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UNFI Posts Q3 Double-digit Sales Gain, Eyes Expansion

Reflecting the ongoing popularity of organic and natural products, United Natural Foods, Inc. (UNFI) yesterday reported sales of $887.0 million for the third quarter of fiscal 2008, ended April 26, an increase of about $154.4 million, or 21 percent, compared to the year ago period.

Excluding the effect of the company's November 2007 acquisition of Millbrook Distribution Services, Inc., sales grew about $77.2 million, or 10.5 percent, to $809.7 million, the company said.

Independent customers generated comparable-sales growth of about 11 percent, while sales to conventional supermarkets rose about 78 percent, mainly due to sales in the Millbrook specialty division, said president and c.e.o. Michael Funk.

"As we approach the end of fiscal 2008, and look forward to 2009, we continue to see significant opportunities to capitalize on profitable sales growth, including enhancing relationships with natural product retailers, expanding our specialty foods operations, and gaining new customers in all of our channels," noted Funk.

The organic/natural wholesaler posted net income of $13.0 million, or 30 cents per share, for the third quarter. Millbrook, which the company acquired in the second quarter of fiscal 2008, negatively affected income by about $2.4 million for the quarter. Excluding the Millbrook effect, net income for the quarter would have been $15.4 million, or 36 cents per diluted share, vs. $13.7 million, or 32 cents.

Operating expenses came to $141.0 million, or 15.9 percent of sales, for the quarter, compared with $104.8 million, or 14.3 percent for the year-ago period, UNFI said.

The company admitted, however, that it was experiencing continuing startup inefficiencies at its Sarasota, Fla. and Portland, Ore. distribution centers, which adversely affected operating margins in the quarter. The facilities opened in September 2007 and December 2007, respectively. UNFI says it usually achieves optimum efficiencies from new facilities within six to nine months after opening.

"Despite operating in an environment of rising fuel and commodity prices, our growth was in line with our expectations, with solid growth across our sales channels," said Funk. "During the quarter, we continued to make progress achieving efficiencies at our Millbrook specialty division, and we remain confident that we can achieve breakeven operating results in that division in the first quarter of fiscal 2009, as previously announced."

Dayville, Conn.-based UNFI carries and distributes over 60,000 products to more than 17,000 customers nationwide. The company serves a wide variety of retail formats, among them conventional supermarket chains, natural product superstores, independent retail operators and the foodservice channel.
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