UNFI Posts Double-digit Q1 Net Sales Rise
United Natural Foods Inc. (UNFI), a wholesaler of natural and organic foods, has reported net sales for its first quarter of fiscal 2013, ended Oct. 27, of $1.410 billion, an increase of 15.8 percent, or $192.6 million, from the $1.217 billion logged in the year-ago period. The Providence, R.I.-based company’s acquisitions of certain assets of three distributors completed during the first quarter of fiscal 2013 contributed $11.2 million in net sales during the quarter. Excluding these incremental net sales, UNFI’s net sales grew by $181.4 million, or 14.9 percent, in the first quarter of fiscal 2013 compared with last year.
“Despite moderated inflation and higher-than-anticipated product shortages, strong consumer demand continued to drive steady growth for our products and services during the quarter,” noted UNFI president and CEO Steven Spinner. “We anticipate growth for the holiday season should remain strong as consumers continue to move towards a healthier lifestyle.”
Total operating expenses in the first quarter of fiscal 2013 rose $8.3 million, or 4.4 percent, to $199.4 million, versus last year’s $191.1 million. Total operating expenses were 14.1 percent as a percentage of net sales for the first quarter of fiscal 2013, a decline of 155 basis points compared from the year-ago period. Total operating expenses for the first quarter of fiscal 2013 included expenses of about $1.6 million related to the termination of a licensing agreement and the write-off of the associated intangible asset. Total operating expenses for the first quarter of fiscal 2012 included $5.3 million in expenses related to the restructuring and divestiture of the UNFI’s conventional nonfood and general merchandise lines of business, and $1.6 million in expenses related to the onboarding of a new national customer. Excluding these expenses in each period, operating expenses as a percentage of net sales came to 14 percent for the first quarter of fiscal 2013, a decrease of 110 basis points compared with the year-ago period.
Noncash rent expense associated with the company’s new Aurora, Colo., distribution center, which is slated to open in the fourth quarter of fiscal 2013, represented about $0.8 million in expense during the first quarter of fiscal 2013.
On a GAAP basis, operating income as a percentage of net sales increased 21.2 percent to 2.6 percent for the first quarter of fiscal 2013, from 2.1 percent last year. Operating income for the first quarter of fiscal 2013 was $36.6 million, a rise of about $10.5 million, or 40.3 percent, from year-ago period. Adjusted to exclude the expenses associated with the write-off of the intangible asset, operating income as a percentage of net sales totaled 2.7 percent for the first quarter of fiscal 2013, which UNFI noted was consistent with last year’s comparable quarter, adjusted to exclude the restructuring and onboarding expenses. Operating income adjusted for the aforementioned items grew 15.8 percent in the first quarter of fiscal 2013 to $38.2 million, compared with $33.0 million in the year-ago period.
Gross margin was 16.7 percent for the first quarter of fiscal 2013, a 110 basis point drop from the 17.8 percent recorded last year. Gross margin for the first quarter of fiscal 2013 was adversely affected by higher supplier out -of -stocks, increased inbound freight costs and UNFI’s commitment to maintain higher service levels, which together represented about 70 percent of the year-over-year decline, the company said, adding that the ongoing shift in customer mix toward the supernatural and conventional supermarket channels also hurt gross margin during the first quarter of fiscal 2013.
GAAP net income for the first quarter of fiscal 2013 rose by $6.4 million, or 42.1 percent, to $21.5 million, or 43 cents per diluted share, from $15.2 million, or 31 cents per diluted share, last year. Earnings per diluted share, adjusted to exclude the after-tax expenses related to the write-off of the intangible asset, the above-mentioned unclaimed property settlement and a discrete tax benefit of $2.7 million primarily associated with the reversal of reserves for uncertain tax positions were 46 cents for the quarter.
“UNFI continued to execute on its strategic plan during our first quarter,” said Spinner. “We are currently in the process of integrating our recent acquisitions into our existing operations, and expect all integration tasks to be completed by the end of our third quarter of fiscal 2013.”
UNFI carries and distributes more than 65,000 products to more than 27,000 customer locations throughout the United States and Canada. The company serves a wide variety of retail formats, among them conventional supermarket chains, natural product superstores, independent retail operators and the foodservice channel.