UNFI Q4 Sales Surge

United Natural Foods Inc. (UNFI) has posted net sales for the fourth quarter of fiscal 2012 ended July 28 of $1.34 billion, a 16.0 percent rise to $185.0 million, compared with $1.16 billion in the year-ago period.

Net income for the wholesaler’s fiscal 2012 fourth quarter grew $8.0 million, or 46.4 percent, to $25.1 million, versus $17.2 million last year. Providence, R.I.-based UNFI attributed this stratospheric rise to improvements in its operational efficiency, as well as pre-tax expenses of $6.3 million recognized during fiscal 2011 fourth quarter in connection with the restructuring of the company’s UNFI Specialty Distribution Services division.

Excluding restructuring expenses, net income for the fourth quarter of fiscal 2012 increased $4.2 million, or 20.1 percent, to $25.1 million, from $20.9 million in the year-ago period. Earnings per diluted share for the fourth quarter of fiscal 2012 were 51 cents, compared with 35 cents last year. Earnings per diluted share for the fourth quarter of fiscal 2012 rose 18.6 percent to 51 cents, from 43 cents in the year-ago period, excluding restructuring expenses.

Gross margin was 17.2 percent for the fourth quarter of fiscal 2012, a 41 basis-point sequential decline from the gross margin of 17.6 percent logged in the third quarter of fiscal 2012. UNFI attributed the lower gross margin e to purchasing and logistics inefficiencies during the fourth quarter, and, to a lesser extent, the ongoing shift in the company’s customer mix to lower-margin conventional supermarkets and lower fuel surcharge revenues. Gross margin for the fourth quarter of fiscal 2012 was 137 basis points lower than last year, mainly because of the continued customer mix shift, as well as the lower fuel surcharge revenues in the fourth quarter, the wholesaler added.

Operating expenses as a percentage of net sales for the fiscal 2012 fourth quarter fell to 14.0 percent from 16.0 percent for year-ago period, partly as a result of the $6.3 million of pre-tax restructuring expenses noted above. This represented a drop of 150 basis points compared with last year, excluding restructuring expenses. Operating income as a percentage of net sales was 3.2 percent for the fiscal 2012 fourth quarter, versus 2.5 percent in the year-ago period, leading to a rise of 12 basis points compared with last year, excluding restructuring expenses.

Net sales for fiscal 2012 came to $5.24 billion, a 15.6 percent increase over last year. Earnings per diluted share were $1.86 for fiscal 2012, a 16.3 percent increase from the $1.60 logged in fiscal 2011. Excluding restructuring expenses during both periods and the expenses incurred in fiscal 2012 related to the onboarding of a national customer, earnings per diluted share were $1.94 for fiscal 2012, a 15.5 percent increase over fiscal 2011’s $1.68. Earnings per diluted share for fiscal 2012 further included the dilutive effect of UNFI’s common stock offering of 4.43 million new shares completed in the first quarter of fiscal 2011.

Fiscal 2012 gross margin, at 17.5 percent of net sales, was 72 basis points lower than in fiscal 2011, primarily because of the continued shift in customer mix. Total operating expenses as a percentage of net sales for fiscal 2012 were 14.5 percent, compared with 15.3 percent last year. Excluding the restructuring and onboarding expenses noted earlier, total operating expenses were 14.4 percent of net sales for fiscal 2012, 81 basis points lower in fiscal 2011. Operating income for fiscal 2012 grew $25.5 million, or 19.7 percent, over the previous year to $155.2 million, leading to an operating margin of 3.0 percent. Excluding restructuring and onboarding expenses, operating income rose $25.9 million, or 19.0 percent, over fiscal 2011 to $161.8 million for fiscal 2012, resulting in an operating margin of 3.1 percent as a percentage of net sales.

“Fiscal 2012 was another record year for us as we continued to achieve substantial sales and earnings growth,” commented Steven L. Spinner, UNFI president and CEO. “Demand for our products and services continued to accelerate as our teams executed quite well against our ongoing strategies for growth.”

For fiscal 2013, the UNFI expects net sales in the range of about $5.88 to $5.98 billion, an increase of around 12.3 percent to 14.2 percent over fiscal 2012.

UNFI has also revealed plans to consolidate its four existing Denver-area distribution centers into a new state-of-the-art, 535,000-square-foot facility located at Gateway Park in Aurora, Colo. The new facility is expected to begin operations in summer 2013.

Located near I-70 in the Denver International Airport corridor, the new facility will serve as a distribution hub for retailers in the Rocky Mountain region of the United States as well as Kansas, Nebraska, New Mexico, Utah and Wyoming. The DC will be leased from The Pauls Corp. in Denver.

“With new and efficient operations, and all our associates located together, this new facility should enable us to continue to expand our operations while reducing operating costs,” explained Spinner. “Denver and Aurora are great communities with a strong and receptive workforce.”

The new facility is expected to open with 475 associates; increasing up to 550 within the first three years. UNFI said that no jobs are likely to be affected by the transition.

The DC will feature about 160,000 square feet of refrigeration and freezer space, including an expanded cold dock, and more than 42,000 square feet for employee offices and workspaces. Environmental design plans include resource and energy conservation, use of sustainable and recycled-content building materials, and exceptional indoor air quality for the building’s occupants. UNFI said it would pursue LEED (Leadership in Energy and Environmental Design) certification for the DC once it opens.

In other UNFI DC news, drivers and warehouse workers at the company’s facility in Auburn, Wash., have rejected a final contract proposal from the wholesaler and voted overwhelmingly to strike.

“This vote demonstrates that these workers are prepared to fight for the respect they deserve,” said Tracey A. Thompson, secretary-treasurer of Tuckwila, Wash.-based Teamsters Local 117.

At issue are a “stiff production standard” and “a large compensation gap” between the UNFI and area competitors, according to the union, which, a spokesman told PG, has not yet called for a strike to take place because it's "still hopeful that the company will return to the bargaining table and bargain a fair contract for its workers."

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.