UNFI: Natural Products Business, Efficiencies Boost Q2 Sales
United Natural Foods Inc. (UNFI) reported yesterday a 4.9% year-over-year net sales increase to $8.2 billion in Q2, fueled by natural product growth and larger wholesale unit volumes as it works to create “more customized service” for its wholesale customers and suppliers.
Announced in January, the Providence, R.I.-based distributor’s wholesale business realignment includes two product-focused divisions with dedicated sales teams to offer differentiated and tailored solutions. One division is focused on conventional grocery products, while the other is centered around natural, organic, specialty and fresh products.
In the quarter ending February 1, UNFI’s conventional products business was up 2%, reflecting new business wins and new customers onboarded over the past four quarters. Across its wholesale business, volumes were up nearly 3%, “broadly [outperforming] the key industry Nielsen benchmarks.” Meanwhile, total sales in UNFI’s retail business were down 3% due to five store closures over the past 12 months.
Net loss was $3 million compared to $15 million in the prior-year period. Adjusted EBITDA climbed 13.3% to $145 million.
“[In Q2], we continued to execute against our multi-year strategic plan focused on creating sustainable value for our customers and suppliers while enhancing our profitability and free cash flow generation and reducing net leverage,” said Sandy Douglas, CEO, in a statement. “Our continued positive volume trends serve as an indicator of the strength of our customer base and the unique role UNFI plays in the food distribution supply chain.”
Under the guidance of CFO Matteo Tarditi, who joined the company last year, UNFI has become more “effective and efficient” across operations, Douglas told shareholders during this morning’s earning call. The company has extended lean daily management into additional distribution centers and has reduced shrink to the lowest level as a percentage of sales in the past 10 quarters.
Last month, the company consolidated its Fort Wayne, Ind., facility, transferring its volume to nearby facilities with greater efficiency. Additionally, the previously closed conventional warehouse in Billings, Mont., is now under contract, and the sale is expected to close in Q4. The proceeds of the sale will be used to further reduce net debt.
“We are laser-focused on improving processes and removing waste so we are better able to bring value and improve service levels to our customers and suppliers,” said Tarditi during this morning’s call, noting that these efforts have already delivered low single-digit productivity gains and improvements in safety and delivery quality.
Based on today’s earnings, UNFI has again raised its outlook for fiscal 2025 across all metrics except capital spending. The company is forecasting sales of $31.3 billion to $31.7 billion (previously $30.6 billion to $31 billion). The guidance for adjusted EBITDA is $550 million to $580 million (previously $530 million to $580 million).
“The strategy we have outlined of bringing value to our customers and suppliers through a differentiated go-to-market proposition and strengthening service levels while improving UNFI’s free cash flow is simple and powerful,” said Tarditi. “We remain confident and optimistic about our future and the value creation opportunity we have.”
