United Natural Foods posts Healthy Q2

DAYVILLE, Conn. -- The nutritional correction continues to treat United Natural Foods, Inc. (UNFI) very well. Citing strong growth across all major channels, the wholesale distributor, based here, yesterday reported revenues for the second quarter of $601.1 million, an increase of $96.4 million, or 19 percent, from the $504.7 million recorded in the year-ago period.

For its second fiscal of 2006, UNFI reported net income of $10.8 million, or 26 cents per share, excluding special items. Including the effect of special items, the company posted net income for the quarter of $10.6 million, or 25 cents per share.

The special items in the second quarter of 2006 were the incremental and redundant costs incurred during the transition from UNFI's former warehouses and outside storage facility in Auburn, Calif. to a new, larger facility in Rocklin, Calif.

Including the effect of these costs, net income for the latest quarter increased 15.3 percent to $10.6 million, or 25 cents per share, compared with $9.2 million, or 22 cents, in the year-ago period. Certain labor costs connected with the closing of the company's Mounds View, Minn. facility, which was completed in the second quarter of fiscal 2005, represented the special items for that quarter.

"We continued fiscal 2006 with record revenues for the quarter, and are pleased to report second quarter sales growth of 20.4 percent and comparable distribution sales growth of 18.7 percent, based on comparable shipping days, excluding the two acquisitions made during fiscal 2005," noted UNFI c.e.o, Michael Funk, in a statement. "This quarter's strong performance demonstrates the effectiveness of our sales and operating strategies, and our ability to capitalize on the continued strong consumer demand for natural and organic products."

"Looking ahead, our business metrics remain strong and our team of associates remains focused on achieving our long-term growth objectives," Funk added. "We also continue to focus on achieving increased efficiencies in our Greenwood, Ind. and Rocklin, Calif. facilities that opened earlier this fiscal year, while maintaining the high service levels our customers have come to expect."

During a conference call yesterday Funk said that the United Natural brands division currently accounted for 3 percent of the company's sales and distribution, with a 60 percent annual growth rate, and that the company expected the branded division to account for 5 percent of sales by the end of fiscal 2008.

He further noted that the company was working with Whole Foods -- which represented 27.2 percent of UNFI’s total sales for the quarter -- to forge a long-term relationship beyond the companies' current contract, which has a little less than two years to run.

Funk also said that while the company "remain[s] an opportunistic buyer for the right deal," there was currently nothing on the horizon except for a few branded acquisitions. The company was nevertheless investigating opportunities in Canada, as there is "certainly momentum building up there."

UNFI also said yesterday that it was raising its guidance for fiscal 2006, ending July 29, with projected revenues rising from $2.38 billion to $2.42 billion, and projected earnings per share, excluding special items, increasing to a range of $1.05 to $1.10 per share. The company's earlier revenue guidance was $2.25 billion to $2.35 billion, and earnings guidance, excluding potential special items, was $1.03 to $1.08 per diluted share for the fiscal year.

UNFI distributes more than 40,000 products to over 20,000 customers nationwide. The company serves a wide variety of retail formats, including conventional supermarket chains, natural product superstores, independent retail operators, and the foodservice channel.
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