PROVIDENCE, R.I.–(BUSINESS WIRE)–United Natural Foods, Inc. (NYSE: UNFI) today reported financial results for the fourth quarter (13 weeks) and fiscal year (52 weeks) ended July 29, 2023.
Fourth Quarter Fiscal 2023 Performance
- Net sales increased 2.0% to $7.4 billion
- Net loss of $68 million; Loss per diluted share (EPS) of $(1.15)
- Adjusted EBITDA decreased 56.3% to $93 million
- Adjusted EPS decreased to $(0.25)
Recent Financial and Operational Summary
- Fiscal 2023 sales in-line with most recent outlook; adjusted EBITDA and adjusted EPS at high-end of most recent outlook
- Year-end net debt reduced to a new post-Supervalu low of $1.95 billion; decline of $1.40 billion since 2018 close
- Actioned nearly $100 million of cost savings from previously disclosed near-term value creation initiatives
- Progressing on key transformation initiatives
- Optimizing and automating supply chain; broke ground on Sarasota distribution center
- Accelerating and expanding transformation initiative, including the addition of three new board members
- Conducting board-led finance review to drive shareholder value creation
“Our fourth quarter concluded a challenging year in which we continued to emphasize serving customers and suppliers, and we also worked diligently to improve operating effectiveness, efficiency and our technological capabilities. While we grew sales across all of our customer channels, profitability declined primarily due to a decrease in inflation driven procurement gains and elevated shrink. We expect further headwinds as we continue to cycle elevated inflationary benefits during the first half of fiscal 2024,” said Sandy Douglas, UNFI Chief Executive Officer.
“As we look to the new fiscal year, we’re focused on addressing near-term profitability while creating a structurally more efficient technology-enabled food retail services company that can better serve our customers and capitalize on the significant growth opportunities we see ahead. To that end, we’ve already captured nearly $100 million of near-term value creation initiatives, and we now expect to drive full year operating margin benefits in fiscal 2024 of nearly $150 million from these actions. We’re continuing to invest in our supply chain and technology infrastructure to improve our cost structure and enhance the customer and supplier experience. We’re confident that combining our industry leading position with a more dynamic and nimble UNFI under the guidance of our newly refreshed board puts us on a strong path to drive meaningful and sustainable long-term shareholder value creation.”
|
|
Fourth Quarter Ended |
|
Fiscal Year Ended |
||||||||||||||||||
|
($ in millions, except for per share data) |
July 29, 2023 |
|
July 30, 2022 |
|
Percent Change |
|
July 29, 2023 |
|
July 30, 2022 |
|
Percent Change |
||||||||||
|
Net sales |
$ |
7,417 |
|
|
$ |
7,273 |
|
|
2.0 |
% |
|
$ |
30,272 |
|
|
$ |
28,928 |
|
|
4.6 |
% |
|
Chains |
$ |
3,141 |
|
|
$ |
3,126 |
|
|
0.5 |
% |
|
$ |
12,816 |
|
|
$ |
12,562 |
|
|
2.0 |
% |
|
Independent retailers |
$ |
1,897 |
|
|
$ |
1,872 |
|
|
1.3 |
% |
|
$ |
7,699 |
|
|
$ |
7,360 |
|
|
4.6 |
% |
|
Supernatural |
$ |
1,555 |
|
|
$ |
1,420 |
|
|
9.5 |
% |
|
$ |
6,374 |
|
|
$ |
5,719 |
|
|
11.5 |
% |
|
Retail |
$ |
609 |
|
|
$ |
621 |
|
|
(1.9 |
)% |
|
$ |
2,480 |
|
|
$ |
2,468 |
|
|
0.5 |
% |
|
Other |
$ |
593 |
|
|
$ |
616 |
|
|
(3.7 |
)% |
|
$ |
2,477 |
|
|
$ |
2,402 |
|
|
3.1 |
% |
|
Eliminations |
$ |
(378 |
) |
|
$ |
(382 |
) |
|
(1.0 |
)% |
|
$ |
(1,574 |
) |
|
$ |
(1,583 |
) |
|
(0.6 |
)% |
|
Net (loss) income |
$ |
(68 |
) |
|
$ |
39 |
|
|
(274.4 |
)% |
|
$ |
24 |
|
|
$ |
248 |
|
|
(90.3 |
)% |
|
Adjusted EBITDA(1) |
$ |
93 |
|
|
$ |
213 |
|
|
(56.3 |
)% |
|
$ |
640 |
|
|
$ |
829 |
|
|
(22.8 |
)% |
|
(Loss) earnings per diluted share (EPS) |
$ |
(1.15 |
) |
|
$ |
0.63 |
|
|
(282.5 |
)% |
|
$ |
0.40 |
|
|
$ |
4.07 |
|
|
(90.2 |
)% |
|
Adjusted (loss) earnings per diluted share (Adjusted EPS)(1) |
$ |
(0.25 |
) |
|
$ |
1.27 |
|
|
(119.7 |
)% |
|
$ |
2.23 |
|
|
$ |
4.83 |
|
|
(53.8 |
)% |
|
(1) |
Please refer to the tables in this press release for a reconciliation of these non-GAAP financial measures to the most directly comparable financial measure calculated in accordance with GAAP. |
Fourth Quarter Fiscal 2023 Summary
Net sales increased 2.0% in the fourth quarter of fiscal 2023 compared to the same period last year, primarily driven by inflation and new business. This new business resulted from selling new or expanded categories to existing customers and adding new customers from our robust pipeline. These increases were partially offset by a decrease in total units sold. While unit volumes continued to decline, there was 100 basis points of sequential improvement from levels in the third quarter of fiscal 2023.
Gross profit in the fourth quarter of fiscal 2023 was $1.0 billion, a decrease of $87 million, or 8.3%, compared to the fourth quarter of fiscal 2022. Excluding the non-cash LIFO charge in both periods, gross profit decreased $107 million, or 9.6%. The gross profit rate in the fourth quarter of fiscal 2023 was 13.0% of net sales, including a $36 million LIFO charge, compared to 14.5% of net sales with a $56 million LIFO charge in the fourth quarter of fiscal 2022. Excluding this non-cash charge, gross profit rate was 13.5% of net sales compared to a gross profit rate of 15.2% of net sales in the fourth quarter of fiscal 2022. The decrease in gross profit rate, excluding the LIFO charge, was primarily driven by lower levels of procurement gains, reduced benefits from inflation and higher levels of shrink.
Operating expenses in the fourth quarter of fiscal 2023 were $1,004 million, or 13.5% of net sales, compared to $980 million, or 13.5% of net sales, in the fourth quarter of fiscal 2022. Operating expenses in the fourth quarter of fiscal 2023 benefited from lower transportation and distribution center labor costs due to a decrease in volume, and lower incentive compensation expense driven by underperformance compared to targets, offset by investments in our transformation initiatives which led to higher costs in this year’s fourth quarter, and higher occupancy-related costs. Operating expenses in the fourth quarter of fiscal 2022 included approximately $14 million in higher incentive compensation expense compared to the fourth quarter of fiscal 2023.
Interest expense, net for the fourth quarter of fiscal 2023 was $35 million, compared to $34 million for the fourth quarter of fiscal 2022. The increase in interest expense, net was primarily driven by higher interest rates, partially offset by lower outstanding debt balances.
Effective tax rate for the fourth quarter of fiscal 2023 was a benefit of 35.0% of a pre-tax loss compared to an expense of 6.8% of pre-tax income for the fourth quarter of fiscal 2022. The effective tax rate for the fourth quarter of fiscal 2023 included benefits from a favorable state audit settlement and the reduction in pre-tax income during the fourth quarter of fiscal 2023. The effective tax rate for the fourth quarter of fiscal 2022 was reduced by discrete tax benefits related to employee stock awards.
Net loss for the fourth quarter of fiscal 2023 was $68 million. Net income for the fourth quarter of fiscal 2022 was $39 million.
Net loss per diluted share (EPS) was $(1.15) for the fourth quarter of fiscal 2023 compared to net income per diluted share of $0.63 for the fourth quarter of fiscal 2022. Adjusted EPS was $(0.25) for the fourth quarter of fiscal 2023, compared to adjusted EPS of $1.27 in the fourth quarter of fiscal 2022.
Adjusted EBITDA for the fourth quarter of fiscal 2023 was $93 million, compared to $213 million for the fourth quarter of fiscal 2022.
Capital Allocation and Financing Overview
- Free Cash Flow – During the fourth quarter of 2023, free cash flow was $117 million, compared to $269 million in last year’s fourth quarter. This quarter’s results reflect net cash provided by operating activities of $222 million less payments for capital expenditures of $105 million.
- Leverage – Total outstanding debt, net of cash, ended the quarter at $1.95 billion, reflecting a decrease of $166 million during fiscal 2023. The net debt to adjusted EBITDA leverage ratio was 3.0x as of July 29, 2023.
- Liquidity – As of July 29, 2023, total liquidity was approximately $1.52 billion, consisting of approximately $37 million in cash, plus the unused capacity of approximately $1.48 billion under the Company’s asset-based lending facility.
- Repurchase program – During the fourth quarter of 2023, the Company repurchased approximately 791,000 shares at an average price of $26.49 for an aggregate cost of approximately $21 million.
Fiscal 2024 Outlook (1)
The Company is providing the following outlook for fiscal 2024, a 53-week year. This outlook reflects lower levels of anticipated procurement gains, driven by moderating levels of inflation, as well as the restoration of performance-based incentive cash compensation in fiscal 2024.
|
Fiscal Year Ending August 3, 2024 (53 weeks) |
|
|
|
|
Net sales ($ in billions) |
|
$30.9 – $31.5 |
|
|
Net loss ($ in millions) |
|
$(110) – $(36) |
|
|
EPS (2) |
|
$(1.86) – $(0.60) |
|
|
Adjusted EPS (2)(3)(4) |
|
$(0.88) – $0.38 |
|
|
Adjusted EBITDA (4) ($ in millions) |
|
$450 – $550 |
|
|
Capital Expenditures (5) ($ in millions) |
|
~ $400 |
|
|
(1) |
The outlook provided above is for fiscal 2024 only. This outlook is forward-looking, is based on management’s current estimates and expectations and is subject to a number of risks, including many that are outside of management’s control. See cautionary Safe Harbor Statement below. The 53rd week is expected to add approximately $600 million to Net sales and $9 million to Adjusted EBITDA in the ranges provided. |
|
(2) |
(Loss) earnings per share amounts as presented include rounding. |
|
(3) |
The Company uses an adjusted effective tax rate in calculating Adjusted EPS. The adjusted effective tax rate is calculated based on adjusted net (loss) income before tax. It also excludes the potential impact of changes to uncertain tax positions, valuation allowances, tax impacts related to the vesting of share-based compensation awards and discrete GAAP tax items which could impact the comparability of the operational effective tax rate. The Company believes using this adjusted effective tax rate provides better consistency across the interim reporting periods since each of these discrete items can cause volatility in the GAAP tax rate that is not indicative of the underlying ongoing operations of the Company. By providing this non-GAAP measure, management intends to provide investors with a meaningful, consistent comparison of the Company’s effective tax rate on ongoing operations. |
|
(4) |
Please refer to the tables in this press release for a reconciliation of these non-GAAP financial measures to the most directly comparable financial measures calculated in accordance with GAAP. |
|
(5) |
The increase compared to fiscal 2023 is primarily driven by investments in the Company’s transformation program. |
About United Natural Foods
UNFI is North America’s premier grocery wholesaler delivering the widest variety of fresh, branded, and owned brand products to more than 30,000 locations throughout North America, including natural product superstores, independent retailers, conventional supermarket chains, eCommerce providers, and foodservice customers. UNFI also provides a broad range of value-added services and segmented marketing expertise, including proprietary technology, data, market insights, and shelf management to help customers and suppliers build their businesses and brands. As the largest full-service grocery partner in North America, UNFI is committed to building a food system that is better for all and is uniquely positioned to deliver great food, more choices, and fresh thinking to customers. To learn more about how UNFI is Fueling the Future of Food, visit www.unfi.com.
