Core Viewpoint - United Natural Foods, Inc. (UNFI) has experienced an 18.2% increase in stock price over the past month, outperforming the industry and the S&P 500 index, leading investors to consider whether to hold or take profits [1]. Stock Performance - UNFI closed at $28.41, trading above its 50-day and 200-day simple moving averages of $26.26 and $23.40, indicating strong momentum and positive investor sentiment [2][3]. Growth and Efficiency - The natural and organic segment of UNFI is showing impressive growth due to increased consumer demand for healthier products, aligning with broader trends favoring "better-for-you" options [4]. - UNFI is optimizing its distribution network to enhance efficiency, including consolidating its distribution center in Fort Wayne, IN, which is expected to improve operational efficiency and financial flexibility [7]. - Lean management practices have led to a reduction in operating expenses to 12.6% of net sales from 13% year-over-year, reflecting disciplined execution [8]. Financial Performance - In the fiscal second quarter, adjusted EBITDA increased by approximately 13.3% year-over-year to around $145 million, while adjusted earnings per share surged 214.3% to 22 cents from 7 cents in the prior-year quarter [9]. - However, UNFI's gross margin narrowed to 13.1% from 13.3% year-over-year, primarily due to a weaker wholesale margin rate [11]. Challenges - UNFI's retail segment faced a 3.3% decline in total retail sales year-over-year, attributed to the closure of five stores, with same-store sales falling by approximately 40 basis points [10]. - Ongoing margin pressures and rising operational costs may limit the company's ability to invest in growth initiatives [12]. Valuation - UNFI is trading at a forward 12-month price-to-earnings multiple of 22.31X, which is above the industry average of 15.75X, suggesting potential overvaluation [13]. Investment Considerations - The recent stock rally reflects investor confidence due to operational execution and efficiency gains, but challenges in retail and high valuation indicate that current investors may benefit from holding, while new investors might wait for stabilization [15].

Industry Overview - Health and fitness companies focus on improving physical well-being through products and services such as gym memberships, fitness equipment, nutritional supplements, and wellness programs [1] - The industry benefits from consistent demand driven by growing global awareness of health issues and the importance of physical fitness, supported by rising rates of lifestyle-related diseases and a growing emphasis on preventive healthcare [3] - Diverse revenue streams, including subscriptions, product sales, and services, make the health and fitness sector attractive to investors seeking long-term gains [4] Investment Opportunities - Five recommended stocks in the health and fitness space with favorable Zacks Rank include Sprouts Farmers Market Inc. (SFM), DexCom Inc. (DXCM), Hims & Hers Health Inc. (HIMS), United Natural Foods Inc. (UNFI), and GoodRx Holdings Inc. (GDRX) [2] Company Highlights Sprouts Farmers Market Inc. (SFM) - Focus on product innovation, e-commerce, private label offerings, and targeted marketing has led to better-than-expected fourth-quarter 2024 results, with both top and bottom lines growing year over year [6] - Expected net sales growth of 10.5% to 12.5% and comparable store sales increase of 4.5% to 6.5% for 2025 [7] - Projected revenue and earnings growth rates of 13.7% and 33.6%, respectively, for the current year [8] DexCom Inc. (DXCM) - Benefiting from strong contributions from the Sensor segment and both domestic and international revenue growth [10] - Expected revenue and earnings growth rates of 14.3% and 23.2%, respectively, for the current year [11] Hims & Hers Health Inc. (HIMS) - Addresses a $360 million U.S. total addressable market across various healthcare specialties, with over 2 million subscribers driving recurring revenues [12] - Expected revenue and earnings growth rates of 58.5% and more than 100%, respectively, for the current year [13] United Natural Foods Inc. (UNFI) - Demonstrating strong growth supported by wholesale momentum and demand for natural and organic products [14] - Expected revenue and earnings growth rates of 1.9% and more than 100%, respectively, for the current year [16] GoodRx Holdings Inc. (GDRX) - Offers a price comparison platform for prescription drugs, enabling consumers to save on purchases [17] - Expected revenue and earnings growth rates of 4% and 14.7%, respectively, for the current year [19]

A month has gone by since the last earnings report for United Natural Foods (UNFI) . Shares have lost about 8.2% in that time frame, underperforming the S&P 500.Will the recent negative trend continue leading up to its next earnings release, or is United Natural due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.How Have Estimates Been Moving Since Then ...

Core Insights - The article emphasizes the investment philosophy focused on small cap companies, highlighting the importance of identifying mispriced securities through understanding financial drivers and utilizing DCF model valuation [1] Investment Philosophy - The investment approach is not confined to traditional categories such as value, dividend, or growth investing, but rather considers all prospects of a stock to assess risk-to-reward [1]

Group 1 - The stock of United Natural Foods (UNFI) has experienced a downtrend, declining 8.6% over the past four weeks, but is now in oversold territory, indicating a potential for a turnaround [1] - The Relative Strength Index (RSI) for UNFI is at 29.96, suggesting that the heavy selling pressure may be exhausting, which could lead to a reversal in the stock's trend [5] - Analysts have raised earnings estimates for UNFI by 8.7% over the last 30 days, indicating a strong consensus that the company may report better earnings than previously predicted [7] Group 2 - UNFI holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimate revisions and EPS surprises, further supporting the potential for a near-term turnaround [8]

The past couple of days have been very interesting for shareholders of food distribution firm United Natural Foods (NYSE: UNFI ). On March 12th, shares of the company spiked 11.6% after management announced financial results forCrude Value Insights offers you an investing service and community focused on oil and natural gas. We focus on cash flow and the companies that generate it, leading to value and growth prospects with real potential.Subscribers get to use a 50+ stock model account, in-depth cash flow ...

Financial Performance - Net sales for the second quarter of fiscal 2025 increased by 4.9% to $8,158 million compared to $7,775 million in the second quarter of fiscal 2024[132]. - Gross profit for the second quarter of fiscal 2025 increased by $37 million, or 3.6%, to $1,072 million, with a gross profit margin of 13.1%[137]. - Operating expenses for the second quarter of fiscal 2025 increased by $21 million, or 2.1%, to $1,031 million, representing 12.6% of net sales[139]. - Adjusted EBITDA for the second quarter of fiscal 2025 was $145 million, up from $128 million in the second quarter of fiscal 2024, reflecting a $17 million increase[130]. - Net loss attributable to United Natural Foods, Inc. was $3 million for the second quarter of fiscal 2025, compared to a net loss of $15 million in the second quarter of fiscal 2024[130]. - Year-to-date net sales for fiscal 2025 increased by 4.6% to $16,029 million compared to $15,327 million for fiscal 2024[135]. - Gross profit for fiscal 2025 year-to-date increased by $45 million, or 2.2%, to $2,110 million, with a gross profit margin of 13.2%[138]. - Operating income for fiscal 2025 year-to-date increased to $32 million, compared to $0 million for fiscal 2024 year-to-date[146]. - Total net sales for Q2 fiscal 2025 increased by $383 million, reaching $8,158 million, compared to $7,775 million in Q2 fiscal 2024[154]. - Wholesale net sales increased by $385 million, or 5.1%, in Q2 fiscal 2025, driven by a 3% increase in unit volumes[155]. - Adjusted EBITDA for wholesale increased by $18 million, or 15.3%, in Q2 fiscal 2025, reaching $136 million, compared to $118 million in Q2 fiscal 2024[159]. Cost and Expenses - The company reported a product cost inflation of approximately 2% in Q2 of fiscal 2025 compared to Q2 of fiscal 2024[115]. - Restructuring, acquisition, and integration related expenses increased to $9 million in the second quarter of fiscal 2025 from $4 million in the second quarter of fiscal 2024[141]. - Interest expense, net, decreased to $38 million in the second quarter of fiscal 2025 from $40 million in the second quarter of fiscal 2024, primarily due to lower outstanding debt balances[147]. - The effective tax rate for Q2 fiscal 2025 was a benefit rate of 60.0% on pre-tax loss, compared to 26.3% in Q2 fiscal 2024[149]. Distribution and Operations - A new distribution center in Manchester, Pennsylvania, with approximately 1.3 million square feet, began operations in Q1 of fiscal 2025 and will be automated later in the fiscal year[111]. - The company has 53 distribution centers and warehouses totaling approximately 31 million square feet of warehouse space across North America[102]. - The company is optimizing its distribution center network to achieve cost savings and improve customer experience[110]. - The company is realigning its commercial wholesale organization into two product-centered divisions to enhance service to customers and suppliers[104]. - The company recognized a $118 million right-of-use asset and operating lease liability for a new distribution center in Sarasota, Florida, in Q1 of fiscal 2025[111]. Cash Flow and Liquidity - Total liquidity as of February 1, 2025, was $1,312 million, consisting of $1,268 million in unused credit and $44 million in cash[164]. - Net cash provided by operating activities increased by $208 million in fiscal 2025 year-to-date compared to fiscal 2024 year-to-date, reaching $137 million[175]. - Net cash used in investing activities decreased by $42 million in fiscal 2025 year-to-date, totaling $100 million, primarily due to lower capital expenditures[176]. - Net cash used in financing activities increased by $242 million in fiscal 2025 year-to-date, resulting in a net cash outflow of $32 million, attributed to increased repayments under the ABL Credit Facility[177]. - Cash and cash equivalents at the end of the period increased by $10 million, totaling $44 million, compared to $34 million at the end of the previous period[175]. - Total debt decreased by $14 million to $2,071 million as of February 1, 2025, from $2,085 million as of August 3, 2024[164]. Capital Expenditures and Investments - Capital expenditures for fiscal 2025 year-to-date were $103 million, a decrease of $38 million from $141 million in fiscal 2024 year-to-date[173]. - Fiscal 2025 capital and cloud implementation spending is expected to be approximately $300 million, focusing on distribution network automation and technology platform investments[174]. Shareholder Returns and Pension Contributions - As of February 1, 2025, the company had $138 million remaining authorized under the $200 million share repurchase program initiated in September 2022[185]. - The company did not repurchase any shares of common stock in fiscal 2025 year-to-date[185]. - The company expects to contribute approximately $51 million to multiemployer pension plans in fiscal 2025, an increase from $47 million in fiscal 2024[182]. - The company assesses the attractiveness of cash contributions to pension plans based on factors such as expected return on assets and cost of debt[180]. - The company anticipates that contributions to multiemployer pension plans could increase in the near term due to various factors, including collective bargaining outcomes[182]. Retail Performance - Retail's net sales decreased by $21 million, or 3.3%, in Q2 fiscal 2025, primarily due to a 0.4% decrease in identical store sales[156]. Economic Outlook - The company anticipates continued economic volatility impacting consumer confidence and spending behavior[108]. Operational Strategy - The company plans to continue investing in its Retail segment, focusing on customer-facing merchandising initiatives and technology improvements[114]. - Overall product sales are balanced throughout the year, with working capital needs peaking during high sales periods, such as the holiday season[188].

Financial Data and Key Metrics Changes - The company reported second quarter sales growth of nearly 5% to $8.2 billion, with adjusted EBITDA growth of over 13% and significant improvement in year-over-year free cash flow [10][29][39] - Adjusted EBITDA reached $145 million, representing a 13% increase compared to the prior year quarter, with an adjusted EBITDA margin rate of nearly 1.8%, the highest since Q3 of fiscal 2023 [38][39] - Free cash flow generation climbed to $193 million in the quarter, approximately $77 million more than last year, bringing year-to-date free cash flow to slightly more than $30 million, an improvement of nearly $250 million compared to the previous year [40][41] Business Line Data and Key Metrics Changes - Sales in the natural products business increased by over 8% compared to last year's second quarter, while the conventional products business was up just over 2% [29] - Wholesale volumes were up about 3%, indicating sequential acceleration and favorable trends compared to industry benchmarks [30] - Retail sales were down about 3% due to five store closures, with same-store sales down about 40 basis points, showing a sequential improvement of about 100 basis points compared to Q1 [31] Market Data and Key Metrics Changes - Inflation remained largely unchanged at approximately 1.5%, close to a percent lower than last year's second quarter [31] - The company expects a sequential deceleration in sales growth from 4.6% in the first half of fiscal 2025 to around 3% in the second half, reflecting the timing of new customer onboarding [44] Company Strategy and Development Direction - The company is focused on increasing value for customers and suppliers while improving free cash flow and strengthening its balance sheet [12][25] - A realignment of the wholesale business into two product-centered divisions aims to provide more tailored solutions to customers and suppliers [20][21] - The company is committed to continuous improvement and has implemented lean management practices across its operations to enhance efficiency and effectiveness [15][16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the multi-year strategy and the ability to deliver long-term financial objectives, with an increased full-year outlook for all financial metrics except capital spending [11][43] - The company has not observed significant changes in consumer behavior recently, maintaining strong performance among its customer base [84] - Management highlighted the importance of innovation and product expertise in meeting customer needs, particularly in the natural products segment [56][100] Other Important Information - The company has successfully consolidated its Fort Wayne distribution center, transferring its volume to more efficient facilities, and is actively marketing other closed distribution centers [17][48] - The company has reduced net leverage to 3.7 times, the lowest level since fiscal 2023, and is on track to achieve a long-term deleveraging goal of less than 2.5 times by the end of fiscal 2027 [41][42] Q&A Session Summary Question: Can you touch on the changes in the wholesale realignment and the benefits seen? - Management indicated that the realignment focuses on product expertise and functional dedication in sales, procurement, and merchandising, which aligns with customer needs [55][56] Question: Were there duplicate costs during the Fort Wayne DC closure? - Management confirmed that operating expenses were ramping down quickly, with expectations for significant cost reductions moving forward [67][68] Question: What is the core sales growth in conventional products? - Management noted that conventional volumes were roughly flat, but the company has seen improvements in existing customer business [78][79] Question: Are there any changes in end customer behavior? - Management reported no significant changes in consumer behavior, with strong performance continuing among customers [84][85] Question: What is the exposure to imports and potential impacts of tariffs? - Management acknowledged the evolving situation and emphasized the importance of supply chain diversification and resiliency [88][89] Question: What are the expectations for productivity gains in the new DCs? - Management expects mid-single-digit productivity gains from the newly implemented lean daily management practices [92][93] Question: How is the demand for natural and organic products by conventional retailers? - Management confirmed that there is still significant momentum for natural and organic products across various channels [111][112]

Financial Data and Key Metrics Changes - The second quarter sales grew nearly 5% to $8.2 billion, with adjusted EBITDA growth of over 13% and significant improvement in year-over-year free cash flow [10][29][39] - Adjusted EBITDA reached $145 million, representing a 13% increase compared to the prior year quarter, with an adjusted EBITDA margin rate of nearly 1.8% [38][39] - Free cash flow generation climbed to $193 million in the quarter, approximately $77 million more than last year, bringing year-to-date free cash flow to slightly more than $30 million [40][41] Business Line Data and Key Metrics Changes - Sales in the natural products business increased by over 8% compared to last year's second quarter, while the conventional products business was up just over 2% [29] - Across the wholesale business, volumes were up about 3%, indicating sequential acceleration and favorable trends [30] - Retail business sales were down about 3% compared to last year, primarily due to five store closures over the past 12 months [31] Market Data and Key Metrics Changes - Inflation remained largely unchanged at approximately 1.5%, which was close to a percent lower than last year's second quarter [31] - The company expects a sequential deceleration in sales growth from 4.6% in the first half of fiscal 2025 to around 3% in the second half [44] Company Strategy and Development Direction - The company is focused on increasing value for customers and suppliers while improving free cash flow and strengthening its balance sheet [12][25] - A realignment of the wholesale business into two product-centered divisions is expected to enable more tailored solutions for customers and suppliers [20][21] - The company aims to embed lean management practices throughout the organization to enhance operational efficiency [15][16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the multi-year strategy and the ability to deliver long-term financial objectives [27][42] - The company raised its full-year outlook for all financial metrics except capital spending, reflecting strong year-to-date performance [43][47] - Management noted that they have not seen significant changes in consumer behavior recently, maintaining strong performance across their customer base [84] Other Important Information - The company has successfully consolidated its Fort Wayne distribution center and is actively marketing other closed facilities [17][48] - The net leverage has been reduced to 3.7 times, the lowest level since fiscal 2023, keeping the company on track to achieve a long-term deleveraging goal of less than 2.5 times by the end of fiscal 2027 [41][42] Q&A Session Summary Question: Can you touch on the changes in the wholesale realignment and the benefits seen? - Management indicated that the realignment focuses on product expertise and functional dedication in sales, procurement, and merchandising, which is expected to better serve customers [55][56] Question: Were there duplicate costs during the closure of the Fort Wayne DC? - Management confirmed that there were some duplicative costs during the transition, but these will be significantly reduced moving forward [67][68] Question: How do you see the cross-selling opportunity for natural and organic products in conventional retailers? - Management affirmed that there is still a significant opportunity for natural and organic products in conventional retailers, with strong category momentum [111] Question: What is the outlook for customer additions and growth in the second half? - Management noted that while growth may decelerate due to tougher comparisons, the pipeline for new customer additions remains strong [117][118]

2nd Quarter Fiscal 2025 March 11, 2025 2 Disclaimer Certain information in this presentation and discussed on the conference call which this presentation accompanies constitutes forward -looking information within the meaning of the Private Securities Litigation Reform Act of 1995 . Statements in this presentation regarding the Company's business that are not historical facts are "forward -looking statements" that involve risks and uncertainties and are based on current expectations and management estimates ...