United Natural Foods Posts ‘Record’ Fiscal 2014
United Natural Foods Inc. (UNFI) reported that for the fiscal year 2014 ended Aug. 2, 2014, net sales increased 14.3 percent to $6.79 billion, excluding about $118.7 million of net sales from the additional week in fiscal 2013. Operating income for the fiscal year rose 13.6 percent to $210.8 million, from $185.5 million in fiscal 2013, while diluted EPS grew 15.6 percent to $2.52 in fiscal 2014.
Gross margin for the period was 16.6 percent, a 30-basis-point decline from fiscal year 2013. UNFI attributed the decline to a combination of severe weather in the second quarter, the foreign exchange effect of weakness in the Canadian dollar on its business in that country, and the ongoing shift in sales growth toward supernatural, national supermarket and multiunit independent retail customers. These challenges were partly offset by better execution by the company's supply chain group, particularly in relation to procurement and inbound logistics, UNFI added.
Net income for fiscal 2014 rose $17.6 million, or 16.3 percent, to $125.5 million, or $2.52 per diluted share, from $107.9 million, or $2.18 per diluted share, for fiscal 2013. Net income for fiscal 2014 included a $4.8 million gain associated with a noncash transfer of land at UNFI's Racine, Wis., facility.
"Fiscal 2014 was a record year for UNFI from both a sales and earnings-per-share growth perspective, with earnings per share increasing by approximately 16 percent," said Steven Spinner, president and CEO of the Providence, R.I.-based wholesaler. "As we look forward to fiscal 2015, we believe we are well positioned to capitalize on new business opportunities and to continue to pursue additional merger and acquisition opportunities aligned with our strategy and our investment in new capacity."
Q4 Gains
Net sales for the fourth quarter of fiscal 2014 increased 7.4 percent to $1.76 billion, from $1.64 billion in the year-ago period. Excluding about $118.7 million of net sales in the 53rd week of fiscal 2013, net sales grew 15.8 percent over Q4 of fiscal 2013. Q4 of fiscal 2014 included incremental net sales of around $64 million resulting from UNFI’s acquisition of Tony’s Fine Foods, as well as that of Trudeau Foods in the first quarter of fiscal 2014.
"During fiscal 2014, UNFI continued to enhance its product offering through the acquisition of Tony's Fine Foods while building out capacity and infrastructure," noted Spinner. "These initiatives will serve us well as consumers and retailers continue to demand our natural, organic, ethnic and specialty SKUs."
Gross margin was 16.4 percent for Q4 2014, a 29-basis-point decline from Q3 2014 and an 88-basis-point drop from gross margin of 17.3 percent for Q4 2013. Gross margin for Q4 2014 was adversely affected by foreign exchange from the declining value of the Canadian dollar on UNFI's business, combined with product and customer mix and the addition of Tony's in July 2014.
Operating income as a percentage of net sales for Q4 2014 fell 51 basis points to 2.9 percent, versus 3.4 percent in the year-ago period. Net income grew $1.3 million, or 4 percent, to $33.4 million, or 67 cents per diluted share, from $32.1 million, or 65 percent per diluted share, last year.
The company anticipates net sales for fiscal 2015 in the range of about $8.13 billion to $8.38 billion, an increase of about 19.7 percent to 23.7 percent over fiscal 2014. Additionally, capital expenditures in fiscal 2015, net of the planned sale leaseback of the company's new Twin Cities-area distribution facility in Prescott, Wis., are expected to be about $130 million to $140 million, or about 1.6 percent to 1.7 percent of estimated fiscal 2015 net sales.
UNFI carries and distributes more than 80,000 products to 40,000-plus customer locations throughout the United States and Canada. The company serves a wide variety of retail formats, including conventional supermarket chains, natural product superstores, independent retail operators and the foodservice channel.