UNFI achieves 4.7% net sales gain in the first quarter

Amid continued high consumer spending on home food, United Natural Foods Inc. (UNFI) saw sales gains at its largest businesses in its first fiscal quarter of 2022 and topped forecast highs of Wall Street profits.

For the quarter ended Oct. 30, net sales rose 4.7 percent to just under $ 7 billion $ 6.68 billion a year earlier, UNFI said on Wednesday. Including a 6% year-over-year increase in First quarter 2021, sales increased 10.7% over a two-year period, noted the Providence, RI-based grocery distributor.

“We released first quarter results at a time of persistent challenges in the industry, including persistent supply chain difficulties, declining fill rates and rising inflation,” the CEO of UNFI, J. Alexander (Sandy) Douglas to analysts on conference call. “UNFI is succeeding in this unpredictable environment by resolutely focusing on what we need to do to ensure our client’s success, which will remain our primary operational focus,” said Douglas, who has served as Managing Director since Aug. 9, date he succeeds Steven Spinner.

Whole Foods Market

UNFI’s net sales to Whole Foods Market, which includes the distributor’s Supernatural chain, jumped 13.5% in the quarter for a two-year gain of nearly 23%.

President Christopher Testa noted that UNFI’s net sales in the first quarter marked a sequential increase of nearly 4% from the fourth quarter.

“This is only the second time in the company’s history that revenue has totaled $ 7 billion in a single quarter,” he said on the call. “The three main sales channels have experienced year-over-year growth, driven by two main factors: new business gains and inflation. The modest market contraction and continued supply chain challenges also partially offset these favorable sales drivers. “

In UNFI’s largest business unit, Chains (retail customers with more than 10 stores), first quarter net sales edged up 1.8% to $ 3.08 billion, building on a gain by 5% the previous year for an increase of 6.9% over two years. The freelance segment (retail customers with fewer than 10 stores) experienced stronger growth, with net sales up 4.7% to $ 1.75 billion, taking the two-year increase to 12.1 %.

The Supernatural unit, made up of Whole Foods Market, led the way in the quarter, as net sales climbed 13.5% to $ 1.38 billion to generate two-year growth of 22.8%, up 9.3% to $ 1.21 billion. Meanwhile, net sales fell 0.2% to $ 580 million in the Other unit, which includes international customers outside of Canada, foodservices, e-commerce, conventional military and d ‘other activites. Over two years, segment sales are down 1.6%.

“Our strong sales of Supernatural were driven by winning new categories and SKUs with our largest customer, which reflects the strength of our relationship and the value we bring to their business,” Testa said. “The growth of independent sales channels was largely driven by new sales we made at our Allentown, PA plant, which began serving independents in the New York metro area in the first quarter. This new distribution center was the largest start-up distribution center in UNFI history.

“In both Supernatural and Independent, new business gains have exceeded volume expectations, and we expect strong and continued performance throughout the remainder of this fiscal year,” he added.

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The opening of the Allentown, PA plant was “the largest start-up distribution center in UNFI history,” said President Chris Testa.

Cross-selling between natural / organic and conventional grocery store generated more than $ 60 million in additional revenue in the quarter, Testa reported.

“The majority of the incremental cross-selling revenue has occurred in our change channel, where we have expanded the categories we sell to these large retailers by providing the benefits of consolidating their purchases with UNFI. This includes retailers who operate their own captive distribution networks, ”he said. “Our cross-selling gains in the first quarter kept us on track to meet the cumulative revenue target of $ 1 billion from cross-selling by the end of this fiscal year. Across all channels, our top 100 customers achieved 6.7% year-over-year revenue gains, driven by the expansion of the categories we serve with our existing customer base and new business initiatives.

UNFI’s fresh produce sales team worked with customers to increase their meat, produce, bakery and deli offerings within store perimeters, and the company landed “another major national customer” for product distribution, according to Testa. In the distributor’s own-label portfolio, totaling more than 5,000 SKUs, sales of natural / organic brands increased by more than 6% in the quarter as consumers sought products with specific characteristics.

“We have also seen traction with a new Save Everyday pricing program for our value items that are positioned to be attractive and affordable alternatives to national brands,” he said. “On the professional services side, we had a good quarter of retailers looking for solutions to reduce their operating costs or increase their revenues beyond retail and grocery. We are seeing a 15% increase in the number of renovations done by our clients compared to last year, as they look to reinvest in their businesses. Our CoinCloud offering, which allows our customers to bring cryptocurrency to their buyers, continues to gain traction. We have now placed nearly 500 machines in customer stores and plan to install 200 more in the coming months.

UNFI’s retail arm, including Cub Foods and Shoppers banners, saw first-quarter net sales decline 0.7% to $ 602 million after growing 15.5% the previous year , fueled by COVID-19. Over two years, sales are up 14.7%.

“We are encouraged by the performance of our retail stores as sales were only slightly down from a very strong comparison in the first quarter of fiscal 2021,” Testa said. “Operationally, we have made improvements to our e-commerce and delivery platforms at Cub to better meet the needs of our customers. Online orders at Cub now allow customers to use their My Cub Rewards card to access exclusive promotions and digital coupons, and all orders are placed locally by a dedicated team of Cub associates. This is another great example of adapting our business model to the changing needs of today’s consumer.

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UNFI’s fresh produce sales team worked with retail customers to strengthen their scope offerings, including meat, deli, produce and bakery.

Ultimately, UNFI reported net income of $ 76 million in the first quarter of fiscal 2022, or $ 1.25 per diluted share, compared to a net loss of about $ 1 million, or 2 cents per. diluted share, during the fiscal quarter of 2021, which included $ 16.4 million of restructuring, acquisition and integration charges plus $ 24.1 million of non-cash charges.

On an adjusted basis, UNFI’s diluted net income per share for the quarter 2022 was 97 cents compared to 51 cents a year earlier. Analysts, on average, had forecast adjusted EPS of 56 cents, with estimates ranging from a low of 39 cents to a high of 80 cents, according to Refinitiv.

Looking ahead, UNFI has reaffirmed its guidance for fiscal 2022 of reported EPS of $ 3.60 to $ 3.90 and adjusted EPS of $ 3.90 to $ 4.20. Net sales are expected to reach $ 27.8 billion to $ 28.3 billion. The average analyst projection is for adjusted EPS of $ 4.09, with estimates ranging from $ 3.88 to $ 4.37, according to Refinitiv.

“Overall, we are encouraged by the first quarter and the start of fiscal 2022,” Douglas said on the call. “Despite a difficult environment that is unlikely to change in the near term, the momentum I spoke about in the last call continues and we plan to build on that momentum for the remainder of the year.”

Ann J. Cox