PROVIDENCE, R.I.–(BUSINESS WIRE)–United Natural Foods, Inc. (NYSE: UNFI) today reported financial results for the first quarter of fiscal 2024 (13 weeks) ended October 28, 2023.
First Quarter Fiscal 2024 Performance (comparisons to first quarter fiscal 2023)
- Net sales increased 0.3% to $7.6 billion
- Net loss of $39 million; Loss per diluted share (EPS) of $(0.67)
- Adjusted EBITDA decreased 43.5% to $117 million
- Adjusted EPS decreased to $(0.04)
Recent Financial and Operational Summary
- Affirmed fiscal 2024 outlook for net sales, Adjusted EBITDA, Adjusted EPS and capital and cloud implementation expenditures; updated net loss and EPS expectations to reflect an asset charge and gain on sale
- Delivered benefits of $150 million near-term value creation initiatives earlier than projected
- Drove improved operational execution and transformation progress
- Revamped processes and management routines resulting in meaningful shrink reduction
- Completed consolidation of Logan Township into Allentown distribution center and the automation system expansion at Carlisle distribution center
- Onboarded new directors, CIO and Retail CEO
“Our performance this quarter exceeded our expectations as we drove improved operational execution, which helped deliver savings from our near-term value creation initiatives earlier in the year than previously expected. These savings partially offset the anticipated decline in procurement gains resulting from lower levels of inflation,” said Sandy Douglas, UNFI’s Chief Executive Officer.
“As we work to restore profitability in the near-term, we also continue to make progress on our multi-year transformation agenda designed to enhance shareholder value by structurally improving our capabilities, efficiency and profitability while meaningfully enhancing the customer and supplier experience. Given our leadership position and the tremendous long-term value creation opportunity we see for our customers, suppliers and our shareholders, we refuse to be incremental in our approach. We remain focused on sustaining operating and transformation momentum as we service our customers throughout the busy holiday season and will continue to drive operational improvement as quickly as possible. ”
First Quarter Fiscal 2024 Summary
|
|
13-Week Period Ended |
|
Percent Change |
|||||||
|
($ in millions, except for per share data) |
October 28, 2023 |
|
October 29, 2022 |
|
||||||
|
Net sales |
$ |
7,552 |
|
|
$ |
7,532 |
|
|
0.3 |
% |
|
Chains |
$ |
3,184 |
|
|
$ |
3,224 |
|
|
(1.2 |
)% |
|
Independent retailers |
$ |
1,899 |
|
|
$ |
1,947 |
|
|
(2.5 |
)% |
|
Supernatural |
$ |
1,612 |
|
|
$ |
1,513 |
|
|
6.5 |
% |
|
Retail |
$ |
606 |
|
|
$ |
613 |
|
|
(1.1 |
)% |
|
Other |
$ |
646 |
|
|
$ |
635 |
|
|
1.7 |
% |
|
Eliminations |
$ |
(395 |
) |
|
$ |
(400 |
) |
|
(1.3 |
)% |
|
Net (loss) income |
$ |
(39 |
) |
|
$ |
66 |
|
|
(159.1 |
)% |
|
Adjusted EBITDA (1) |
$ |
117 |
|
|
$ |
207 |
|
|
(43.5 |
)% |
|
EPS |
$ |
(0.67 |
) |
|
$ |
1.07 |
|
|
(162.6 |
)% |
|
Adjusted EPS (1) |
$ |
(0.04 |
) |
|
$ |
1.13 |
|
|
(103.5 |
)% |
|
(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 measures calculated in accordance with GAAP. |
Net sales increased 0.3% in the first quarter of fiscal 2024 compared to the same period last year, primarily driven by inflation and new business with existing customers, primarily in our Supernatural channel. These increases were largely offset by a decrease in units sold. While unit volumes continued to decline, there was 60 basis points of sequential improvement from levels in the fourth quarter of fiscal 2023.
Gross profit in the first quarter of fiscal 2024 was $1.0 billion, a decrease of $66 million, or 6.0%, compared to the first quarter of fiscal 2023. Excluding the non-cash LIFO charge in both periods, gross profit decreased $80 million, or 7.2%. The gross profit rate in the first quarter of fiscal 2024 was 13.6% of net sales and included a $7 million LIFO charge. Excluding this non-cash charge, gross profit rate was 13.7% of net sales. Gross profit rate in the first quarter of fiscal 2023 was 14.6% of net sales and included a $21 million LIFO charge. Excluding this non-cash charge, gross profit rate in the first quarter of fiscal 2023 was 14.8% of net sales. The decrease in gross profit rate, excluding the LIFO charge, was primarily driven by lower levels of procurement gains resulting from decelerating inflation.
Operating expenses in the first quarter of fiscal 2024 were $1,023 million, or 13.5% of net sales, compared to $1,000 million, or 13.3% of net sales, in the first quarter of fiscal 2023. The increase in operating expenses as a percentage of net sales was primarily driven by investments in our transformation initiatives, partially offset by lower transportation and distribution center labor costs due to increased operational efficiencies across our supply chain and a decrease in volume.
Interest expense, net for the first quarter of fiscal 2024 and fiscal 2023 was $35 million, as higher average interest rates were offset by lower outstanding debt balances.
Effective tax rate for the first quarter of fiscal 2024 was a benefit of 18.8% on pre-tax loss compared to an expense rate of 6.9% for the first quarter of fiscal 2023. The change from the first quarter of fiscal 2023 was primarily driven by the reduction of discrete tax benefits related to employee stock award vestings in the first quarter of fiscal 2024. In addition, the first quarter of fiscal 2023 included a tax benefit from the release of reserves for unrecognized tax positions that did not recur in the first quarter of fiscal 2024.
Net loss for the first quarter of fiscal 2024 was $39 million. Net income for the first quarter of fiscal 2023 was $66 million.
Net loss per diluted share (EPS) was $(0.67) for the first quarter of fiscal 2024 compared to net income per diluted share of $1.07 for the first quarter of fiscal 2023. Adjusted EPS was $(0.04) for the first quarter of fiscal 2024 compared to $1.13 in the first quarter of fiscal 2023.
Adjusted EBITDA for the first quarter of fiscal 2024 was $117 million compared to $207 million for the first quarter of fiscal 2023.
Capital Allocation and Financing Overview
- Free Cash Flow – During the first quarter of fiscal 2024, free cash flow was $(328) million compared to $(329) million in the first quarter of fiscal 2023. The results for the first quarter of fiscal 2024 reflect net cash used in operating activities of $254 million, including expected seasonally higher levels of holiday-driven working capital, and payments for capital expenditures of $74 million.
- Leverage – Total outstanding debt, net of cash, ended the quarter at $2.29 billion, reflecting an increase of $336 million in the first quarter of fiscal 2024. The net debt to Adjusted EBITDA leverage ratio was 4.2x as of October 28, 2023.
- Liquidity – As of October 28, 2023, total liquidity was approximately $1.29 billion, consisting of approximately $37 million in cash, plus the unused capacity of approximately $1.25 billion under the Company’s asset-based lending facility.
Fiscal 2024 Outlook (1)
The Company is updating its full-year outlook for fiscal 2024 for net loss and EPS to reflect non-cash asset charges and a gain on sale and reaffirming its expectations for net sales, Adjusted EBITDA, Adjusted EPS and capital and cloud implementation expenditures:
|
Fiscal Year Ending August 3, 2024 (53 weeks) |
|
Previous Full Year Outlook |
|
Updated Full Year Outlook |
|
Change |
|
Net sales ($ in billions) |
|
$30.9 – $31.5 |
|
$30.9 – $31.5 |
|
— |
|
Net loss ($ in millions) |
|
$(110) – $(36) |
|
$(120) – $(46) |
|
$(10) |
|
EPS (2) |
|
$(1.86) – $(0.60) |
|
$(2.02) – $(0.76) |
|
$(0.16) |
|
Adjusted EPS (2)(3)(4) |
|
$(0.88) – $0.38 |
|
$(0.88) – $0.38 |
|
— |
|
Adjusted EBITDA (4) ($ in millions) |
|
$450 – $550 |
|
$450 – $550 |
|
— |
|
Capital and cloud implementation expenditures (5) ($ in millions) |
|
~ $400 |
|
~ $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) |
Reflects the sum of payments for capital expenditures and cloud technology implementation expenditures. The Company believes that providing this non-GAAP measure provides investors with better visibility to the Company’s total investment spend. The increase compared to fiscal 2023 is primarily driven by investments in the Company’s transformation program. The components of fiscal 2024 will be primarily dependent on the nature of certain contracts to be executed. |
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 delivering value for its stakeholders, visit www.unfi.com.
