
Don’t miss any content from Distribution Strategy Group. Join our list.
