UNFI Posts Double-digit Q3 Net Sales Surge
United Natural Foods Inc. reported that net sales for the third quarter of fiscal 2011 ended April 30 totaled $1.20 billion, a rise of 22.1 percent, or $218.3 million, from the $985.7 million posted in the third quarter of fiscal 2010. Excluding the impact of sales related to the natural and organic food wholesaler’s June 2010 Canadian acquisition and October 2010 purchase of certain inventory and distribution assets of Whole Foods Market, which generated combined estimated incremental net sales of about $95.9 million during the third quarter, third-quarter fiscal 2011 net sales grew 12.4 percent, or $122.4 million, to $1.11 billion.
The company’s net income for the third quarter rose $3.9 million, or 19.9 percent, to $23.4 million, from $19.5 million for in the year-ago period. Earnings per diluted share for the third quarter of fiscal 2011 came to 48 cents, an increase of 6.9 percent from the 45 cents per diluted share recorded last year.
“During the quarter, we continued to see strong demand for UNFI’s products across our customer channels and delivered strong earnings growth despite tough comparisons vs. the prior year and increasing fuel costs,” noted Steven Spinner, president and CEO of the Providence, R.I.-based company. “In particular, the independent channel had sales growth of 14.0 percent, reflecting our continued commitment to our largest group of customers. Excluding our acquisitions, the independent channel increased by 8.0 percent.”
Gross margin was 18.2 percent for the third quarter, a 33-basis-point improvement from the 17.8 percent posted in the second quarter of fiscal 2011. UNFI attributed this higher gross margin to higher fuel surcharges, lower inventory adjustments and the non-recurrence of the higher inbound freight expenses that it experienced in the second quarter as it expedited deliveries to maintain service levels. The decrease of 36 basis points from the gross margin of 18.5 percent for the third quarter of fiscal 2010 was mainly because of an ongoing shift in the company's customer mix, according to UNFI.
Net sales for the first nine months of fiscal 2011 came to $3.37 billion, a 21.8 percent rise from last year. Diluted EPS was $1.25 per share, including the dilutive effect from an equity offering completed in the first quarter of fiscal 2011, and representing a 6.8 percent increase over the first nine months of fiscal 2010. Gross margin was 47 basis points lower than last year, at 18.1 percent of net sales for the first nine months of fiscal 2011.
Based on performance through the first nine months of fiscal 2011 and the current outlook for the remainder of the year, UNFI revised its net sales guidance for fiscal year 2011 ending July 31 to a range of $4.48 billion to $4.52 billion, a 19.2 percent to 20.3 percent increase in total net sales over fiscal 2010. The company had previously issued a net sales guidance target of $4.4 billion to $4.5 billion.
Additionally, UNFI narrowed its earnings per share guidance for fiscal 2011 to a range of $1.67 to $1.69 per diluted share. It has had earlier updated its fiscal 2011 earnings per share guidance to $1.65 to $1.71 per diluted share.
UNFI carries and distributes more than 60,000 items to more than 23,000 customer locations throughout the United States and Canada. The wholesaler serves a wide variety of retail formats, including conventional supermarket chains, natural product superstores, independent retail operators and the foodservice channel.