United Natural Foods(UNFI) - 2021 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Second quarter sales grew by 7.1% to $6.9 billion, with adjusted EBITDA increasing by 57% to $206 million, marking the second highest adjusted EBITDA in the company's history [9][45] - Adjusted EBITDA margin expanded by 95 basis points year-over-year, demonstrating the company's ability to translate topline performance into stronger bottom-line growth [49][50] - Net debt to adjusted EBITDA leverage ratio improved to 3.2 times, a two-turn improvement since the second quarter of the previous year [11][52] Business Line Data and Key Metrics Changes - Wholesale growth rate was 6.5%, with cross-selling efforts generating approximately $90 million in incremental sales for the quarter, totaling nearly $500 million since the SUPERVALU acquisition [19][20] - E-commerce sales increased by 97%, driven by new business and growth from the largest e-commerce player, now a top 25 customer [30] - The Brands+ private brands business grew by 7.3%, with significant growth from the Field Day brand, which saw over 30% growth this fiscal year [36][38] Market Data and Key Metrics Changes - Sales to independent retailers increased by 9%, while sales to chains rose by 6.5%, both exceeding the growth rates indicated by syndicated data [28] - The company is positioned to capture a $140 billion addressable wholesale market, with $38 billion from existing customers and $78 billion from new customers [15][22] Company Strategy and Development Direction - The company is focused on optimizing its distribution network and investing in technologies to enhance future business growth and reduce costs [16][41] - A new e-commerce platform, Community Marketplace, is set to launch, providing customers access to local brands and enhancing product assortment [31][32] - The company has extended its contract with its largest customer through late 2027, reflecting a strong working relationship [17] Management's Comments on Operating Environment and Future Outlook - Management believes food-at-home consumption will remain elevated for several years, providing a favorable backdrop for growth [13][55] - The company is optimistic about achieving its fiscal year 2021 operating guidance, reaffirming expectations for net sales between $27 billion and $27.8 billion [58][60] - Management is confident in the ability to generate significant free cash flow and reduce debt further [62] Other Important Information - The company has made progress in its ESG initiatives, including reducing food waste and improving its climate change response score [64][65] - The search for a new CEO is ongoing, with the current CEO committed to ensuring a smooth transition [67] Q&A Session Summary Question: Details on the Whole Foods contract - Management expressed pride in the negotiation outcome, securing a nearly seven-year contract with similar economics to the previous agreement [76][78] Question: Consumer products and vendor promotions - Management noted that there are more tailwinds than headwinds for gross margins, with expectations for promotional activity to return post-COVID [82][84] Question: Guidance on sales expectations - Management maintained the sales guidance while expecting EBITDA and EPS to be at the higher end of the range due to operational improvements [90][92] Question: Contribution from new accounts - The pipeline includes numerous opportunities across various categories, with significant growth expected from both independent and chain customers [106][108] Question: Operating margin improvements - Management indicated that improvements are due to stabilization in operations and ongoing productivity initiatives, with further potential for margin enhancement [123][127]