A Look at UNFI's Uneven Q3
It was a mixed bag for United Natural Foods Inc. (UNFI) during the third quarter, as the natural and organic wholesaler and distributor reported a scant 0.1% year-over-year dip in net sales, missing market expectations, and a 2% bump in gross profit. Q3 sales were just below $7.5 billion and gross profit hit $1.02 billion.
During the 13-week period ending April 27, adjusted EBITDA was $130 million, down from $159 million in the third quarter of 2023. Still, it was the third quarter in a row of rising adjusted EBITDA, UNFI disclosed.
UNFI’s ongoing transformation initiative, including efforts to clamp down on costs, were behind some of the misses during Q3 and the company’s revised outlook for the rest of the fiscal year. Here, too, there is some unevenness, as the organization projects that charges related to cost reduction actions will drive lower expected ranges for net income but is raising its adjusted EBITDA midpoints.
CEO Sandy Douglas reiterated that the transformation in progress is shaping performance. “We delivered another quarter in-line with our fiscal 2024 plan and our third consecutive quarter of improving profitability driven by continued progress on near-term operational and efficiency initiatives. This progress includes significant cost reduction actions and supply chain efficiencies, and we see opportunity to drive further improvement across these areas,” he declared.
During the Q3 conference call, Douglas shared ways that UNFI is working to drive growth for its business and its customers’ businesses. Emphasizing that its refined focus is fueling its multi-year strategic plan, he noted that the business will lower capital expenditures by $70 million in fiscal 2025 and work to improve cash flow by lowering inventory days on hand. “Our leadership team is highly motivated and accountable for rapidly improving profitability, free cash flow and shareholder returns,” he remarked.
In his first earnings call as UNFI president and CFO, Matteo Tarditi said that he expects inflation to gradually decline moving into the fourth fiscal quarter. “We continue to be focused on closing out the year in improving our operational and efficiency-driven financial performance. I’m optimistic about the future of the company and the returns I believe we can generate for shareholders,” he added.
There were some noteworthy developments for UNFI during the third quarter. The company extended its agreement with Whole Foods Market, for example, and partnered with Swiftly to roll out a first-of-its-kind retail media network for independent and regional grocery retailers.
Providence, R.I.-based UNFI delivers a wide variety of products to more than 30,000 customer locations throughout North America, including natural product superstores, independent retailers, conventional supermarket chains, e-commerce retailers and foodservice customers. The largest publicly traded grocery distributor in America, the company is No. 22 on The PG 100, Progressive Grocer’s 2024 list of the top food and consumables retailers in North America.
