UNFI Shipping On ‘Limited Basis’ Following Security Breach

Wholesale distributor UNFI is shipping on a “limited basis” in the wake of last week’s cyberattack, executives said during an earnings call today to discuss third-quarter financial results.

While it is unclear what percentage of business remains restrained by the security breach, CEO Sandy Douglas told analysts the company is focused on restoring and repairing its system and offering short-term solutions such as partnering with other wholesalers to supply its grocery customers.

“The focus right now… is to help customers meet their needs in whatever way it can be done, and that, in some cases, involves help from other wholesalers. In other cases, it’s a lot of very innovative work that our teams have done to help respond as best as our capabilities will allow,” Douglas said.

UNFI – which is the primary supplier to Whole Foods Market – shut down some of its information technology systems on Thursday following the discovery of “unauthorized activity” and began working with third-party cybersecurity professionals to assess, mitigate and remediate the issues. The company locked down its entire network on Friday and disclosed the incident in an 8-K filing with the U.S. Securities and Exchange Commission (SEC) prior to the market opening on Monday morning.

“Pursuant to our business continuity plans, we have implemented workarounds for certain operations in order to continue servicing our customers where possible, and we’re continuing to safely bring our systems back online and restore broad-based customer service as soon as possible,” Douglas said during the call, adding, “we believe we are managing the incident capably.”

He said the company will likely incur elevated costs as it works to safely bring its systems back online and support its customers during the disruption. He declined to provide an estimate of the financial impact of the incident or timing of a resolution.

“We’re using our resources and our tremendous team of sales and supply chain and procurement to work with suppliers and customers to make their situation as good as we possibly can,” he said.

Overall, UNFI posted strong third-quarter results that benefited from new profitable business wins and steady margin improvement.

Net sales increased 7.5% to $8.1 billion, driven by higher wholesale unit volumes and inflation. The company reported a net loss of $7 million, a significant improvement compared to its posted net loss of $21 million in the prior-year period. Adjusted EBITDA grew 20.8% to $157 million.

The company updated its full-year outlook for net loss to reflect costs and charges associated with terminating its contract with grocery operator Key Food and optimizing its distribution network in the Northeast. Executives declined to provide guidance for other metrics due to the ongoing assessment of the cyberattack impact.

Shares of UNFI plummeted by as much as 10% today following the earnings release.