UNFI Sees Double-Digit Q3 Net Sales Rise

Citing continued increase in demand for its products, United Natural Foods Inc. (UNFI) has posted net sales for its the third quarter of fiscal 2018 ended April 28 of $2.65 billion, a rise of 11.8 percent, or $279.3 million, from the $2.37 billion logged in the year-ago period.

“We delivered strong results for the quarter, underscoring the strength of our market position as we continue to grow amid continuous change in the retail landscape,” noted Steven L. Spinner, chairman and CEO of the Providence, R.I.-based wholesaler. “UNFI continues to be an important connector between manufacturers [and] brick-and-mortar retailers, as well as ecommerce customers. We are pleased with the continued momentum in our business, and we continue to work to balance and improve upon the challenges associated with this higher-than-expected growth. Our outlook for the remainder of fiscal 2018 has improved, as reflected in the revised guidance.”

By customer channel, supernatural chains’ net sales for the third quarter of fiscal 2018 grew 24.3 percent to $992 million, those of independently owned natural product retailers were up 6.1 percent to $664 million, convention supermarkets’ net sales rose 3.7 percent to $718 million, and all others’ increased 8.3 percent to $275 million.

Gross margin for the quarter was 15.41 percent, reflecting a five-basis-point decline from last year, which UNFI attributed mainly to a shift in customer mix where sales growth with lower-margin customers outpaced growth with other customers, paired with higher inbound freight costs.

Operating income grew $17.2 million, or 26.5 percent, to $82.2 million for the third quarter of fiscal 2018, versus $64.9 million for the third quarter of fiscal 2017, while adjusted operating income, which excludes restructuring charges, was $82.3 million for the third quarter of fiscal 2018, an increase of $13.4 million, or 19.5 percent, compared with the $68.9 million reported for the year-ago period.

Thanks for tax reform legislation, UNFI’s effective tax rate for the third quarter of fiscal 2018 fell to 33.3 percent from 39.4 percent last year, and the company’s adjusted effective tax rate decreased to 32 percent for the third quarter of fiscal 2018.

The company’s net income for the quarter rose $15.3 million, or 41.8 percent, to $51.9 million, from $36.6 million last year. 

UNFI’s adjusted EBITDA for the third quarter of fiscal 2018 came to $104.0 million, a 15.1 percent rise from the $90.4 million reported for the year-ago period. 

Earnings per share (EPS) grew 30 cents to $1.02 for the third quarter of fiscal 2018 versus 72 cents last year, while adjusted EPS was up 27 cents, or 35.1 percent, to $1.04 for the third quarter of fiscal 2018 compared with 77 cents for the third quarter of fiscal 2017. 

Year-to-Date Performance

On a year-to-date basis, UNFI’s net sales for the 39-week period ended April 28 totaled $7.63 billion, a 10.1 percent increase over last year. By customer channel net sales were up 19.4 percent to $2.8 billion for supernatural chains, 6.1 percent to $1.9 billion for independently owned natural product retailers, 4.9 percent to $2.2 billion for conventional supermarkets and 5.2 percent to $787 million for other.

Gross margin for the period decreased 27 basis points to 15.02 percent, compared with 15.29 percent last year, due primarily to the same factors noted for the Q3 decline, according to the company.

Year-to-date operating income grew $12.9 million, or 7.8 percent, to $177.5 million, versus $164.6 million the prior fiscal year period, while adjusted operating income rose 12.1 percent to $188.9 million from $168.5 million last year.

The company’s effective tax rate for the fiscal year-to-date period declined to 20.3 percent from 39.5 percent in the year-ago period, while its adjusted effective tax rate fell to 32.8 percent.

Year-to-date net income rose $41.6 million, or 45.6 percent, to $132.9 million, versus to $91.3 million in the year-ago period.

Adjusted EBITDA for the period was $254.8 million, up 9.6 percent from the $232.4 million logged last year.

UNFI’s year-to-date EPS increased 81 cents to $2.61, from $1.80 in the same period last fiscal year, while the wholesaler’s adjusted EPS was up 50 cents, or 27 percent, to $2.35, compared with $1.85 in the year-ago period.

Based on its performance to date and the outlook for the remainder of its fiscal 2018, UNFI revised its guidance upward, anticipating net sales growth of 10.3 percent to 10.8 percent, and adjusted EPS growth of 23.6 percent to 25.6 percent.

UNFI distributes 110,000-plus products to more than 43,000 customer locations including natural product superstores, independent retailers, conventional supermarket chains, ecommerce retailers and foodservice customers.