# Sysco (SYY) Financial Model Free Excel 3-statement financial model and company analysis for Sysco. - Canonical: https://finamodel.com/companies/sysco - Industry: Food - Downloadable model: Yes - Excel download: https://finamodel.com/company-models/SYY.xlsx ## Model Purpose This model provides a comprehensive equity valuation and operational benchmarking tool to assess Sysco's ability to drive operating leverage, manage route density, and pass through food cost inflation in a low-margin, high-volume distribution business. ## Company Overview Sysco Corporation is the global leader in selling, marketing, and distributing food and non-food products to restaurants, healthcare and educational facilities, lodging establishments, and other customers who prepare meals away from home. The company operates a highly efficient, asset-heavy distribution network comprising warehouses and a massive fleet of delivery trucks. Business segments include: * U.S. Foodservice Operations (approximately 70% of revenue) * International Foodservice Operations (approximately 18% of revenue) * SYGMA (approximately 10% of revenue) * Other (approximately 2% of revenue) Key geographies are primarily the United States, Canada, the United Kingdom, and France. The business model relies heavily on route density, drop size, and local customer mix to generate profitability, as the industry is characterised by extremely thin margins. Sysco holds the number one market share position in a highly fragmented US market, competing directly with US Foods and Performance Food Group. Recent major events include ongoing bolt-on acquisitions, strategic sourcing initiatives, and a continuous focus on cost-out targets to offset supply chain and wage inflation. ## Revenue Deep Dive ### U.S. Foodservice Operations * **Segment name:** U.S. Foodservice Operations * **Revenue driver formula:** Prior Year Revenue x (1 + Total Case Volume Growth + Product Cost Inflation) * **Historical growth rate:** 3% to 5% CAGR * **Key growth levers and headwinds:** Mix shift towards "local" independent restaurants (which carry higher margins than national accounts), sales consultant retention, and restaurant foot traffic trends. * **Pricing dynamics:** Highly sensitive to food cost inflation; Sysco generally passes commodity inflation through to customers, which drives revenue dollars up but can mathematically compress gross margin percentages. * **Revenue recognition notes:** Recognised upon delivery of products to the customer. * **Seasonality:** Relatively stable, though the summer months and holiday seasons typically see slight upticks in away-from-home dining. ### International Foodservice Operations * **Segment name:** International Foodservice Operations * **Revenue driver formula:** Prior Year Revenue x (1 + Local Case Volume Growth) x (1 + FX Impact) * **Historical growth rate:** 5% to 7% CAGR * **Key growth levers and headwinds:** European economic conditions, currency fluctuations, and integration of international bolt-on acquisitions. * **Pricing dynamics:** Similar pass-through dynamics to the US, but subject to local market competitive pressures and regulatory environments. * **Revenue recognition notes:** Recognised upon delivery. * **Seasonality:** European operations often see a dip in late summer due to widespread holiday closures, offset by tourism in key markets. ### SYGMA * **Segment name:** SYGMA * **Revenue driver formula:** Number of Chain Customers x Average Revenue per Chain * **Historical growth rate:** 4% to 8% CAGR * **Key growth levers and headwinds:** Winning or losing large national quick-service restaurant (QSR) contracts. * **Pricing dynamics:** Contractual, cost-plus pricing models with very thin margins. * **Revenue recognition notes:** Recognised upon delivery. * **Seasonality:** Mirrors national fast-food promotional calendars. ### Other * **Segment name:** Other * **Revenue driver formula:** Hotel Occupancy Rates x Supply Spend per Available Room * **Historical growth rate:** Flat to low single digits * **Key growth levers and headwinds:** Primarily consists of Guest Worldwide (hotel supplies); driven by global travel and hospitality trends. * **Pricing dynamics:** Contractual and spot pricing for hospitality supplies. * **Revenue recognition notes:** Recognised upon delivery. * **Seasonality:** Peaks during major global travel seasons. ## Cost Structure ### Variable Costs / COGS * **Line-by-line breakdown:** Product costs (meat, poultry, dairy, produce, frozen foods) and inbound freight costs. * **Gross margin range:** 18.0% to 19.0% (historically stable, FY24 reported at 18.5%). * **Key input costs and commodity exposures:** Highly exposed to protein and dairy commodity pricing; inflation is typically passed through, but deflation can compress gross profit dollars. * **How COGS scales with revenue:** Almost perfectly linear, as this is a pure distribution model. ### Operating Expenses * **R&D:** Not material for this business. * **SG&A:** Reported as "Operating Expenses". Includes outbound freight, warehouse labour, delivery driver wages, fuel, fleet maintenance, and sales consultant commissions. * **Depreciation & Amortisation:** Typically 1.0% to 1.5% of revenue, driven by the heavy asset base of distribution centres and delivery fleets. * **Stock-Based Compensation:** Less than 0.5% of revenue. * **Restructuring / one-time charges:** Frequent but small, usually related to facility consolidations or severance from cost-out programmes. ### Margin Profile * **Gross margin:** 18.0% to 19.0% * **EBITDA margin:** 5.0% to 5.5% * **Operating margin:** 4.0% to 4.5% * **Net margin:** 2.0% to 2.5% * **Margin trend:** Stable to slightly expanding due to strategic sourcing and supply chain efficiency initiatives. * **Segment-level margins:** U.S. Foodservice (~19.4% gross margin), International (~20.2% gross margin), SYGMA (structurally lower, typically high single digits). ## Balance Sheet Structure * **Total assets:** Approximately $22 billion to $24 billion. * **Key asset categories:** Accounts Receivable, Inventory, Property, Plant & Equipment (PP&E), and Goodwill. * **Goodwill & intangibles:** Approximately 25% to 30% of total assets, reflecting a long history of bolt-on acquisitions. * **Working capital profile:** * **Days Sales Outstanding (DSO):** 20 to 25 days (restaurants and institutions pay relatively quickly). * **Days Inventory Outstanding (DIO):** 25 to 30 days (perishable goods require rapid inventory turns). * **Days Payable Outstanding (DPO):** 35 to 40 days. * **Net working capital as % of revenue:** Near zero or slightly negative. * **Is working capital positive or negative?** Sysco operates with very tight, often negative working capital, meaning it funds growth efficiently by collecting from customers before paying suppliers. * **PP&E:** Consists of distribution facilities, refrigerated warehouses, and a massive fleet of delivery trucks. Useful lives range from 3 to 10 years for vehicles and up to 40 years for buildings. * **Right-of-use assets / operating leases:** Material, representing leased distribution centres and some fleet vehicles, typically around $1.0 billion to $1.5 billion. ## Capital Expenditure & Investment * **Capex as % of revenue:** 1.0% to 1.2% (approximately $700 million to $800 million annually). * **Maintenance capex vs. growth capex:** Roughly 70% maintenance (fleet replacement, facility upkeep) and 30% growth (facility expansion, automation, routing software). * **Major capex programmes underway or planned:** Investments in warehouse automation, electric vehicle fleet testing, and supply chain technology. * **Capitalised software / development costs:** Minimal compared to physical infrastructure. * **M&A pattern:** Serial bolt-on acquirer, purchasing regional broadline distributors and specialty food purveyors (e.g., Italian imports, custom meat cutters). * **Typical acquisition multiple paid:** 8x to 10x EV/EBITDA. ## Debt & Capital Structure * **Total debt:** Approximately $10 billion to $12 billion. * **Debt/EBITDA ratio:** Target is 2.5x to 2.7x (FY24 reported at 2.7x). * **Credit rating:** Investment grade (typically BBB+ / Baa1). * **Key debt instruments:** Senior unsecured notes and a commercial paper programme for working capital needs. * **Maturity profile:** Well-laddered with average maturities exceeding 5 years. * **Interest rate profile:** Predominantly fixed-rate bonds, with floating exposure limited to commercial paper. * **Covenants:** Standard investment-grade covenants; no restrictive financial maintenance covenants on the bonds. * **Share repurchase programme:** Highly active; repurchased approximately $1.2 billion in FY24 and $1.3 billion in FY25. * **Dividend policy:** Long-standing dividend payer with a payout ratio of roughly 40% to 50% of net income, yielding around 2.5%. ## Cash Flow Characteristics * **Operating cash flow conversion:** Consistently strong, typically 1.5x to 2.0x of Net Income (generating $2.5 billion to $3.0 billion annually). * **Free cash flow margin:** 2.0% to 3.0% of revenue. * **Major non-cash items:** Depreciation, amortisation, and occasional goodwill impairments (e.g., Guest Worldwide impairment in FY25). * **Working capital cash flow impact:** Generally a source of cash or neutral due to the negative working capital dynamic. * **Capex intensity:** Low relative to revenue (1%), but high in absolute dollar terms. * **Cash tax rate vs. GAAP effective tax rate:** Cash taxes closely mirror the GAAP effective rate of approximately 23% to 24%. ## Sheet Structure 1. **Assumptions**: Contains all hardcoded drivers for case volume growth, product cost inflation, segment margins, working capital days, and capital allocation targets. 2. **Revenue & Gross Profit**: Builds revenue and gross profit line-by-line for U.S. Foodservice Operations, International Foodservice Operations, SYGMA, and Other. 3. **Operating Expenses**: Details warehouse costs, delivery costs (including fuel), selling expenses, and G&A. 4. **Income Statement**: Consolidated view linking revenue, COGS, Opex, D&A, Interest, and Taxes to calculate Net Income and EPS. 5. **Balance Sheet**: Projects Assets (Receivables, Inventory, PP&E, Goodwill) and Liabilities (Payables, Debt, Equity) using working capital days and capex schedules. 6. **Cash Flow Statement**: Reconciles Net Income to Operating, Investing, and Financing cash flows, calculating Free Cash Flow. 7. **Debt & Interest Schedule**: Tracks senior notes, commercial paper balances, interest expense, and debt paydowns. 8. **Valuation (DCF)**: Calculates Unlevered Free Cash Flow, applies WACC, and derives an implied share price using a terminal growth rate. ## Key Financial Relationships 1. U.S. Foodservice Revenue = Prior Year U.S. Foodservice Revenue x (1 + U.S. Case Volume Growth + Product Cost Inflation) 2. International Foodservice Revenue = Prior Year International Revenue x (1 + International Volume Growth) x (1 + FX Impact) 3. SYGMA Revenue = Prior Year SYGMA Revenue x (1 + SYGMA Volume Growth) 4. Consolidated COGS = Consolidated Revenue - (Sum of Segment Gross Profits) 5. Segment Gross Profit = Segment Revenue x Segment Gross Margin % 6. Operating Expenses = Prior Year Operating Expenses x (1 + Total Case Volume Growth + Wage/Fuel Inflation) 7. Accounts Receivable = (Consolidated Revenue / 365) x DSO 8. Inventory = (Consolidated COGS / 365) x DIO 9. Accounts Payable = (Consolidated COGS / 365) x DPO 10. Depreciation Expense = Beginning PP&E x Blended Depreciation Rate 11. Interest Expense = Average Total Debt x Weighted Average Interest Rate 12. Free Cash Flow = Cash Flow from Operations - Capital Expenditures ## Cross-Sheet Dependencies The **Assumptions** sheet dictates the growth and margin profiles on the **Revenue & Gross Profit** and **Operating Expenses** sheets. These operational sheets feed directly into the **Income Statement**. Net Income from the Income Statement flows to the top of the **Cash Flow Statement**. The Cash Flow Statement calculates changes in working capital (driven by the **Balance Sheet**) and capital expenditures, which in turn update the PP&E line on the Balance Sheet. The financing section of the Cash Flow Statement links to the **Debt & Interest Schedule**, which calculates interest expense. This interest expense flows back to the Income Statement, creating a circular reference that must be managed via an iterative calculation or a circuit breaker toggle. ## Sign Convention * Revenue, Gross Profit, and Asset balances are entered and displayed as positive numbers. * Expenses (COGS, Opex, Interest, Taxes) are entered as positive numbers in their respective build schedules but subtracted in the Income Statement totals. * Liability and Equity balances are positive. * On the Cash Flow Statement, cash inflows are positive, and cash outflows (e.g., Capital Expenditures, Dividends, Share Repurchases) are negative. ## Things Most Likely to Go Wrong * Failing to model inflation pass-through correctly; Sysco passes food costs to customers, meaning revenue rises during inflationary periods, but gross margin percentages mathematically compress even if gross profit dollars increase. * Ignoring the structural margin differences between segments; SYGMA operates at a significantly lower gross margin than U.S. Foodservice, so mix shifts will distort consolidated margins. * Overcomplicating working capital; Sysco's cash conversion cycle is extremely tight, and minor errors in DSO or DPO assumptions will cause massive, unrealistic swings in Operating Cash Flow. * Miscalculating the impact of a 53-week fiscal year, which occurs periodically and artificially inflates year-over-year growth rates by approximately 2%. * Underestimating the impact of fuel costs; while Sysco uses fuel surcharges, rapid spikes in diesel prices can temporarily compress operating margins before pricing catches up. * Failing to account for constant-currency adjustments in the International segment, as FX swings can alter reported revenue by 1% to 3% annually. * Excluding the impact of share repurchases on EPS; Sysco aggressively buys back stock, meaning EPS grows faster than Net Income. * Misaligning capex and D&A; as an asset-heavy business, D&A is a massive non-cash add-back, and capex must be modelled accurately to prevent the net PP&E balance from deteriorating. ## Validation Checks * Consolidated Gross Margin should remain strictly within the 18.0% to 19.0% band based on historical performance. * Operating Margin should be between 4.0% and 4.5%; flag if it drops below 3.5% or exceeds 5.0%. * Net Debt to Adjusted EBITDA must remain between 2.5x and 3.0x, aligning with management's stated target and rating agency requirements. * Capital Expenditures as a percentage of revenue should consistently run between 1.0% and 1.2%. * Operating Cash Flow to Net Income conversion should be greater than 1.2x, reflecting the heavy D&A add-back. * The Balance Sheet must balance perfectly in every projected period (Total Assets = Total Liabilities + Shareholders' Equity). * Dividend payout ratio should remain between 40% and 50% of Net Income. * Effective tax rate should be stable at approximately 23% to 24%. ## Key Assumptions (Default Values) | Assumption | Default Value | Unit | Rationale | |---|---|---|---| | U.S. Foodservice Volume Growth | 1.5 | % | Aligns with recent local and national case volume trends. | | Product Cost Inflation | 2.0 | % | Normalised long-term food cost inflation expectation. | | U.S. Foodservice Gross Margin | 19.4 | % | Based on FY24 reported segment margins. | | International Volume Growth | 2.5 | % | Reflects steady European recovery and bolt-on M&A. | | International Gross Margin | 20.2 | % | Based on FY24 reported segment margins. | | SYGMA Revenue Growth | 5.0 | % | Historical average for chain restaurant distribution. | | SYGMA Gross Margin | 9.0 | % | Structurally lower margin cost-plus business model. | | Days Sales Outstanding (DSO) | 22 | Days | Calculated from recent receivables and revenue. | | Days Inventory Outstanding (DIO) | 28 | Days | Calculated from recent inventory and COGS. | | Days Payable Outstanding (DPO) | 38 | Days | Calculated from recent payables and COGS. | | Capex as % of Revenue | 1.1 | % | Historical average required to maintain fleet and facilities. | | Effective Tax Rate | 23.5 | % | Blended statutory rate across US and international jurisdictions. | | Share Repurchases | 1,200 | $ Millions | Aligns with FY24 and FY25 capital return run-rate. | | Dividend per Share Growth | 4.0 | % | Consistent with historical dividend aristocrat behaviour. | | WACC | 7.5 | % | Standard discount rate for a mature, defensive consumer staples firm. | | Terminal Growth Rate | 2.0 | % | Aligns with long-term GDP and population growth. | ## Data Sources & Benchmarks * **Filings:** SEC EDGAR database for Sysco's 10-K, 10-Q, and 8-K filings; Sysco Investor Relations website for earnings presentations and supplemental data. * **Key Peers:** US Foods Holding Corp. (USFD), Performance Food Group Company (PFGC), and Gordon Food Service (private). * **Industry Data:** National Restaurant Association (NRA) Restaurant Performance Index, USDA food cost inflation reports. * **Consensus Estimates:** FactSet or Bloomberg for forward-looking analyst estimates on case volume growth and gross margins. ## Sources * Sysco Corporation Form 10-K for the fiscal year ended June 29, 2024. * Sysco Corporation Form 10-K for the fiscal year ended June 28, 2025. * Sysco FY24 and FY25 Quarterly Earnings Releases (Q1-Q4). * Sysco Investor Relations Presentations and Supplemental Financial Information. --- ## Frequently asked questions ### What does Sysco Corporation do? Sysco Corporation is the global leader in selling, marketing, and distributing food and non-food products to various customers who prepare meals away from home. These customers include restaurants, healthcare and educational facilities, and lodging establishments. The company operates a highly efficient, asset-heavy distribution network. ### How does Sysco generate revenue and what are its main business segments? Sysco generates revenue by distributing food and non-food products, with its business model relying heavily on route density, drop size, and local customer mix to drive profitability. Its primary business segments include U.S. Foodservice Operations (approximately 70% of revenue), International Foodservice Operations (approximately 18% of revenue), and SYGMA (approximately 10% of revenue). ### What is Sysco's capital expenditure strategy and how much does it spend on capex? Sysco's capital expenditure typically ranges from 1.0% to 1.2% of revenue, amounting to approximately $700 million to $800 million annually. Roughly 70% of this capex is for maintenance, such as fleet replacement and facility upkeep, while 30% is allocated for growth initiatives like facility expansion and automation. ### How does Sysco manage profitability in its low-margin industry? Sysco operates in a low-margin, high-volume distribution business where profitability relies on driving operating leverage, managing route density, and effectively passing through food cost inflation. The company also focuses on strategic sourcing initiatives and continuous cost-out targets to offset supply chain and wage inflation. ### What is the purpose of the financial model for Sysco (SYY)? The financial model for Sysco provides a comprehensive equity valuation and operational benchmarking tool. It is designed to assess Sysco's ability to drive operating leverage, manage route density, and pass through food cost inflation in its distribution business. The model helps understand the company's financial performance and future prospects. ### Can I download an Excel financial model for Sysco (SYY) and what is its forecast horizon? Yes, an Excel financial model for Sysco (SYY) is available for download, offering a comprehensive analysis of the company's financials. This model provides a forecast horizon covering fiscal years 2026 through 2030, allowing for long-term financial projections and valuation. [Interactive forecast calculator](https://finamodel.com/companies/sysco/forecast)