UNFI Logs Q4 Improvements
For its 14-week fourth quarter ended Aug. 3, United Natural Foods Inc. (UNFI) experienced a net sales increase of 10.0% to $8.2 billion; grew 2.1% on a comparable 13-week basis, and recorded a net loss of $37 million and a loss per diluted share (EPS) of 63 cents. Also during the quarter, adjusted EBITDA increased 53.8% to $143 million, including an approximately $10 million benefit from the additional week in the quarter, with adjusted EPS of 1 cent.
According to the company, improving volume trends, new business with existing customers, and benefits from near-term efficiency initiatives resulted in a full-year performance at the upper end of its outlook ranges for key financial metrics. Its net debt and net leverage declined sequentially to $2.06 billion and 4.0x, respectively, at year end from $2.13 billion and 4.6x, respectively, at the end of the third quarter.
Additionally, UNFI advanced its network optimization in Q4 by consolidating its Billings, Mont., and Bismarck, N.D., distribution centers into other facilities. This move is expected to enhance the customer and supplier experience in the region through better technology access, a wider product assortment, and more efficient and effective service. The company also introduced a three-year business plan and financial objectives driving customer and supplier value, margin expansion, free cash flow generation, and deleveraging.
“We delivered fourth-quarter results that drove fiscal 2024 performance to the upper end of our previously provided outlook,” affirmed UNFI CEO Sandy Douglas. ”This capped a year in which we generated four consecutive quarters of sequentially increasing profitability, significantly strengthened our foundation and built momentum as we enter fiscal 2025. During fiscal 2024, we drove strong same-customer growth, extended our agreement with our largest customer, realized approximately $150 million dollars in benefits from structural efficiency initiatives, significantly reduced shrink, lengthened the maturity on our term loan, and onboarded our new president and CFO, Matteo Tarditi.”
Added Douglas: “We are also actioning key elements of our updated strategy that has resulted from our ongoing board- and management-led financial review, which we expect will drive accelerating performance and create sustainable value for our customers and suppliers. Simultaneously, we are working to improve free cash flow generation and to reduce net leverage by optimizing our distribution center network, reducing the capital intensity of our business, and driving efficiencies across the organization. We expect these two elements of our strategy will work together to help us generate meaningful shareholder value.”
UNFI’s Q4 net sales of $8.2 billion saw an approximately $582 million benefit from the additional week in fiscal 2024, compared with net sales of $7.4 billion in the fourth quarter of fiscal 2023. Excluding this additional week, sales were driven by improving unit volumes that turned positive toward the end of the quarter. Sales additionally benefited from inflation.
Gross profit in Q4 was $1.1 billion, an increase of $150 million, or 15.5%, versus the fourth quarter of fiscal 2023. On a comparable 13-week basis, gross profit grew 7.0% compared with the prior-year quarter. The gross profit rate in the fourth quarter of fiscal 2024 was 13.7% of net sales, including a $12 million LIFO benefit. Gross profit rate was 13.0% of net sales in the fourth quarter of fiscal 2023, including a $36 million LIFO charge. Excluding the impact of LIFO, the gross profit rate was 13.5% of net sales in the fourth quarter of both fiscal years. The benefit of lower shrink expense was offset by lower product margin rates and a shift in business mix.
Q4 operating expenses were $1,075 million, or 13.2% of net sales, compared with $1,004 million, or 13.5% of net sales, in the year-ago period. According to UNFI, the decline in operating expenses as a percentage of sales was driven by the benefits of cost-saving initiatives.
During Q4, the company managed to narrow its net loss and net loss per diluted share, which for the fourth quarter of fiscal 2023 were $68 million and $1.15, respectively, while adjusted EPS increased from an adjusted EPS loss of 25 cents in the year-ago period. Adjusted EBITDA for Q4 was also up from the $93 million logged for the fourth quarter of fiscal 2023.
For fiscal 2025, the company provided the following outlook: net sales of $30.3 billion-$30.8 billion, a net loss of $41 million-$3 million, EPS loss of 65 cents-5 cents, adjusted EPS of 20 cents to 80 cents, adjusted EBITDA of $520 million to $580 million, and capital and cloud implementation expenditures of about $300 million.
Providence, R.I.-based UNFI delivers a wide variety of products to more than 30,000 customer locations throughout North America, including natural product superstores, independent retailers, conventional supermarket chains, e-commerce retailers and foodservice customers. The largest publicly traded grocery distributor in America, the company is No. 22 on The PG 100, Progressive Grocer’s 2024 list of the top food and consumables retailers in North America.
