Core Insights - United Natural Foods, Inc. (UNFI) reported strong third-quarter fiscal 2025 results, with revenues and earnings exceeding expectations and showing year-over-year growth [1][3] - The company has achieved seven consecutive quarters of sequential adjusted EBITDA growth, reflecting effective execution of its multi-year strategy [1][6] Financial Performance - Adjusted earnings per share for Q3 were 44 cents, surpassing the Zacks Consensus Estimate of 24 cents and up from 10 cents in the same quarter last year [3][7] - Net sales increased by 7.5% year over year to $8,059 million, exceeding the Zacks Consensus Estimate of $7,846 million, driven by a 4% rise in wholesale unit volumes and inflation effects [3][7] - Gross profit rose 6.1% year over year to $1,082 million, with a gross margin of 13.4%, a slight contraction from 13.6% in the previous year [5][6] Segment Performance - Revenue from the Natural segment grew 12% to $4,160 million, Conventional sales increased by 2.7% to $3,628 million, and Retail sales saw a 0.4% rise to $573 million [4] Cost and Margin Analysis - Operating expenses were $1,025 million, up from $992 million in the prior year, but as a percentage of sales, they decreased to 12.7% from 13.2% [6] - Adjusted EBITDA reached $157 million, marking a 20.8% increase from $130 million in the same quarter last year [6] Financial Health - Total liquidity stood at $1.49 billion as of May 3, 2025, including nearly $52 million in cash and approximately $1.44 billion in unused capacity under its asset-based lending facility [7] - Free cash flow for Q3 was $119 million, up from $49 million in the prior-year quarter [7] - Total outstanding debt, net of cash, was $1.93 billion, a decrease of $118 million from the previous quarter [8] Future Guidance - For fiscal 2025, UNFI anticipates net sales between $31.3 billion and $31.7 billion, with adjusted EBITDA expected to be between $550 million and $580 million [9][10] - The company projects a net loss of $55 million to $80 million for fiscal 2025, contrasting with earlier expectations of a net loss of $13 million and net earnings of $3 million [9]

Financial Performance - Net sales for the 13-week period ended May 3, 2025, were $8,059 million, an increase of $561 million or 7.5% compared to $7,498 million for the same period in 2024 [126]. - Adjusted EBITDA for the 13-week period ended May 3, 2025, was $157 million, up $27 million or 20.8% from $130 million for the same period in 2024 [126]. - Gross profit for the 13-week period ended May 3, 2025, increased by $62 million or 6.1% to $1,082 million, with a gross profit margin of 13.4% compared to 13.6% in the same period of 2024 [135]. - Operating expenses for the 13-week period ended May 3, 2025, were $1,025 million, an increase of $33 million or 3.3%, representing 12.7% of net sales compared to 13.2% in the same period of 2024 [137]. - Net loss attributable to United Natural Foods, Inc. for the 13-week period ended May 3, 2025, was $7 million, a decrease of $14 million compared to a net loss of $21 million for the same period in 2024 [126]. - The company reported a year-to-date net sales increase of approximately 5.5% for fiscal 2025 compared to fiscal 2024, driven by higher Natural unit volumes and inflation [133]. - Operating income increased by $41 million to $47 million for fiscal 2025 year-to-date, compared to $6 million for fiscal 2024 year-to-date [144]. - Net loss attributable to United Natural Foods, Inc. was $7 million, or $0.12 per diluted common share, for the third quarter of fiscal 2025, down from a net loss of $21 million, or $0.34 per diluted common share, for the same quarter in fiscal 2024 [149]. Cost Management and Efficiency - In the third quarter of fiscal 2025, the company experienced product cost inflation of approximately 2% compared to the same period in fiscal 2024 [112]. - The company is consolidating two distribution centers in the Central region to achieve cost savings and improve customer experience [106]. - The company is focused on optimizing its distribution network to enhance efficiency and minimize future costs [109]. - Retail's Adjusted EBITDA increased by $4 million for the third quarter of fiscal 2025, driven primarily by lower operating expenses [158]. Distribution and Operations - A new distribution center in Manchester, Pennsylvania, with approximately 1.3 million square feet, began operations in the first quarter of fiscal 2025, focusing on natural products [108]. - The company operates 75 grocery stores, including 53 Cub Foods and 22 Shoppers stores, and plans to invest in customer-facing merchandising initiatives and technology [110]. - The company recognized a $118 million right-of-use asset and operating lease liability for a new distribution center in Sarasota, Florida, expected to begin operations in the first half of fiscal 2026 [108]. - The company is realigning its commercial wholesale organization into two product-centered divisions to enhance service to customers and suppliers [100]. Debt and Liquidity - Total liquidity as of May 3, 2025, was $1,494 million, consisting of $1,442 million in unused credit and $52 million in cash [161]. - Total debt decreased by $123 million to $1,962 million as of May 3, 2025, from $2,085 million as of August 3, 2024 [161]. - The company expects to continue replenishing operating assets and paying down debt obligations with internally generated funds [162]. - As of May 3, 2025, the company had $750 million of floating rate notional debt under interest rate swap contracts, with fixed rates ranging from 2.475% to 4.130% [169]. Capital Expenditures and Investments - Capital expenditures for fiscal 2025 year-to-date were $157 million, a decrease of $60 million compared to $217 million for fiscal 2024 year-to-date [171]. - Cloud technology implementation expenditures for fiscal 2025 year-to-date were $6 million, down from $28 million in fiscal 2024 year-to-date [171]. - The company expects total capital and cloud implementation spending for fiscal 2025 to be approximately $300 million, focusing on distribution network automation and technology platform investments [172]. Market Risks and Other Considerations - The company’s exposure to market risk includes fluctuations in interest rates and price increases in diesel fuel, with no material changes reported since the last annual report [187]. - The company expects to contribute approximately $51 million to multiemployer pension plans in fiscal 2025, up from $47 million in fiscal 2024 [180]. - The company did not repurchase any shares in fiscal 2025 year-to-date, managing repurchases based on market conditions [184]. - Restructuring, acquisition, and integration related expenses increased to $14 million for the 13-week period ended May 3, 2025, compared to $9 million for the same period in 2024 [139]. - The company experienced a decrease in retail net sales by 2.2% year-to-date due to lower volume and store closures [134]. - The gross profit as a percentage of net sales decreased to 13.3% for fiscal 2025 year-to-date compared to 13.5% for fiscal 2024 year-to-date [136]. - Wholesale net sales increased by 4% in unit volumes, contributing to the overall growth in net sales for fiscal 2025 year-to-date [153]. - Adjusted EBITDA for wholesale increased by $33 million, or 26.4%, for the third quarter of fiscal 2025 compared to the same period in fiscal 2024 [157].

Core Viewpoint - United Natural Foods, Inc. (UNFI) held its Third Quarter Fiscal 2025 Earnings Conference Call on June 10, 2025, to discuss financial results and business updates [1][2][3]. Group 1: Company Overview - The conference call was led by Steven J. Bloomquist, Vice President of Investor Relations, who welcomed participants and introduced the management team [2][3]. - Key executives present included Sandy Douglas, Chief Executive Officer, and Matteo Tarditi, President and Chief Financial Officer, who will provide insights into the company's performance [3]. Group 2: Financial Information - A copy of the earnings release was made available prior to the call, along with a supplemental disclosure containing key financial information in Microsoft Excel format [3].

Group 1 - United Natural Foods (UNFI) reported quarterly earnings of $0.44 per share, exceeding the Zacks Consensus Estimate of $0.24 per share, and showing a significant increase from $0.10 per share a year ago, representing an earnings surprise of 83.33% [1] - The company achieved revenues of $8.06 billion for the quarter ended April 2025, surpassing the Zacks Consensus Estimate by 2.71% and increasing from $7.5 billion year-over-year [2] - United Natural has consistently surpassed consensus EPS estimates over the last four quarters, indicating strong performance [2] Group 2 - The stock has underperformed the market, losing about 5% since the beginning of the year, while the S&P 500 has gained 2.1% [3] - The company's earnings outlook is mixed, with current consensus EPS estimates at $0.19 for the coming quarter and $0.82 for the current fiscal year, with revenues expected to be $7.7 billion and $31.58 billion respectively [7] - The Zacks Industry Rank for Food - Miscellaneous is currently in the bottom 33% of over 250 Zacks industries, which may impact the stock's performance [8]

Financial Data and Key Metrics Changes - The company achieved a sales growth of 7.5%, amounting to approximately $8.1 billion, with adjusted EBITDA growth of 21% to $157 million, marking the highest adjusted EBITDA margin rate in two years [19][25][10] - Free cash flow for the quarter was $190 million, significantly higher than the previous year's $70 million, contributing to a year-to-date free cash flow of approximately $150 million [25][10][26] - Net leverage decreased to 3.3 turns, down 1.3 turns from the previous year, with expectations to reach 2.5 turns by the end of fiscal 2026 [25][26][10] Business Line Data and Key Metrics Changes - Sales in the wholesale natural products business increased by 12%, while the wholesale conventional products business grew by nearly 3% [19][20] - Unit volumes across the wholesale business rose by about 4%, indicating a sequential acceleration in performance [19][20] - Retail business sales showed slight growth, with same-store sales up 1.5% [20] Market Data and Key Metrics Changes - Inflation remained stable at approximately 1.5%, contributing to the sales increase alongside a favorable product mix [20][19] - The natural products segment outperformed conventional products, growing at 12% compared to 3% for conventional [80][19] Company Strategy and Development Direction - The company is focused on optimizing its network and reducing capital spending while enhancing operational efficiency [12][13] - A strategic decision was made to exit the unprofitable relationship with Key Food, allowing for better service to remaining customers and optimizing the Northeast distribution network [12][38] - The company aims to continue driving consistent annual margin expansion and free cash flow generation, with a focus on building win-win relationships with suppliers and customers [10][11] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by a dynamic macroeconomic environment but expressed confidence in the company's ability to support customers and suppliers [11][10] - The company is committed to transparency and customer service during the ongoing IT systems security incident, which has impacted operations [7][8] - Future financial objectives will be updated after the fiscal 2026 budgeting process, with a focus on long-term sustainable value creation [16][17] Other Important Information - The company reported an incident of unauthorized activity on its IT systems, prompting a response plan and operational adjustments to maintain customer service [7][8] - The company is actively working to restore its systems while managing customer needs through alternative means [41][42] Q&A Session Summary Question: Clarification on guidance for non-GAAP elements - Management reiterated that guidance remains unchanged due to the ongoing IT incident, despite strong year-to-date performance [31][35] Question: Insights on the Key Foods relationship - Management explained the decision to exit the Key Foods agreement was based on operational challenges and profitability assessments [36][38] Question: Current shipping capabilities post-incident - Management confirmed limited shipping is occurring, with ongoing efforts to restore full capabilities [41][42] Question: Impact of the cyber incident on customer contracts - Management emphasized a focus on meeting customer needs rather than contractual obligations during the crisis [46][47] Question: Long-term implications of Lean Six Sigma initiatives - Management expressed confidence in sustaining productivity gains despite temporary disruptions from the cyber incident [62][66] Question: Customer response to the cyber incident - Management reported constructive and collaborative conversations with customers, focusing on meeting their needs during the crisis [57][58] Question: Future CapEx and technology spending post-incident - Management indicated that while cybersecurity investments will be prioritized, overall capital spending strategies remain unchanged [85][86]

Financial Data and Key Metrics Changes - The company achieved a sales growth of 7.5%, amounting to approximately $8.1 billion, with adjusted EBITDA growth of 21% to $157 million, marking the highest adjusted EBITDA margin rate in two years [19][24][8] - Free cash flow for the quarter was $190 million, significantly higher than the previous year's $70 million, contributing to a year-to-date free cash flow of approximately $150 million [24][26] - Net leverage was reduced to 3.3 turns, down 1.3 turns from the previous year, with expectations to reach 2.5 turns by the end of fiscal 2026, a year earlier than previously planned [25][24] Business Line Data and Key Metrics Changes - Wholesale natural products sales increased by 12%, while wholesale conventional products grew by nearly 3%, with unit volumes up about 4% [19][20] - Retail business sales were slightly up, with same-store sales increasing by 1.5% [20] Market Data and Key Metrics Changes - Inflation remained stable at approximately 1.5%, contributing to the sales increase alongside a favorable product mix that added 200 basis points to growth [20][24] - The company noted strong performance in the natural organic and specialty segments, with natural products growing at 12% compared to 3% for conventional products [81][82] Company Strategy and Development Direction - The company is focused on optimizing its network and reducing annual capital spending while enhancing operational efficiency through lean management practices [12][13] - A strategic decision was made to exit the unprofitable relationship with Key Food, allowing for better optimization of the Northeast distribution network [12][38] - The company aims to create win-win relationships with suppliers and customers, driving profitable growth while managing a dynamic macroeconomic environment [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving long-term sustainable value for stakeholders despite current operational disruptions due to a cyber incident [16][27] - The company is committed to transparency and customer service during the ongoing recovery from the IT systems security incident [6][32] - Future financial objectives will be updated after the fiscal 2026 budgeting process, with a focus on maintaining operational efficiency and customer value creation [15][16] Other Important Information - The company is implementing workarounds to continue servicing customers during the IT incident, with a focus on restoring systems safely and efficiently [6][32] - The company has made a voluntary $100 million prepayment on its term loan, saving approximately $1 million in quarterly interest expenses [26] Q&A Session Summary Question: Clarification on guidance for non-GAAP elements - Management reiterated that guidance remains unchanged due to the focus on restoring systems and customer service [31][35] Question: Insights on the Key Foods relationship - Management explained the decision to exit the Key Foods agreement was based on operational challenges and mutual agreement to optimize results for both parties [36][38] Question: Current shipping capabilities post-cyber incident - Management confirmed limited shipping is occurring, with ongoing efforts to restore full capabilities [42][44] Question: Customer response to the cyber incident - Management noted constructive and collaborative conversations with customers, focusing on meeting their needs during the crisis [57][58] Question: Impact of the cyber incident on Lean Six Sigma rollout - Management indicated that while there may be temporary disruptions, the underlying momentum for Lean initiatives remains strong [65][66] Question: Long-term outlook for the conventional segment - Management emphasized a disciplined approach to contract analysis and the importance of driving throughput for profitable growth [72][75] Question: Consumer behavior and shopping trends - Management observed strong performance in natural and organic categories, with ongoing support for retailers navigating macroeconomic challenges [78][81]

Financial Performance - Q3 FY25 - Net sales increased by 7.5% to $8,059 million compared to $7,498 million in Q3 FY24[13] - Adjusted EBITDA increased by 20.8% to $157 million compared to $130 million in Q3 FY24[13] - Adjusted EPS increased by $0.34 to $0.44 compared to $0.10 in Q3 FY24[13] - Free cash flow increased by $70 million to $119 million compared to $49 million in Q3 FY24[13] Financial Performance - YTD Q3 FY25 - Net sales increased by 5.5% to $24,088 million compared to $22,825 million in YTD Q3 FY24[13] - Adjusted EBITDA increased by 16.3% to $436 million compared to $375 million in YTD Q3 FY24[13] - Adjusted EPS increased by $0.69 to $0.82 compared to $0.13 in YTD Q3 FY24[13] - Free cash flow increased by $316 million to $153 million compared to $(163) million in YTD Q3 FY24[13] Fiscal 2025 Outlook (Reiterated) - Net Sales: $31.3 - $31.7 billion[34] - Adjusted EBITDA: $550 - $580 million (Increase of 3.6% compared to Fiscal 2024 on 52-week basis)[34] - Adjusted EPS: $0.70 - $0.90 (Increase of ~ 5-times compared to Fiscal 2024)[34] - Free Cash Flow: > $150 million (Increase of ~ $250 million compared to Fiscal 2024)[34] - Capital and Cloud Implementation Expenditures: ~$300 million (Decrease of ~$70 million compared to Fiscal 2024)[34]

Financial Performance - Net sales increased by 7.5% to $8.1 billion compared to the same period last year, driven by a 4% increase in wholesale unit volumes [5]. - Adjusted EBITDA rose by 20.8% to $157 million, reflecting a steady margin improvement and increased free cash flow [8]. - Free cash flow improved significantly to $119 million, up 142.9% from $49 million in the prior year quarter [16]. - The net loss for the quarter was $(7) million, a significant improvement from a net loss of $(21) million in the same quarter last year [14]. - Adjusted earnings per diluted share (Adjusted EPS) increased to $0.44, compared to $0.10 in the prior year quarter, marking a 340% increase [8]. - Gross profit for the quarter was $1.1 billion, an increase of $62 million or 6.1% compared to the same quarter last year [10]. - The net loss attributable to United Natural Foods, Inc. for the 39-week period ended May 3, 2025, was $31 million, compared to a net loss of $75 million for the same period in 2024 [28]. - Adjusted EBITDA for the 39-week period ended May 3, 2025, increased to $436 million, up from $375 million in the prior year, reflecting a growth of 16.3% [33]. - Adjusted net income for the 39-week period ended May 3, 2025, was $50 million, compared to $8 million in the same period of 2024, representing a substantial increase [38]. Cash Flow and Liquidity - Free cash flow for the 39-week period ended May 3, 2025, was $310 million, significantly higher than $54 million for the same period in 2024 [31]. - The company maintained total liquidity of approximately $1.49 billion, consisting of $52 million in cash and $1.44 billion in unused capacity under its asset-based lending facility [16]. - Free cash flow for the 13-week period ended May 3, 2025, was $119 million, significantly higher than $49 million for the same period in 2024 [42]. Debt and Capital Structure - The net debt to Adjusted EBITDA ratio declined to 3.3x, the lowest in the past two fiscal years [8]. - The company reported a net carrying value of debt and finance lease liabilities of $1,928 million, with an adjusted EBITDA leverage ratio of 3.3x [40]. - The net debt to Adjusted EBITDA leverage ratio will be calculated based on the trailing four quarters Adjusted EBITDA, providing insights into the company's capital structure [26]. Expenses and Capital Expenditures - Operating expenses decreased as a percentage of net sales to 12.7%, down from 13.2% in the prior year quarter, due to higher sales and cost-saving initiatives [11]. - Capital expenditures for the 39-week period ended May 3, 2025, were $157 million, a decrease from $217 million in the same period last year [31]. - Payments for capital expenditures for the 39-week period ended May 3, 2025, totaled $157 million, down from $217 million in the prior year [43]. - The company incurred $54 million in restructuring, acquisition, and integration-related expenses over the trailing four quarters [41]. Tax and Impairment - The U.S. GAAP effective tax rate for fiscal 2025 is estimated at 32%, while the adjusted effective tax rate is projected to be 20% [44]. - The company recognized a $24 million non-cash asset impairment charge related to a distribution center in fiscal 2025 [35]. Outlook - The full-year outlook for net sales remains unchanged at $31.3 - $31.7 billion, while the net loss and EPS outlook has been updated to reflect costs associated with exiting a customer contract [17].

Core Insights - United Natural Foods, Inc. (UNFI) is expected to show growth in both revenue and earnings for the third quarter of fiscal 2025, with earnings report scheduled for June 10 [1] Revenue and Earnings Estimates - The Zacks Consensus Estimate for UNFI's revenues is $7.85 billion, reflecting a 4.6% increase compared to the same quarter last year [2] - The consensus estimate for earnings per share (EPS) has risen to 24 cents, a significant increase from 10 cents reported in the previous year [2] - UNFI has achieved an average earnings surprise of 408.7% over the trailing four quarters [2] Growth Drivers - UNFI's growth is supported by strong demand in its wholesale segment and a rising consumer preference for natural and organic products [3] - The company is implementing strategic initiatives such as customer base expansion, distribution network optimization, and increased investment in automation to enhance efficiency and market reach [3] - Lean management practices have improved operational effectiveness by aligning supply with customer needs and generating cost savings [4] Operational Efficiency - Disciplined management of selling, general and administrative (SG&A) expenses, along with ongoing supply chain optimization and productivity improvements, are contributing positively to UNFI's performance [5] - The natural products category is identified as a key growth driver, a trend expected to continue in upcoming quarters [4][9]

Group 1 - United Natural Foods (NYSE: UNFI) recently exceeded earnings estimates and raised its guidance, although this was reported back in March [1] - The impact of tariffs on the company's performance has not yet been fully accounted for, and the stock price remains above pre-tariff levels [1] Group 2 - The analyst has over 10 years of experience researching various companies across multiple sectors, including commodities and technology [1] - The focus of the analyst's research includes metals and mining stocks, as well as consumer discretionary/staples, REITs, and utilities [1]