UNFI's Q1 Sales Up Double Digits

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UNFI's Q1 Sales Up Double Digits

United Natural Foods, Inc. (UNFI) yesterday reported net sales for the first quarter of fiscal 2009 ended Nov. 1, 2008, of $864.2 million, a rise of $127.8 million, or 17.4 percent, from the $736.4 million in net sales recorded in the year-ago period.

Not counting the effect of the company's November 2007 acquisition of Millbrook Distribution Services, Inc. (now known as UNFI Specialty), net sales grew about $74.7 million, or 10.1 percent, to $811.1 million for the quarter ended No. 1, 2008.

UNFI president and c.e.o. Steven Spinner said the first quarter performance highlights included "delivering comparable-sales growth of over 10 percent in spite of these difficult and uncertain economic conditions. These results reflect our associates' continuing commitment to growing our core businesses."

As a result of such results, despite a recent overall "softening" of top-line revenue, Spinner said in a conference call yesterday that the company was "cautiously optimistic" about the near future.

Spinner noted during the call, "Our sales growth was driven primarily by our sales to independent retailers and conventional supermarket channels, which grew by 11.5 percent and 56.2 percent, respectively."

Net income was $13.2 million, or 31 cents per share, for the first quarter of fiscal 2009, vs. $13.6 million, or 32 cents, for the year ago period. UNFI Specialty, which the company acquired in the second quarter of fiscal 2008, negatively affected operating income by about $1.6 million during the latest quarter. Excluding the effect of UNFI Specialty, net income for the quarter would have been $14.7 million, or 34 cents per diluted share.

However, according to Spinner during yesterday's call, "UNFI Specialty Distribution will become the fastest-growing segment of our business, following its integration into our national footprint of distribution centers by adding new customers in this space and more fully penetrating existing customers."

As far as future acquisitions go, c.f.o. Mark Shamber said during the call that the company was continuing to buy up small brands, which "tend to be smaller, very accretive deals that are a great addition to our Blue Marble Brands program."

Operating expenses were adversely affected by $2.5 million in labor and other nonrecurring expenses related to the UNFI's move from its Fontana, Calif. facility to a new DC in Moreno Valley, Calif., and the planned relocation of the company's current Oxford, Pa. facility to a new sustainable facility in York, Pa. that will be the company's first fully integrated UNFI Natural, Organic, and Specialty building by April 2009. Integration of all of UNFI's Specialty DCs into its existing facilities will take about 18 months, Spinner said during the call.

The Moreno Valley facility began shipments in September 2008, and the York facility is expected to start operations in mid-January 2009. Operating expenses increased $31.3 million, or 28.1 percent, vs. the year-ago period's operating expenses of $111.3 million, or 15.1 percent of net sales.

Additional capital expenditures included the company's planned move of its headquarters to Providence, R.I. during the early summer of 2009, and the construction of a distribution center in Texas slated to begin in calendar year 2009. "Once Texas and our Connecticut facility expansion are completed, we will have a fully built-out national structure, providing us with the ability to compete on a national scale, with the most cost-efficient platform in the industry," said Spinner.

According to Spinner, "These facilities will allow us to achieve greater operational efficiencies and provide us with capabilities to grow our market share in the natural, organic, specialty, and supplement channels."

UNFI carries and distributes over 60,000 products to more than 17,000 customers across the country. The company serves a broad assortment of retail formats, among them conventional supermarket chains, natural product superstores, independent retail operators, and the foodservice channel.