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Revenue: Third-quarter sales grew by 7.5% to nearly $8.1 billion.
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Wholesale Natural Products Sales: Increased by 12% compared to last year’s third quarter.
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Wholesale Conventional Products Sales: Up close to 3% year-over-year.
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Same-Store Sales: Increased by 1.5% on an ID basis.
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Gross Margin Rate: Declined 30 basis points to 13.4% of net sales.
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Adjusted EBITDA: Grew 21% to $157 million, with an adjusted EBITDA rate of 2%.
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Adjusted EPS: Increased to $0.44 from $0.10 in the prior year’s third quarter.
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Free Cash Flow: Generated $119 million in the quarter, $70 million more than the previous year.
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Net Debt: Reduced to under $1.93 billion, with net leverage at 3.3 turns.
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Capital Structure: Made a $100 million prepayment on the term loan, saving $1 million in quarterly interest expense.
Release Date: June 10, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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United Natural Foods Inc (NYSE:UNFI) achieved a solid quarter with sales growth of 7.5%, driven by strong performance in its Wholesale Natural Products business.
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The company reported a significant improvement in adjusted EBITDA, which grew by 21% compared to the prior year quarter, reaching $157 million.
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UNFI’s free cash flow generation was robust, with $119 million generated in the quarter, significantly surpassing the previous year’s third quarter.
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The company successfully reduced its net leverage by 1.3 turns compared to last year’s third quarter, demonstrating effective debt management.
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UNFI’s lean daily management implementation in 20 distribution centers has led to improvements in safety, quality, delivery, and cost, with further opportunities for enhancement.
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UNFI experienced an IT systems security breach, which required the company to activate its incident response plan and could potentially impact its operations and financial performance.
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The company faced a decline in its consolidated gross margin rate, excluding LIFO, by 30 basis points compared to the prior year period, due to a lower Wholesale margin rate and a shift in customer and product mix.
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UNFI had to terminate its distribution agreement with Key Food, resulting in a $53 million termination fee and the closure of its Allentown facility, impacting its Northeast DC network.
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The cyber incident has introduced uncertainty, leading the company to maintain its guidance for key non-GAAP financial metrics, despite strong performance year to date.
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There are potential elevated costs associated with managing the cyber incident and maintaining customer service, which could affect the company’s financials in the short term.
Q: Are you reiterating the guidance on the non-GAAP elements or simply not updating them? A: Sandy Douglas, CEO, explained that due to the recent IT incident, they decided to leave the guidance unchanged for now, despite strong performance in the third quarter and year-to-date. They are focused on restoring systems and customer service.
Q: What led to the decision to end the distribution agreement with Key Food in the Northeast? A: Sandy Douglas, CEO, stated that operational factors, post-COVID impacts, and the specifics of the agreement made it difficult to maintain profitability. After careful consideration, both parties agreed to end the relationship to optimize results.
Q: Are you currently shipping to customers despite the IT issues? A: Yes, Sandy Douglas, CEO, confirmed that they are shipping on a limited basis, with progress improving daily. They are working closely with customers to meet their needs as best as possible.
Q: How has the customer response been to the cyber attack, and does it affect your focus on customer retention versus new business acquisition? A: Sandy Douglas, CEO, noted that customer conversations have been constructive and collaborative. The focus is on meeting existing customer needs, and they are not speculating on the length of the issue.
Q: How does the cyber incident impact your Lean Six Sigma rollout and potential shrink issues? A: Giorgio Tarditi, CFO, stated that while there may be short-term disruptions, the underlying momentum of Lean Six Sigma is strong. They are prioritizing inventory management to minimize shrink.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.