United Natural Foods(US:UNFI)2022-06-07 18:59Financial Data and Key Metrics Changes - Total net sales for Q3 were $7.2 billion, a 9.2% increase compared to the same quarter last year, bringing year-to-date sales to $21.7 billion, a 7.1% increase [31][46] - Adjusted EBITDA for Q3 totaled $196 million, a 5.9% increase from $185 million in the same quarter last year, with year-to-date adjusted EBITDA at $616 million, a 9.2% increase [49][51] - Adjusted EPS for Q3 was $1.10, a 10% increase from $1.00 in the same quarter last year, with year-to-date adjusted EPS at $3.56, a 22% increase over the previous year [51][56] Business Line Data and Key Metrics Changes - Cross-selling with existing customers contributed an additional $95 million in revenue for the quarter, totaling $260 million year-to-date, on track for nearly $1 billion in cross-selling revenue for fiscal 2022 [32][34] - The Professional Services business saw growth rates in adjusted EBITDA more than double that of the wholesale business, indicating strong demand for these services [38] Market Data and Key Metrics Changes - The company reported a decrease in driver vacancy rates to 9% and distribution center vacancy rates improved to less than 7% by the end of Q3, reflecting stabilization in workforce [11][41] - The food-at-home inflation rate was reported at 10.8%, impacting consumer behavior and sales dynamics [9] Company Strategy and Development Direction - The "Fuel the Future" strategy aims for long-term sustainable growth, focusing on enhancing customer value, improving supplier partnerships, providing career opportunities for associates, and supporting community and environmental initiatives [14][16][24] - The company is committed to a disciplined approach to value creation, focusing on strategic areas that drive economic profit rather than growth for growth's sake [28] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the ability to grow the business further, citing a robust new business pipeline and improvements in supply levels [10][33] - The company anticipates continued challenges from inflation and supply chain issues but remains confident in its agility and resilience [59] Other Important Information - The company revised its definition of adjusted EBITDA and adjusted EPS to exclude the impact of LIFO expense, which is expected to provide a clearer view of underlying operating performance [47][48] - Full-year sales guidance has been raised to a range of $28.8 billion to $29.1 billion, reflecting improved performance and market conditions [55][56] Q&A Session Summary Question: Did the quarter beat internal expectations and what is the outlook for Q4 and FY2023? - Management indicated that Q3 results were in line with internal expectations and did not provide specific guidance for Q4 or FY2023 but affirmed confidence in achieving long-term targets [64][65] Question: What caused the increase in the LIFO charge? - The increase in the LIFO charge was attributed to rising inflation, with no fundamental changes in inventory balances [66][67] Question: How quickly can the company gain market share with the One-UNFI initiative? - The One-UNFI initiative is a multi-year process, with incremental opportunities identified to enhance supply chain efficiency and customer service [75] Question: How does scale benefit the company in the current environment? - Scale provides flexibility in distribution and purchasing power, allowing the company to better serve its customers and suppliers [82][84] Question: Is there a shift from branded to private label products? - There has been an acceleration in private label brand sales, reflecting changing consumer preferences amid inflation [93][97] Question: What is the outlook for promotional activities and their impact on margins? - Promotional dollars are expected to improve as fill rates stabilize, but there is a lag in promotional activity following fill rate improvements [96][98]