UNFI Posts Double-digit Q4 Sales Surge
United Natural Foods Inc. (UNFI) has reported net sales for the fourth quarter of fiscal 2011 ended July 30, 2011, of $1.16 billion, a rise of 17.2 percent, or $170.2 million, over net sales of $988.5 million for the year-ago period. Net income for the quarter fell by $0.5 million, or 2.6 percent, to $17.2 million, from $17.6 million last year, mainly because of pre-tax expenses of $6.3 million in connection with the restructuring of the company’s UNFI Specialty Distribution Services division, including a $5.8 million non-cash impairment charge related to its Harrison, Ark., facility and other expenses incurred during the divestiture of its general merchandise and conventional nonfood lines of business.
Earnings per diluted share for the fourth quarter of fiscal 2011 were 35 cents, including the restructuring expenses noted above. Excluding those expenses, earnings per diluted share for the quarter were 43 cents, an increase of 7.5 percent from the 40 cents per diluted share earned last year. Earnings per diluted share in the fourth quarter of fiscal 2011 also included the additional dilutive effect of the company’s common stock offering, which was completed in the first quarter of the fiscal year.
Gross margin was 18.6 percent for the fourth quarter of fiscal 2011, a 43-basis-point improvement sequentially from last year’s 18.2 percent. UNFI attributed the higher gross margin to purchasing and logistics efficiencies, as well as higher fuel surcharge revenues. According to the company, gross margin for the fourth quarter of fiscal 2011 was consistent with the year-ago quarter and primarily the result of the higher fuel surcharge revenues in the current-year quarter, partially offset by the continued shift in UNFI’s customer mix.
Operating expenses as a percentage of net sales rose to 16.0 percent for the fiscal 2011 fourth quarter, mainly as a result of the $6.3 million of pre-tax restructuring expenses recognized during the quarter. Excluding the restructuring expenses, operating expenses were 15.5 percent of net sales, a decrease of 38 basis points versus the fiscal 2010 fourth quarter. Operating income as a percentage of net sales was 2.5 percent for the fiscal 2011 fourth quarter, compared with 2.7 percent of net sales last year. Excluding the restructuring expenses, operating income as a percentage of net sales was 3.1 percent for the fourth quarter of fiscal 2011, an increase of 42 basis points from the fiscal 2010 fourth quarter.
Net sales for fiscal 2011 came to $4.53 billion, a 20.6 percent increase over the prior fiscal year. As a result of the ongoing shift in customer mix, gross margin was 34 basis points lower than the comparable prior-year period, at 18.2 percent of net sales for fiscal 2011. Gross margin was also adversely affected during the year by startup costs related to inventory issues, and incremental freight and service costs incurred during the first half of fiscal 2011 in connection with UNFI’s new Lancaster, Texas, distribution facility, although these costs were partially offset by higher fuel surcharge revenue.
Total operating expenses as a percentage of net sales for fiscal 2011 were 15.3 percent, versus 15.5 percent for fiscal 2010. Excluding the restructuring expenses, total operating expenses were 15.2 percent of net sales for fiscal 2011, 28 basis points lower than the prior fiscal year. Operating income grew $14.8 million, or 12.9 percent, from fiscal 2010 to $129.7 million, resulting in an operating margin of 2.9 percent. Excluding the restructuring expenses, operating income rose $21.0 million, or 18.3 percent, over fiscal 2010 to $136.0 million, resulting in an operating margin of 3.0 percent as a percentage of net sales.
Diluted earnings per share were $1.60 for fiscal 2011, a 1.9 percent increase over fiscal 2010. Excluding the restructuring expenses, earnings per diluted share were $1.68, a 7.0 percent increase from fiscal 2010. Earnings per diluted share for fiscal 2011 also included the additional dilutive effect of the UNFI’s common stock offering, as noted above.
“Fiscal 2011 was a transitional year for UNFI, as we generated over 20 percent sales growth, and record net income,” said Steven Spinner, president and CEO of the Providence, R.I.-based wholesaler, carries and distributes more than 60,000 products to more than 23,000 customer locations throughout the United States and Canada, serving a wide variety of retail formats, including conventional supermarket chains, natural product superstores, independent retail operators and the food service channel. “As we look forward to fiscal 2012, we plan to continue the rollout of our new warehouse management system, while focusing on increasing service levels and operational productivity.”
The company also has provided its financial outlook for fiscal 2012: It expects net sales in the range of about $5.0 to $5.1 billion, an increase of about 10.4 percent to 12.6 percent over fiscal 2011.