United Natural Q3 Earnings Meet Estimates, Sales Decline

United Natural Foods, Inc. UNFI posted soft third-quarter fiscal 2024 results, as both the top and bottom lines declined year over year, and sales fell short of the Zacks Consensus Estimate.
However, the company has been on track with operational and efficiency initiatives to drive cost reductions and supply chain efficiencies. Additionally, United Natural is nearing a new multi-year strategic plan set to commence in fiscal 2025. The updated strategy is expected to generate nearly $100 million in free cash flow in fiscal 2025, with expectations for stable and reliable profit and cash flow growth, improved returns on capital and a reduction in net leverage over multiple years.

Quarter in Detail

United Natural's adjusted earnings came in at 10 cents per share, which matched the Zacks Consensus Estimate. However, this Zacks Rank #4 (Sell) company's bottom line slumped 81.5% from 54 cents reported in the year-ago period.

Net sales inched down 0.1% to $7,498 million, which missed the Zacks Consensus Estimate of $7,564 million. The downside can be attributed to lower unit volumes, partly compensated by inflation and new business with existing customers.
Chains, Independent retailers and Retail witnessed a sales decline of 1.2%, 3.1% and 4.5%, respectively. Supernatural and Other channels rose 5.3% and 0.6%, respectively.
United Natural's gross profit rose 2% to $1,020 million. Excluding the non-cash LIFO charge in both periods, the gross margin contracted 10 basis points to 13.7% in the third quarter due to reduced levels of procurement gains stemming from decelerating inflation, as well as a reduced retail gross margin.
Operating expenses were $992 million compared with $967 million reported in the year-ago quarter. As a percentage of sales, operating expenses were 13.2% compared with 12.9% in the year-ago period. The increase resulted from elevated incentive compensation.
Adjusted EBITDA came in at $130 million, down from the $159 million reported in the year-ago quarter.

Other Updates

The company had total liquidity of nearly $1.26 billion as of Apr 27, 2024, including cash of nearly $39 million and nearly $1.23 billion under the company's asset-backed lending facility. Total outstanding debt (net of cash) was $2.13 billion, down $30 million on a sequential basis.
During the third quarter, United Natural's free cash flow amounted to $49 million, with net cash provided by operating activities being $125 million and capital expenditures amounting to $76 million.

Fiscal 2024 Guidance

For fiscal 2024, the company continues to anticipate net sales in the range of $30.5-$31.0 billion.
Adjusted EBITDA is now expected in the $490-$520 million range compared with the $475-$525 million range forecasted earlier. UNFI now expects to deliver a net loss of $109-$85 million in fiscal 2024 compared with a net loss of $101-$65 million expected earlier.
United Natural now envisions the fiscal 2024 bottom line between a loss of 20 cents and earnings of 20 cents. Management had earlier guided the bottom line between a loss of 56 cents per share and earnings of 6 cents.
The company projects capital and cloud implementation expenditures of nearly $370 million for fiscal 2024.
Shares of UNFI have risen 10.5% in the past three months against the industry's decline of 3.2%.

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The Zacks Consensus Estimate for Vital Farms' current financial-year sales and earnings suggests growth of 22.5% and 59.3%, respectively, from the year-ago reported numbers.
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