You mentioned upfront monies in your question. I want to be clear. Upfront monies are not a bad thing. Upfront monies, if they enable you to secure a large customer win for a dedicated period of time with minimum volume guarantees; our finance team underwrites every single one of those deals. I approve personally, the bigger deals, those are good deals. So I don’t want you to infer that increase in upfront monies is actually a bad thing. They tend to be a good thing. And we have not, to answer your question, specifically seen an increase that activity in the marketplace. Mark, back to you, if you have a follow-up.
Mark Carden: Got it. That’s helpful. And then as my follow-up, just amid some of the industry slowdown, have you seen any changes to the M&A backdrop? Any more opportunities opening up just for consolidation base with some of the smaller players maybe running some challenges?
Kenny Cheung: Yes. So in terms of M&A, what we’re doing at Sysco is a couple of things, right? So number one, we are focused very hard on the integration. By the way, the Edward Don integration is underway and the synergies are being realized on both from a go-to-market standpoint as well as from a back office purchase standpoint. So right now, our priority is to focus on integrating and realizing synergies that we have in our portfolio today. In terms of the backdrop and how we think about M&A, and from a more of a macro standpoint, we have a robust pipeline. We have extremely robust pipeline right now, given the lens of ROIC, we will keep a close eye out for accretive opportunities. But at that moment, as I mentioned, we are focused on integrating and realizing synergies as we expect, these M&A opportunities that we have in our portfolio will be enterprise accretive from a multiple standpoint.
Operator: [Operator Instructions]. And our next question comes from Jake Bartlett with Truist Securities.
Jake Bartlett: Great. Thanks for taking the question. My first was a clarification on the comments on April trends. There’s a big calendar shift of Easter and some spring break. You mentioned, I think that the kind of similar growth rate for both months. So that to me would imply a kind of underlying deceleration in April. I just want to clarify what the message is there, whether the comments are kind of adjusted for those calendar shifts. And then my real question is really about the non-local case growth, and it’s not specifically given, but it looks like it implies an acceleration. The question is, what is driving that that non-local case growth? The builders are the drivers of that. And what your expectations are in the next couple quarters, whether you think that that momentum will continue and potentially offset some of the headwinds that we might be seeing in independence. Thank you.
Kenny Cheung: Okay. I’ll take the first part. This is Kenny. So just to clarify, there is no deceleration into April. The growth rate from March is carrying into April. So just to be very clear, we’re not seeing a deceleration in the market right now. It’s similar to the ex of velocity of Q3. And with that said, as Kevin mentioned, we do have action in place to stimulate volume growth further in subsequent periods. Kevin, back to you.
Kevin Hourican: Yes. And I think the second part of your question is outside of local, what else do you see going on. We’ve had a tremendous amount of success in our corporate national CMU business over the last few years, and we continue to win net new business profitably. In national sales, including new customer wins signed in the quarter, Q3 that began shipping at the end of Q4 and into fiscal 2025. And one other call out is our SYGMA business, which I mentioned earlier, down $3.5 million in the most recent quarter. We’re now lapping week 53 of a customer exit from a year ago. That was an unprofitable customer that wasn’t willing to partner with Sysco to far an appropriate margin profile, and we exited that business we are now lapping that, which will positively impact SYGMA’s growth rates in Q4, and we’ve signed some net new profitable business in SYGMA, which will contribute positively to SYGMA in Q4 and into 2025 as well.
Kenny Cheung: Sorry on SYGMA, one piece to add is SYGMA is down on a sales basis, however, year-to-date, the profit margins are up 20% year-on-year. So we’ve done a nice job really focusing hard on supply chain productivity. And once volume comes in, as Kevin talked about, the new deals we are signing at inking that should flow nicely down to the bottom line.
Jake Bartlett: Just if I’m so on, just a follow-up question. Is Easter a negative for you? Or how does the calendar shift just to make sure I understand how the calendar shift would impact Sysco as a whole?
Kevin Hourican: Yes. I don’t think we’re going to get into a specific commentary about Easter. There’s movable holidays. Easter is one of them. I think it can move six weeks in any calendar year. Kenny’s commentary was much more macro than that just one event, it was in Q3. There was a notable step up from a very tough January into more positive February. February stepped up more positive into March, and we’re seeing the trend of that improvement continue. And we have to take further actions in Q4 to drive a step up from Q3, and we’re prepared to do that through the things that I talked about on today’s call. We’re confident — we’re focusing our sales reps on the new customer acquisitions in Q4 that we can improve our market share capture. And to be clear, we took profitable market share. We grew profitably versus the market in Q3, and we believe we can step up that performance in Q4, and we’re focused on doing so.
Operator: And we have our next question from Edward Kelly with Wells Fargo.
Edward Kelly: Hi, good morning, guys. I wanted to ask a question just about the backdrop and the expectation and how we should be thinking about the go-forward. Kevin, your tone definitely seems to have changed a bit about the backdrop. Kenny, you mentioned transitory, I think in your remarks, and if you look at Q4 guidance, you have a $0.20 range out there. That’s a pretty big range, I think, for you guys. So it does suggest some uncertainty. But I guess what I’m curious about is how you’re thinking about the duration of what we are seeing today? What specific adjustments that you’re making that allow you to get to your goals? How do you think that’s going to actually impact next year?
Kevin Hourican: Yes. Good morning, Ed. It’s Kevin. I’ll start. Yes, Q3, from a volume and traffic to restaurant perspective was a softer macro than we had anticipated. It was negative for the industry, food-away-from-home in total, volume of cases by the food distributor network in aggregate was negative in the quarter and that’s not what we would have anticipated for the quarter. So the tone that you heard is tied to that fact based, the overall macro in Q3 was softer than we had anticipated. So that means we need to take share in order to be able to grow at the rate that we desire to grow at. And the good news is we can do that. We can do that by focusing on net new customer prospecting. We can do that by further penetrating our specialty businesses, which have a large opportunity to grow prospective market share.
And we have teams really focused in that regard. I think we’ll defer a comment on fiscal 2025 until our May Investor Day. But we are confident in our ability to deliver against the guidance for the year. And for that, Kenny, I’ll toss you to comment on Ed’s question about the guidance range for the year and for the fourth quarter.
Kenny Cheung: Hi Ed, it’s Kenny. So based on our current expectation and with three quarters under our belt, we are more confident at the mid-point of our guidance range. And why is that? Three reasons. One is our confidence is guided by data. We partner with third parties, suppliers, institutions, and we have a lot of data. We have a lot of volume running through our shop each and every day. That’s point number one. Number two, what gives me confidence in our guidance is the fact that we have a ton of dynamic levers in our P&L. As you can see in Q3, our GP grew faster than expenses and faster than sales, which means that you can leverage on both the GP line as well as the operating expense line. We talked about a lot of levers in the GP.
You have strategic sourcing. You have Sysco brand penetrated within local. You have centralized pricing tool. We also have growth from our specialty business, which we saw this quarter. So GP leverage that we see. And then we’re also very excited with the fact that we increased our structural SG&A cost takeout from $100 million to $120 million. And the good news is, as the market normalizes as volume materializes, that volume will flow down nicely and accretively down to the bottom line. And as these costs are structural and they will not be back in.
Kevin Hourican: And just to add one, we try not to do three-part answers. But as we think about where else can sources of value come from as we go from 2024 into 2025, there’s more to be gained with supply chain productivity. We’re not done. There’s still gas in the tank on productivity improvement. We’re really pleased with our performance in supply chain in March. It was the best performance in years, and we’re seeing that carry into Q4, and that can and will carry into 2025. So supply chain productivity will continue to be a beneficial contribution going forward. And then local case growth. We can accelerate local case growth relative to our total company case growth and that’s something we’re very focused on for fiscal 2025, and we’ll talk about how we’re going to do that at Investor Day.
Operator: And we now have our next question from Kelly Bania with BMO Capital Markets.
Kelly Bania: Hi, good morning. Thanks for taking our question. Kevin, you noted a couple of times just the need for restaurants to lower their menu prices. Just curious if you can elaborate on any context you’re hearing from them about their willingness to do so. And can you also tie in just what you’re seeing in California, in particular, in light of the recent wage dynamics there? Are you seeing restaurants pass along those higher costs in terms of menu pricing? How is California impacting the total volumes across the industry?
Kevin Hourican: Yes. Kelly, it’s a good question. I appreciate the question. We tend not to get into conversations with our customers about the prices they should charge their end consumers. I was just making an observation on what we see in the data, just being back based traffic down for the quarter. Cases shipped in aggregate by the food-away-from-home industry down year-over-year for the quarter and sales up at restaurants, so it’s just pure math. The only way that those dynamics could be true at the same time is for menu prices to be up significantly on a year-over-year basis. And research indicates, we do a lot of consumer research that consumers are getting fatigued with the increases in menu prices. But it’s not for us to tell our end customers what to do with how they run their business.
What’s on us is what we can control. We can provide them value. We can provide them value with Sysco brand. We can provide them value by smaller portion size. We can provide the value by doing value-added cut services to take labor out of their kitchen. And that’s what we focus on. We tend to focus on what we can control and help be a solution-oriented company for our customers. So the second part of your question about California, it’s too soon to tell. I mean the largest passed we are not seeing a negative impact to our business in California to discretely and specifically answer that part of your question. I think what I’ve read and what I’m sure you’ve read is new door count openings will be muted in the state versus historical 10-year average tied to concerns that — these are more — these are national chain operators.
