Sysco Corporation ((SYY Quick QuoteSYY - Free Report) ) kicked off fiscal 2026 on a strong note, with the first quarter reflecting meaningful progress across sales performance, margin management and supply chain operations.

The company’s bottom line surpassed estimates, supported by notable strength in its local business. Broadline local operations delivered positive results, showing steady sequential gains, while the U.S. Foodservice (USFS) local segment recorded solid improvement. The USFS local volume growth also significantly outperformed the broader industry traffic trends.

Sysco’s performance featured volume gains, another period of gross margin expansion and disciplined cost management — demonstrating the company’s commitment to operational excellence amid a dynamic macroeconomic environment. Management reaffirmed its guidance for fiscal 2026.

Closer Look at SYY’s Q1 Results

Sysco’s adjusted earnings of $1.15 per share surpassed the Zacks Consensus Estimate of $1.12. This figure increased 5.5% year over year.

The global food product maker and distributor reported sales of $21.1 billion, which moved up 3.2% year over year, and came almost in line with the Zacks Consensus Estimate. Foreign exchange movements boosted the company’s sales by 0.4%. Excluding the impacts of the divested Mexico joint venture, Sysco’s sales grew 3.8%.

Sysco’s gross profit rose 3.9% to $3.9 billion, while the gross margin improved by 13 basis points to 18.5%. At the enterprise level, product cost inflation stood at 3.4% due to higher costs in the meat and seafood categories. The gross profit growth was mainly attributed to the company’s effective handling of product cost inflation, along with its prudent sourcing efficiencies. Foreign exchange movements boosted SYY’s gross profit by 0.6%.

The company’s operating expenses rose 5.3% year over year to $3.1 billion due to investments in business capacity and sales headcount. Adjusted operating expenses increased 4.3% to $3 billion.

Operating income slipped 1% to $800 million, while adjusted operating income inched up 2.9% to $898 million. We note that the adjusted operating margin was almost in line with the year-ago period level at 4.3%. SYY’s adjusted EBITDA came in at $1.1 billion.

SYY Provides Insights by Segments

U.S. Foodservice Operations: Segment performance reflects impacts from slight volume improvement as well as ongoing investments in headcount and capacity. Segment sales rose 2.9% year over year to $14.8 billion in the reported quarter. Total case volume climbed 0.1%, whereas local case volume dipped 0.2%.

Gross profit grew 2.8% to $2.8 billion, with the gross margin contracting 3 basis points to 19.1%. Adjusted operating income dipped 1% to $916 million.

International Foodservice Operations: The segment performance continued to reflect gains from efficient margin management, growth in local volume and double-digit profit expansion. Sales for the quarter increased 4.5% to $4 billion. On a constant-currency basis, sales rose 2.1% to $3.9 billion. Foreign exchange movements boosted the segment sales by 2.4%. Excluding the impacts of the divested Mexico joint venture, International Foodservice sales grew 7.9%.

Gross profit climbed 6.7% to $826 million, with the gross margin improving by 43 basis points to 20.8%. On a constant-currency basis, gross profit increased 3.6% to $802 million. Foreign exchange movements boosted the segment’s gross profit by 3.1%.

Adjusted operating income rose 13.1% to $147 million. On a constant-currency basis, adjusted operating income increased 12.3% to $146 million.

SYGMA: The segment’s sales were $2,129 million, rising 4.1% year over year.

Meanwhile, the Other segment’s sales decreased 3.2% year over year to $273 million.

Sysco’s Financial Health Snapshot

This Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $844 million and total liquidity of $3.5 billion.

Cash flow from operations amounted to $86 million for the first 13 weeks of fiscal 2026, while the free cash flow amounted to negative $50 million. Capital expenditure, net of proceeds from sales of plant and equipment, was $136 million during this time.

In the first quarter of fiscal 2026, Sysco returned $259 million to its shareholders through dividends.

SYY’s FY26 Outlook

Sysco reaffirmed its guidance for fiscal 2026, wherein it expects sales to grow 3-5%. Adjusted earnings per share are projected to increase 1-3%. This guidance includes a headwind of $100 million, or 16 cents per share, related to the prior year’s lower incentive compensation. Excluding this impact, adjusted EPS growth is anticipated to be 5-7%, with the mid-point aligning with the company’s long-term growth targets.

SYY shares have lost 2.9% in the past three months compared with the industry’s decline of 7.3%.

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