UNFI Experiences Q1 Sales Surge
For its first quarter of fiscal 2015, ended Nov. 1, 2014, United Natural Foods Inc. (UNFI) reported a net sales increase of 24.4 percent to $1.99 billion, compared with $1.6 billion for the year-ago period, while operating income skyrocketed 21.6 percent to $58.4 million, versus $48 million last year. UNFI's diluted EPS rose 17.9 percent to 66 cents, from 56 percent in the prior-year period.
"UNFI achieved record sales of almost $2 billion during our first quarter of fiscal 2015, and comparable-sales growth recovered nicely after experiencing a modest slowdown during the first few weeks of the quarter," affirmed Steven Spinner, president and CEO of the Providence, R.I.-based wholesaler of natural and organic products.
Q1 2015 included incremental net sales of about $227.7 million, resulting from the company’s acquisitions of Trudeau Foods in Q1 2014 and Tony's Fine Foods in Q4.
Gross margin fell 92 basis points to 16 percent for Q1 2015, versus 16.9 percent last year. According to UNFI, gross margin was adversely affected primarily by the dilution from Tony's sales in the quarter, while shifting customer mix, inbound freight costs and foreign exchange from the declining value of the Canadian dollar on the company’s Canadian business additionally contributed to the year-over-year decline.
Reaffirming Guidance
Total operating expenses came to 13.1 percent as a percentage of net sales for Q1, a decline of 85 basis points from the year-ago period. Total operating expenses grew $37.5 million, or 16.8 percent, to $260.6 million, compared with $223.2 million last year, which UNFI primarily attributed to higher sales volume. Total operating expenses included nonrecurring costs of about $1 million related to the startup of a Hudson Valley, N.Y., distribution center; $0.6 million associated with the write-off of an intangible asset related to the company's Canadian division, which was acquired in June 2010; and around $0.3 million in remaining costs related to the Tony’s acquisition.
"Tony's Fine Foods performed extremely well during their first quarter as part of UNFI, and we look forward to rolling this perishable platform out across the U.S. as we look to both existing and new customers," added Spinner. "[O]ur newest distribution facilities, located in Racine, Wis., and Hudson Valley … were designed to handle the unique storage requirements of these exciting products."
Based on its performance to date and the current outlook for the rest of the fiscal year, the company is reaffirming its previous fiscal 2015 guidance, which it originally provided in September. For fiscal 2015, ending Aug. 1, 2015, UNFI expects net sales in the range of $8.13 billion to $8.38 billion, an increase of about 19.7 percent to 23.7 percent from fiscal 2014, and GAAP earnings per diluted share for fiscal 2015 in the range of $2.88 to $3.01 per share, an increase of 14.3 percent to 19.4 percent over fiscal 2014 GAAP earnings per diluted share of $2.52.
UNFI carries and distributes more than 80,000 products to 40,000-plus customer locations throughout the United States and Canada. The company serves a wide variety of retail formats, including conventional supermarket chains, natural product superstores, independent retail operators and the foodservice channel.