UNFI Q2 Net Sales, Income Up by Double Digits
United Natural Foods Inc. (UNFI) has reported net sales for the second quarter of fiscal 2012 ended Jan. 28 of $1.29 billion, an increase of 15.5 percent, or $172.5 million, from the $1.11 billion posted in the year-ago period.
“Sales growth continued to accelerate in the second quarter of fiscal 2012, despite facing our toughest prior-year sales comparisons,” said Steven Spinner, president and CEO of Providence, R.I.-based UNFI. “This acceleration reflects the onboarding of our new national customer, the growing consumer demand for natural and organic products, and the continued movement by consumers towards a healthier lifestyle.”
Gross margin was 17.3 percent for the second quarter of fiscal 2012, representing a 48-basis-point drop from a gross margin of 17.8 percent last year. Gross margin for the second quarter of fiscal 2012 was affected by the continued shift in customer mix to the conventional supermarket channel and abourt $1.7 million in inventory write-offs, mostly of perishable and bulk products, because of higher inventory levels during the quarter.
Total operating expenses were 14.4 percent as a percentage of net sales for the second quarter of fiscal 2012, the lowest quarterly percentage since the third quarter of fiscal 2007, and a decline of 56 basis points versus the second quarter of fiscal 2011. The company attributed this improvement to its continuing initiatives to boost productivity throughout the organization and lower operating expenses as a percentage of net sales. Total operating expenses grew by $18.7 million, or 11.2 percent, to $185.6 million, compared with the year-ago period, for which operating expenses of $166.9 million were logged.
Operating income as a percentage of net sales rose six basis points to 2.9 percent for the second quarter of fiscal 2012, compared with the second quarter of fiscal 2011. Net income for the second quarter of fiscal 2012 went up by $3.3 million, or 17.5 percent, to $22.0 million, or 45 cents per diluted share, from $18.7 million, or 39 cents per diluted share, last year.
“During the quarter, we continued to reduce operating costs as a percentage of net sales by implementing operational productivity improvements,” added Spinner. “We … believe that increased sales volume and continued efforts to control expenses should drive further expansion of our operating margin.”
Net sales for the first half of fiscal 2012 came to $2.50 billion, a 15.5 percent increase over the year-ago period. Gross margin was 46 basis points lower than last year, at 17.6 percent of net sales for the six months ended Jan. 28.
At 15.0 percent of net sales, total operating expenses for the six months ended Jan. 28 were 17 basis points lower than the year-ago period. Operating expenses for the first half of fiscal 2012 included expenses of about $6.8 million related to the previously revealed restructuring and divestiture of the UNFI’s conventional nonfoods and general merchandise lines of business and onboarding expenses related to the company’s newest national customer. Excluding these expenses, operating expenses as a percentage of net sales were 14.8 percent for the first half of fiscal 2012, a decline of 44 basis points versus the first half of fiscal 2011.
Operating income as a percentage of net sales was 2.5 percent for the first half of fiscal 2012. Excluding about $6.8 million of the aforementioned restructuring and onboarding expenses, operating income as a percentage of net sales was 2.8 percent for the first six months of fiscal 2012, consistent with the year-ago period.
Diluted earnings per share for the first half of fiscal 2012 were 76 cents, a 1.3 percent dip from the diluted earnings per share last year. Excluding the restructuring and onboarding expenses mentioned above, diluted earnings per share was 84 cents for the six months ended Jan. 28, a 9.1 percent increase over the year-ago period. Further, diluted earnings per share was affected by an increase in the weighted average diluted common shares outstanding to 48.9 million for the first half of fiscal 2012, from 46.8 million for the same period in fiscal 2011, as a result of the company’s equity offering that was completed late in the first quarter of fiscal 2011.
“Our Albert’s Organics division continues to grow its market share and exceed our expectations, fully embracing the company’s strategy of leveraging our complete product mix and industry expertise to expand market share,” noted Spinner. “As we look to the second half of fiscal 2012, we anticipate further expansion of existing relationships while working to add new customers across all channels and continuing to reduce operating costs and enhance productivity throughout our organization.”
Based on UNFI’s fiscal 2012 performance to date and the current outlook for the remainder of the 2012 fiscal year, the company is raising its net sales guidance for fiscal year 2012 ending July 28 to a range of $5.11 billion to $5.17 billion, a 12.8 percent to 14.1 percent increase in total net sales over fiscal 2011. The previous net sales guidance target was $5.0 billion to $5.1 billion, an increase of about 10.4 percent to 12.6 percent over fiscal 2011.
UNFI carries and distributes more than 60,000 products to more than 23,000 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.