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United Natural Foods Posts Record Q3

DAYVILLE, Conn. -- The health & wellness trend continues to be very good to United Natural Foods, Inc. here. The specialty distributor yesterday posted a record $534.3 million in net sales for the third quarter of fiscal 2005, up $85.4 million, or 19 percent, from the $448.9 million it garnered in the year-ago period.

On a comparable-growth analysis, wholesale revenue growth was 14.6 percent for the current quarter.

During a conference call yesterday, c.e.o. Steven Townsend attributed the company's overall comp growth to its commitment to a diverse selection of products, multiple delivery options, and consistently strong service levels and fill rates to all of its customers; as well as a variety of marketing and customer support programs to help its customers drive sales in their own businesses.

Townsend broke down United's mix of business by channel as follows: independents, 46 percent; super naturals, 38 percent; conventional supermarkets, 13 percent; others, approximately 3 percent.

He said Whole Foods, United's biggest customer, represents approximately 26 percent of its total sales, while Wild Oats represents approximately 11 percent.

During the conference call, Townsend outlined his company's key initiatives: implementing its contract with Whole Foods; consolidating its former Minneapolis business with a newly expanded Iowa City location; completing integration efforts with Select Nutrition Distributors; and construction of new facilities in Indiana and Northern California.

The Indiana facility will increase United's capacity in the region while enabling it to better balance sales among its New Oxford, Iowa City, and Atlanta facilities, Townsend said. The Northern California site will allow United to consolidate operations from two existing DCs in a single building, supporting expected growth in the region while operating more efficiently. The new facility in Northern California is slated to open during the first quarter of fiscal 2006, and the two existing DCs are scheduled close in the following quarter.

When asked during the call if United would become involved in ventures such as Publix's GreenWise organic food store concept, or Wild Oats' store-within-a-store format at Stop & Shop, Townsend replied, "We expect to be playing a role." He declined to speculate on what that role might be, however.

United reported that excluding the effect of special items, net income for the quarter grew 16.7 percent to $10.8 million, or 26 cents per diluted share, vs. $9.2 million, or 22 cents, for the quarter ended April 30, 2004. In 2005, the special items included certain labor costs connected to the closing of the Mounds View, Minn. facility, which occurred in the third quarter of fiscal 2005; and certain labor costs related to the opening the Greenwood, Ind. facility, which will be in operation in early July. In the third quarter of fiscal 2004, special items consisted of certain equipment rental and labor costs recorded in the third quarter of fiscal 2004 for the startup and transition costs of implementing the company's primary distribution relationship with Boulder. Colo.-based Wild Oats Market, Inc.

Including the effect of special items, net income for the latest quarter rose 24.2 percent to $10.7 million, or 26 cents, as opposed to $8.6 million, or 21 cents.

The recent acquisition of Select Nutrition Distributors had a minimal negative impact on diluted earnings per share in the current quarter, the company said. Higher fuel costs also continued to negatively affect earnings during the quarter.

"We are pleased with our continued strong performance, highlighted by our success in meeting the growing consumer demand for natural and organic foods," said c.e.o. Steven Townsend. "We remain focused on serving a broad customer base and are pleased that we achieved strong year-over-year growth in all channels. Looking ahead, we remain committed to meeting the needs of all our customers while consistently providing high service levels across our entire distribution network."

The company is upping its guidance for fiscal 2005, ending July 31, with projected revenues growing to $2.00 billion to $2.05 billion. Earlier, United set its revenue guidance at $1.9 billion to $2.0 billion.

United Natural Foods carries and distributes more than 40,000 products to over 20,000 customers, among them conventional supermarket chains, natural product superstores, independent retail operators, and the food service channel.
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