UNFI Posts Profit Decline, Names New President and CFO
United Natural Foods Inc (UNFI) reported a 0.5% decrease in net sales to $7.8 billion during Q2 2024 in an earnings release this morning, missing analyst revenue expectations but beating share price predictions.
CEO Sandy Douglas attributed the decline to lower unit volumes, partially offset by inflation and new business with existing customers in its Supernatural channel.
“Inflation rates continue to decline sequentially, with some category-specific deflation occurring. Despite this trend, overall unit volumes remain under pressure and increased competition in food retail persists,” Douglas told investors on the call.
The distributor’s gross profit accounted for 13.3% of net sales and declined by $34 million, or 3.2%, to $1 billion. Adjusted earnings per share (EPS) was $0.07, compared to $0.78 in the second quarter of fiscal 2023. Adjusted EBITDA was down compared to Q2 2023 and came in at $128 million this past quarter, or 1.6% of sales.
Business transformation costs reached $14 million during the quarter, compared to $4 million in Q2 last year. That brought operating expenses to a total of over $1 billion in the quarter, only increasing slightly compared to Q2 2023 expenses. However, excluding those costs, operating expenses were $996 million, or 12.8% of net sales.
Douglas told investors on the call that UNFI has generated $150 million in annual savings from its efficiency initiatives and continues to refine its cost structure.
During the earnings call, Douglas also announced the appointment of Giorgio “Matteo” Tarditi as president and CFO. Tarditi brings more than two decades of CFO experience from GE and will succeed John Howard, who will stay on through May to facilitate the transition.
“I believe [Tarditi’s] experience, combined with his strong background in process excellence, is an important complement to the existing efforts that we have put in place to reset and improve our profitability,” Douglas told investors on the call. “It also positions him well to augment the momentum we are building in our customer and merchandising capabilities across our existing organization.”
In addition to realigning its management team, UNFI’s business transformation plan has also taken place in its warehouses. The distributor is working to activate a new distribution center in Manchester, Penn. and is increasingly automating existing distribution center operations. UNFI’s Centralia, Wash. facility will be automated by this Spring and the optimization of its northeast distribution center is expected to be complete by 2025.
“We’ve also seen steadily increasing outbound fill rates [from these efforts]. These improvements were offset by DC start-up and real estate related costs, which include about $5 million related to [the Pennsylvania facility’s] rent,” said Howard on a call with investors. “This also includes continued investment and foundational initiatives designed to drive operating efficiencies and provide the highest possible service levels for our customers.”
Looking ahead, UNFI has lowered full-year net sales expectations and narrowed the ranges for its 2024 net income, EPS, adjusted EPS, and adjusted EBITDA.
