Sysco Corp raised its multi-year growth targets and detailed the financial impact of its pending acquisition of Jetro Restaurant Depot at the Barclays 19th Annual Global Consumer Conference on Wednesday, signaling confidence in the foodservice distributor's expansion strategy.
Interim Chief Financial Officer Brandon Sewell gave analysts a first look at how the Restaurant Depot deal would reshape Sysco's earnings profile. The acquisition is expected to add 20% in incremental revenue, 45% in incremental EBITDA and 55% in incremental free cash flow, according to Sewell. "Within 4 years, our free cash flow at Sysco will double through Restaurant Depot's acquisition," he said.
Sysco reaffirmed full-year fiscal 2027 guidance calling for revenue growth of 6% to 7%, roughly $90 billion in sales, and EPS growth of 9% to 11%—about 8% on a normalized basis once the impact of a 53rd week is removed. First-quarter FY2027 EPS is targeted at $1.18 to $1.20, with a midpoint of $1.19.
More significantly, the company raised its midterm guidance for fiscal 2028 and 2029. Sales growth is now projected at 4% to 7%, up from the prior range of 4% to 6%, and the EPS range was widened to $9 to $11 from $6 to $8—a 300-basis-point improvement in the midpoint.
Chairman and CEO Kevin Hourican pointed to the company's artificial-intelligence and technology transformation program as a key contributor to margin expansion. Sysco set a target of $500 million in operating-margin improvement by FY2029, with $100 million embedded in the FY2027 guidance. The program comprises 30 initiatives, with four core projects—supply-chain routing, merchandising and fill-rate improvement, indirect sourcing via reverse-auction technology across more than $1 billion in annual spend, and back-office automation—driving roughly 70% of the value.
Hourican noted the routing project alone could eliminate 4.5 million weekly miles in U.S. operations, while the merchandising initiative aims to lift fill rates by 50 to 100 basis points.
The Restaurant Depot acquisition, financed with $1 billion of common equity and the remainder in debt, is expected to close in the January-to-March quarter of the upcoming calendar year. Net leverage at closing is projected at about 4.5 turns, with a target reduction to 3.5 turns within 24 months. Share repurchases remain paused during the deleveraging period, though dividend increases continue.
Jetro Restaurant Depot, led by Richard Kirschner, has posted 30 straight years of profit growth and operates with EBITDA margins around 13% and operating-income margins near 12%. Its pricing runs 15% to 20% below delivery alternatives, and it is wholly focused on food with no pharmacy or optical ancillary services.
Sysco sees capacity for more than 125 net new Restaurant Depot locations in the United States, plus upside in Canada, with a build rate of five to six new stores annually. The deal would make Sysco's local business 1.5 times larger.
Working-capital improvements tied to the same inventory and merchandising initiatives are expected to improve cash conversion by two days, worth several hundred million dollars, Sewell said.
"The margins are durable, they are sustainable, they've been in place for two decades and they will be in place for another two decades," Hourican said of Restaurant Depot's cost structure.
On the conference call, Jeff Bernstein of Barclays, who hosted the session, noted Sysco trades at a P/E of 22.5 with a market capitalization of $39.5 billion and a dividend yield of 2.76%. The stock rose 3.2% to $82.40 after earlier trading at $79.84, within a 52-week range of $68.19 to $91.85. Sysco has increased its dividend for 56 consecutive years, earning it Dividend Aristocrat status.
The broader foodservice distribution industry is estimated at approximately $380 billion and remains highly fragmented, with the top three broadline distributors holding less than 40% combined market share. Sysco operates 335 distribution facilities worldwide and serves roughly 730,000 customer locations, with about 60% of revenue coming from restaurants and 40% from non-commercial sectors including healthcare, education, travel and hospitality. The company identified its specialty business—spanning produce, protein, Italian and Asian foods and the Edward Don & Company platform—as a $10 billion growth opportunity, alongside another $10 billion in international expansion potential.
