For its 14-week fourth quarter ending August 3, United Natural Foods Inc. (UNFI) posted significant financial results. The company saw a net sales increase of 10.0%, reaching $8.2 billion, and a comparable 2.1% growth on a 13-week basis. However, UNFI did report a net loss of $37 million, translating to a loss per diluted share (EPS) of 63 cents. In contrast, the adjusted EBITDA showed a remarkable increase of 53.8%, amounting to $143 million, boosted by around $10 million from the additional week included in this quarter. The adjusted EPS stood at 1 cent.
Improving volume trends and new business from existing customers played a crucial role in achieving these results. Moreover, UNFI has benefitted from short-term efficiency initiatives that have helped enhance its operational performance, pushing full-year metrics to the higher end of the anticipated ranges. The company’s commitment to fiscal prudence is also evident as it saw net debt drop to $2.06 billion and net leverage decrease to 4.0x by year-end, down from $2.13 billion and 4.6x at the end of the previous quarter.
As part of its ongoing strategic enhancements, UNFI took significant steps in Q4 by optimizing its distribution network. The consolidation of its Billings, Montana, and Bismarck, North Dakota, distribution centers into other facilities aimed to improve customer and supplier experiences through enhanced access to effective technologies, wider product assortments, and more streamlined services. Furthermore, UNFI has introduced a comprehensive three-year business plan that focuses on driving customer and supplier value, margin expansion, free cash flow generation, and improved balance sheet efficiency.
UNFI CEO Sandy Douglas emphasized the importance of the fourth-quarter results, stating, “This capped a year in which we generated four consecutive quarters of sequentially increasing profitability and significantly strengthened our foundation as we enter fiscal 2025.” Key achievements for fiscal 2024 included strong same-customer growth, extending an agreement with the firm’s largest customer, and reaping approximately $150 million in benefits from structural efficiency initiatives. The company also successfully managed to reduce shrink and extended the maturity on its term loan.
Moving forward, Douglas is optimistic about UNFI’s revised strategy, which emerged from substantial financial reviews led by both management and the board. The expectation is that this updated approach will foster accelerated performance and create sustainable value for stakeholders. The focus on enhancing free cash flow and reducing net leverage is considered paramount. This will be achieved by fine-tuning distribution networks, lowering capital intensity, and enhancing overall operational efficiencies.
In Q4, UNFI’s net sales benefitted from a substantial estimated $582 million impact from the additional week of the fiscal year, compared to $7.4 billion in the same quarter of the prior fiscal year. Even without this extra week, sales trends turned positive towards the end of the quarter, aided significantly by inflationary pressures on product prices.
Gross profit for Q4 stood at $1.1 billion, reflecting an increase of $150 million, or 15.5%, year-over-year. When adjusted for a 13-week period, the gross profit rose 7.0% compared to Q4 of the previous fiscal year. The gross profit rate was calculated at 13.7% of net sales, influenced by a $12 million LIFO benefit. In contrast, the prior year’s rate was 13.0%. Notably, the gross profit rate excluding LIFO for both fiscal years stood at 13.5%. Lower shrink costs partially offset diminished product margin rates resulting from a shift in business mix.
Operating expenses for Q4 were reported at $1.075 billion, equating to 13.2% of net sales, slightly down from 13.5% a year prior. This decline in operational costs as a percentage of sales is attributed to the company’s successful cost-saving initiatives, demonstrating effective management practices amidst challenging economic conditions.
A closer look at the net loss figures indicates substantial improvement as the loss was narrowed from $68 million or $1.15 per diluted share in Q4 of fiscal 2023. The adjusted EPS reflected substantial gains transitioning from a $0.25 loss in the previous year to a nominal profit in the current quarter.
Looking ahead, UNFI has provided an optimistic guidance for fiscal 2025, anticipating net sales between $30.3 billion and $30.8 billion. They expect a reduced net loss ranging from $41 million to $3 million with corresponding EPS loss expectations between 65 and 5 cents. Notably, the company has forecasted adjusted EPS between 20 to 80 cents, along with an adjusted EBITDA estimate of $520 million to $580 million, alongside planned capital and cloud expenditures of approximately $300 million.
As the largest publicly traded grocery distributor in the U.S., UNFI serves over 30,000 customer locations across North America, which includes a variety of retail platforms such as natural product superstores, independent retailers, and e-commerce platforms. With its robust marketplace position, UNFI continues to cement its status within the food and consumables sector, ranked No. 22 on Progressive Grocer’s list of the top food and consumables retailers for 2024.
This combination of solid financial performance and strategic initiatives illustrates UNFI’s commitment to meeting market demands while positioning itself for sustainable growth.
