UNFI Reports 2019 Q3 Net Sales Increase Amid Softness in Category

UNFI Reports 2019 Q3 Net Sales Increase Amid Softness in Category

Total net sales for UNFI’s 2019 Q3 were $5.96 billion, an increase of $3.3 billion over last year, and includes $3.24 billion from Supervalu. Sales on the natural side, formerly UNFI’s business, increased 2.8 percent over last year even as softness across the industry continues to affect the top line. Sales from the conventional category, formerly Supervalu’s business, saw a slight decline to $3.24 billion.

The company, which announced in April that is operating under a national UNFI leadership team, is positioned well to capture the growth associated with the changing retail landscape, according to comments made by Chairman and CEO Steven Spinner, during the earnings call.

“I am truly excited about where we are and what we've accomplished. Our future is bright as we emerge as the leading North American distributor of retail products and services throughout the 50 states, Canada and the Caribbean,” he said.

Spinner noted that company will continue to be focused on five priorities moving forward:

  1. Continue UNFI's core mission, values and strategy
  2. Execute financially in terms of year-over-year improvement to EBITDA, net sales and free cash flow
  3. Build out the Store, sell the entire portfolio of products and services, utilizing the new national organizations
  4. Deploy Thrive 2, UNFI's project to drive integration work streams and the power behind unique and exemplary experiences for our associates, customers and suppliers
  5. Divest retail (Spinner noted that the wholesaler has retained Greenhill & Co. to evaluate alternatives for the Cubs brand and is continuing to work with several buyers for the Shopper's banner; all with the goal of exiting retail within 10 months.)

Also during the call, Spinner noted that he expected the business to continue to prosper even while the retail sector is seeing slowing growth and fewer store openings, and that the impact of any proposed tariffs on goods, both from Mexico or China, will be low as the tariffs are likely to largely affect produce and seasonal products, both of which the wholesaler does limited business in.

Q3 Results

In the third quarter of fiscal 2019, UNFI’s supermarket channel grew 420 percent versus the third quarter of last year, and represented 61.6 percent of total net sales. Conventional supermarket net sales were $2.97 billion, a comparable decline of about 3.6 percent versus last year when conventional was not part of the UNFI business. Excluding this acquired conventional business, legacy UNFI’s supermarket channel net sales would have decreased by 1.8 percent versus Q3 last year.

A year ago Supervalu was a customer of UNFI in a cross-stock program. As a result, each company independently recognized the cross-stock program net sales. In the combined company, these consolidated net sales are only recognized once, and therefore, get reflected as lower net sales growth year-over-year. Adjusting last year’s results for these duplicative cross-stock sales, natural supermarket channel net sales would have decreased by 0.4 percent versus Q3 last year.

Net sales in the independent channel grew 20.2 percent and represented about 13.9 percent of total net sales. Excluding the impact of the acquired conventional volume independent channel, net sales would have grown about 2.5 percent. Third quarter supernatural net sales grew 11.1 percent over Q3 last year and represented 18.5 percent of total net sales.

The other channel grew by 36.5 percent and represented 6.0 percent of total net sales. Natural net sales in this channel decreased 15.3 percent, driven primarily by ecommerce declines where UNFI has not yet cycled the declines from the rationalization of lower profit businesses.

In 2018, United Natural Foods Inc. (UNFI) acquired Supervalu. Providence, R.I.-based UNFI delivers products to customer locations throughout North America, including natural product superstores, independent retailers, conventional supermarket chains, ecommerce retailers and foodservice customers. Combined with Supervalu, UNFI is the largest publicly traded grocery distributor in the United States, and is No. 30 on Progressive Grocer’s 2019 Super 50 list of the top grocers in the United States.

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