‘Transformational’ Year for UNFI Since Supervalu Acquisition
Wall Street wasn’t kind to UNFI this week, as the grocery wholesaler posted earnings below estimates for the fourth quarter of its fiscal year ending Aug. 3, clobbering its stock price.
UNFI’s Q4 adjusted earnings came in at 44 cents per share, missing the Zacks Consensus Estimate of 69 cents, suggesting headwinds in the integration of Supervalu, the acquisition of which the company completed in late October of last year.
The wholesaler has been selling off Supervalu’s retail banners in an effort to focus the attention and resources of the combined company on distributing products to its independent grocer customers.
"This past fiscal year has been a transformational one for us as we began realizing some of the key benefits and competitive advantages from the Supervalu acquisition that will be the foundation of our long-term success," said Steven L. Spinner, chairman and CEO of Providence, R.I.-based UNFI. "As we begin the new fiscal year, I see tremendous focus and enthusiasm across the organization as we execute our strategy. This passion will be a tailwind as we drive to accelerate cross-selling efforts, realize new cost efficiencies, aggressively pay down debt and deliver results in the quarters to come."
Q4 net sales were $6.41 billion, an increase of 2.8% when excluding the contribution from Supervalu and an extra week in this year’s fourth quarter. Q4 net income came in at $18.9 million. The company finished its 2019 fiscal year with net sales just shy of $21.4 billion.
By customer channel, UNFI finished Q4 with net sales of $4.02 billion in its supermarket channel (versus $702 million a year ago, reflecting the impact of Supervalu’s retail banners); $1.2 billion in the supernatural channel ($982 million a year ago); $848 million for independents ($670 million); and $371 million listed as other ($238 million).
Gross margin in Q4 was 12.83% of net sales, compared with 14.50% for the year-ago period. Q4 operating expenses were $776.9 million, or 12.13% of net sales, compared with $316.6 million, or 12.21% of net sales, a year ago.
Q4 adjusted operating income was $49.8 million, which included restructuring charges and acquisition costs of $9.6 million.
UNFI’s outlook for fiscal year 2020 projects net sales of $23.5 billion to $24.3 billion and earnings of 35 to 89 cents per diluted share.
Serving natural product superstores, independent retailers, conventional supermarket chains, ecommerce retailers and foodservice customers, UNFI is the largest publicly traded grocery distributor in the United States, and is No. 30 on Progressive Grocer’s 2019 Super 50 list of the top grocers in the United States.