SYY
#Thank you Bill, and good morning everyone
Fiscal 2017 was a successful year for Sysco and I'm proud of the results our associates have accomplished this year
They are executing at a high level as we continue to achieve the key strategies levers of our current three-year plan, including delivering accelerated case growth through a focus on local customers, growing gross profit dollars and managing overall expenses
Fiscal 2017 was marked not only by our strong performance in which we continued our relentless focus on the customer, but also because of the some important highlights that include the addition of the Brakes business in Europe, a completion of the successful transition of 12 operating companies from SAP through enhanced version of our legacy ERP system, and validation of our customer-centric approach to our business as reinforced by the improvement in our customer loyalty scores
An example is our approach to giving customers a choice in how they want to interact with us, whether it’s through our best-in-class sales force, via our mobile platform or through a phone call
I would now like to discuss our segment results starting with U.S
Foodservice Operations including some highlights of key strategic initiatives that are helping to differentiate Sysco in the marketplace
In addition, I will speak to the performance of our International Foodservice Operations
Foodservice segment had a solid year with fiscal 2017 results on a comparable 52 week basis of sales growth of 1.5% and gross profit growth of 4%, while adjusted operating expenses grew 1.7% resulting in adjusted operating income growth of 7.8%
We once again experienced strong growth in our local business, up 2.4% in U.S
This was partially offset by declines in case volume for our multi-unit business due to our efforts to deliver disciplined profitable growth
This resulted in approximately 1% total case growth overall
As we progress through the next year, we expect to see those trends around our multi-unit business begin to improve
Importantly, as we strive to provide value for our local customers through innovative product offerings and value-added services, along with e-commerce capabilities, we are seeing them reward us with growth for the 13th quarter in a row
Looking at gross profit growth for U.S
Foodservice Operations, on a comparable 52 week basis, we delivered growth of 4% and gross margin expansion of 48 basis points, as we manage the deflationary environment in the first part of the year very well and are now working our way through an inflationary environment
Poultry, produce, seafood and dairy are driving the current inflation and we expect inflation to continue for the balance of the calendar year
Our strategic focus on accelerating growth of local customers is working
It all starts with an insight-based customer-centric approach that permeates everything we do
For example, we have improved the capabilities of our sales force through investments made in training, technology and targeted specialized resources and as a result our marketing associates are spending more time working with our customers on value-added activities and consultative services such as menu analysis, inventory management and business reviews
These services foster a deeper relationship with our customers and further enforces the importance of sales force play in helping our customers succeed
From a cost perspective, within U.S
Foodservice Operations our expense management was solid as we limited growth to 1.7% on an adjusted 52 week comparable basis for the year
Looking at U.S
Broadline, cost-per-case for fiscal 2017 improved by approximately $0.01 compared to the prior year
And on a fuel price neutral basis, cost-per-case increased by one penny
The consistent performance we have been to achieve is driven by key strategic initiatives which are supported by the expansive network of dedicated hard working front line associates in the warehouse and those team members delivering our products; through their efforts we have consistently been able to deliver a high level of service to our customers
Looking at the overall performance for the U.S
foodservice operations on a 52 week comparable basis, I'm pleased with how all of our associates executed our plan; as our adjusted operating income performed well and we were able to improve adjusted operating margins by 45 basis points for the full-year
Moving to international foodservice operations; on a 52 week comparable basis sales and adjusted operating income nearly doubled both largely driven by our recent acquisition of the Brakes Group
During the year Brakes performed reasonably well in midst of challenging environment in the UK as they exceed our expectation for EPS accretion contributing $0.14 per share
They are also making good progress in their supply chain transformational efforts as they move to multi-temp capability across the UK
Growth in France remains steady and Sweden continues to produce favorable results
We also continue to see long-term opportunities for growth across our new European business
Additionally we are in the process of integrating our Ireland businesses and things are progressing well; we expect to achieve modest benefits from these activities
Looking forward, we are excited about the long-term opportunities to create value for our customers in the European business
Over the next few years we will invest capital and resources to build on the existing foundation of the business as we continue to work on key strategic initiatives that will position us well for the future
We remain pleased with our performance in Canada despite the continued softness in Alberta which has been driven primarily by the energy market decline
Our Canadian business has seen positive momentum in the growth of its local business driven by improved sales execution and implementation of our customer focused initiatives such as category management and revenue management
In addition we are effectively managing costs by streamlining administrative expenses to improve productivity
As a result, we expect the Canadian business to continue to deliver positive performance
Turning to Latin America we are excited about the new facilities in both Costa Rica and Panama
Specifically in Costa Rica, we recently opened a 180,000 square foot state-of-the-art facility with the test kitchen and training facilities
This new space is enabling new products and full product lines to be available to our customers and we are excited about the accelerated growth potential those offerings will deliver
As we enter the new fiscal year, we do so with strong momentum and I believe fiscal 2018 will bring opportunities for Sysco
Our ongoing focus on customer insights and delivering against their needs for innovative products and consultative services will enable our sales force to continue to add significant value and deliver growth with those local customers
We will need to effectively manage the ongoing transition to an inflationary environment with our customers while staying focused on gross profit growth and we will continue to focus on driving efficiency from our supply chain through our expansive network that is built to provide a high level of service to our customers
In summary, fiscal 2017 showed important progress against our customer-centric strategy for Sysco
Our customer and operational strategies are firmly aligned around improving our customers' experience, engaging our associates at the highest level to improve execution and delivering on our financial objectives
Finally, as I work through the leadership transition with Bill, I'm personally honored to be given the opportunity to lead this amazing Company and I'm incredibly excited about the future for Sysco
Now, I'd like to turn the call over to <UNK> <UNK> for further details
Hey, <UNK>
Good morning, it’s Tom
I think we continue to feel that the independent segment is well positioned to continue to perform at a decent level
Obviously as we talked, there is been some I would say some softness in restaurants in general, but I think we still feel like the independents are well positioned whether it’s the product offering that they have, their ability to be flexible to meet the changing consumer needs
I think the other thing just as always a reminder is because of our - whether it’s our current share of the market or the fragmentation that exists generally in foodservice, we continue to believe that there is lots of opportunity for us to grow and whether that’s in independent restaurant segment or other segments of our business
Good morning, <UNK>
What I think specifically to those areas we are fortunate at Sysco, we have got an organization and a business structure that is exists around specialty meat and produce that positions us well
And so, I think we continue to believe that center of the plate is an important category and I think we look at that and say whether it’s the way we have structured ourselves now or the fact that we have got those capabilities that we are well positioned to grow
And so, whether or not that’s going to be a significant acceleration or not probably has much to do with what is going on broadly in the marketplace, but I think we feel like we are well positioned and we continue to work on improving even our current position in those areas
And then regarding just generally how we are feeling about it, as I mentioned the UK market certainly had some choppiness in it, but I think we are feeling good about where we can be positioned there
We had good movement in growth in France and we feel good about our business in Sweden and obviously with what we are doing in Ireland we continue to feel pretty good about that as well
So, I think overall we feel like we remain pretty well positioned and I think we are just obviously going to have to keep an eye on what is going on from a market perspective, but I think we are positioned how we are performing we feel pretty good
We do have some investments we need to make over the next year there and we feel like that’s an important part of us continuing to build on the work they had started pre-acquisition and we shared and talked a little bit about that earlier
Yes
So, a couple of things, as we talked, we had consistent improvement in the local growth over the last 13 quarters quite honestly, but we talked about the 2.7% in the fourth quarter for local; the contract business or the CNU we talked about it was in fact negative for the quarter and that's consistent with what we have talked about as we have looked at our portfolio and as Bill mentioned earlier we had certain customers we made some decisions on and there are customers who had made some decisions around doing business with us
But we continue to feel really good about the overall number that 1% comes from a combination of the contract business declining and the local business continuing to be strong; and my comment about improving is we do see some lapping of that happening in fiscal year 2018 and we also have some new business, will be coming on later in the year
I think the only thing I would just add, just lot of the questions that we get - questions on minimum wage loss and this and that and the other thing and that’s an impact on our customers in terms of the things they are dealing with that doesn’t necessarily or doesn’t really impact us at all and that most of our labors as well double or wage rates
I don’t know if we can help you with that one today, Chris
Andy this is Tom, I think the first thing I'd start with is when we talk we talk a lot about this, it remains very competitive out there
We have lots of competitors in general and from a market perspective I think we continue to look at leveraging all of the capabilities we have whether it’s things like the category management we talked about to make sure we have got the best cost on products or its revenue management tool, so we make sure that we are pricing products appropriately in the marketplace and making sure we are taking care of our customers
We still feel really good about obviously our ability to grow and our ability to do it in the right way and I think that’s really what you are seeing
I don’t think there is any specific thing that’s happened in addition to that
This is really about a balanced approach, making sure we are focused the right levers of the business that starts with that local customer where we can incremental value and doing the things that help basically get recognized and rewarded by them for providing the right products and the right services in a right way
So I don’t think there is anything beyond that that you should read into it
So on the contract side, as I said earlier, I think you will see us showing some improvement in those numbers as we get into fiscal year 2018, because of the both lapping some of the decision were made last year and also we have some new business that will be coming on
So, I think you should feel like there will be some improvement there
Regarding the local business, I mean we continue to feel really good about how we are positioned and as we talked about why we feel like we are able to succeed in that space has really more to do with how we are focused on delivering the value for those customers
I did say in my prepared comments about our loyalty score is going up
And I think one of the things as we think about what drove that, we talk to our customers a lot and what we have heard was everything from they are feeling about our marketing associates and continuing to add a lot of value through our selling resources and that means we are accomplishing the things we said, which is making them much more capable on and be more consultative and how they are working with our customers
We also heard good things around our technology platform, so I think we feel really good about the types of strides we are making the strategic initiatives we have been talking about
And so I think to us that’s confirmation that the things we are trying to do for these customers is working
