PROVIDENCE, R.I.–(BUSINESS WIRE)–United Natural Foods, Inc. (NYSE: UNFI) today reported financial results for the third quarter of fiscal 2024 (13 weeks) ended April 27, 2024.
Third Quarter Fiscal 2024 Performance (comparisons to third quarter fiscal 2023)
- Net sales decreased 0.1% to $7.5 billion
- Net loss of $21 million; Loss per diluted share (EPS) of $(0.34)
- Adjusted EBITDA decreased 18.2% to $130 million
- Adjusted EPS decreased to $0.10
Recent Financial and Operational Summary
- Continuing to reset profitability and strengthen foundation while revamping long-term strategy
- Drove sequentially improving financial performance, including gradually improving volumes and the third sequential quarter of accelerating adjusted EBITDA, primarily due to disciplined expense management, including supply chain efficiencies
- Extended term loan maturity to May 2031
- Financial review progressing, multi-year strategic plan starting in fiscal 2025 being finalized; expect continued strengthening of operational and financial performance and capital structure
- Revising fiscal 2024 outlook:
- Charges related to cost reduction actions driving lower expected ranges for net income and EPS
- Raising adjusted EBITDA and adjusted EPS midpoints; reducing capital and cloud implementation expenditures
“We delivered another quarter in-line with our fiscal 2024 plan and our third consecutive quarter of improving profitability driven by continued progress on near-term operational and efficiency initiatives. This progress includes significant cost reduction actions and supply chain efficiencies, and we see opportunity to drive further improvement across these areas,” said Sandy Douglas, UNFI’s Chief Executive Officer.
“Our ongoing board- and management-led financial review is also nearing an important milestone, which is our new multi-year strategic plan that will begin in fiscal 2025. We are beginning to see tangible benefits to our financial performance stemming from this process and are focused on driving short- and long-term improvement by optimizing controllable variables in our new plan. We expect our updated strategy to generate free cash flow approaching $100 million in fiscal 2025 and stable and dependable profit and cash flow growth, with improving returns on capital and declining net leverage on a multi-year basis.”
Third Quarter Fiscal 2024 Summary
|
|
13-Week Period Ended |
|
Percent Change |
|||||||
|
($ in millions, except for per share data) |
April 27, 2024 |
|
April 29, 2023 |
|
||||||
|
Net sales |
$ |
7,498 |
|
|
$ |
7,507 |
|
|
(0.1 |
)% |
|
Chains |
$ |
3,092 |
|
|
$ |
3,129 |
|
|
(1.2 |
)% |
|
Independent retailers |
$ |
1,816 |
|
|
$ |
1,875 |
|
|
(3.1 |
)% |
|
Supernatural |
$ |
1,734 |
|
|
$ |
1,647 |
|
|
5.3 |
% |
|
Retail |
$ |
571 |
|
|
$ |
598 |
|
|
(4.5 |
)% |
|
Other |
$ |
644 |
|
|
$ |
640 |
|
|
0.6 |
% |
|
Eliminations |
$ |
(359 |
) |
|
$ |
(382 |
) |
|
(6.0 |
)% |
|
Net (loss) income |
$ |
(21 |
) |
|
$ |
7 |
|
|
(400.0 |
)% |
|
Adjusted EBITDA (1) |
$ |
130 |
|
|
$ |
159 |
|
|
(18.2 |
)% |
|
EPS |
$ |
(0.34 |
) |
|
$ |
0.12 |
|
|
(383.3 |
)% |
|
Adjusted EPS (1) |
$ |
0.10 |
|
|
$ |
0.54 |
|
|
(81.5 |
)% |
|
(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 decreased 0.1% in the third quarter of fiscal 2024 compared to the same period in the prior year, primarily driven by a decline in unit volumes, which was largely offset by inflation and new business with existing customers.
Gross profit in the third quarter of fiscal 2024 was $1.0 billion, an increase of $20 million, or 2.0%, compared to the third quarter of fiscal 2023. The gross profit rate in the third quarter of fiscal 2024 was 13.6% of net sales and included a $6 million LIFO charge. Excluding this non-cash charge, gross profit rate was 13.7% of net sales. Gross profit rate in the third quarter of fiscal 2023 was 13.3% of net sales and included a $33 million LIFO charge. Excluding this non-cash charge, gross profit rate in the third quarter of fiscal 2023 was 13.8% of net sales. The decrease in gross profit rate, excluding the LIFO charge, was driven by lower levels of procurement gains resulting from decelerating inflation and a lower retail gross profit rate, which were nearly offset by the benefit of lower shrink expense.
Operating expenses in the third quarter of fiscal 2024 were $992 million, or 13.2% of net sales, compared to $967 million, or 12.9% of net sales, in the third quarter of fiscal 2023. Operating expenses increased by $25 million, primarily driven by a $33 million increase in incentive compensation due to $13 million in expense in the third quarter of fiscal 2024, compared to a $20 million benefit in the third quarter of fiscal 2023 resulting from the reversal of previously accrued incentive compensation expense driven by underperformance in fiscal 2023. This increase was partially offset by lower transportation costs and other operational supply chain efficiencies.
Interest expense, net for the third quarter of fiscal 2024 was $37 million compared to $35 million for the third quarter of fiscal 2023. The increase in interest expense, net was primarily driven by higher average interest rates.
Effective tax rate for the third quarter of fiscal 2024 was a benefit of 23.1% on pre-tax loss compared to a benefit of 14.3% on pre-tax income for the third quarter of fiscal 2023. The change from the third quarter of fiscal 2023 is primarily driven by the impact of a partnership investment entered into in the third quarter of fiscal 2023, and the reduction in pre-tax income during the third quarter of fiscal 2023.
Net loss for the third quarter of fiscal 2024 was $21 million. Net income for the third quarter of fiscal 2023 was $7 million.
Net loss per diluted share (EPS) was $(0.34) for the third quarter of fiscal 2024 compared to net income per diluted share of $0.12 for the third quarter of fiscal 2023. Adjusted EPS was $0.10 for the third quarter of fiscal 2024 compared to $0.54 in the third quarter of fiscal 2023.
Adjusted EBITDA for the third quarter of fiscal 2024 was $130 million compared to $159 million for the third quarter of fiscal 2023, including $33 million in higher incentive compensation.
Capital Allocation and Financing Overview
- Free Cash Flow – During the third quarter of fiscal 2024, free cash flow was $49 million compared to $65 million in the third quarter of fiscal 2023. Free Cash Flow for the third quarter of fiscal 2024 reflects net cash provided by operating activities of $125 million less payments for capital expenditures of $76 million.
- Leverage – Total outstanding debt, net of cash, was $2.13 billion at the end of the third quarter of fiscal 2024, reflecting a decrease of $30 million compared to the end of the second quarter of fiscal 2024. The net debt to Adjusted EBITDA leverage ratio was 4.6x as of April 27, 2024.
- Liquidity – As of April 27, 2024, total liquidity was approximately $1.26 billion, consisting of approximately $39 million in cash plus the unused capacity of approximately $1.23 billion under the Company’s asset-based lending facility.
Fiscal 2024 Outlook (1)
The Company is updating its full-year outlook which lowers its expectations for net income and EPS primarily due to charges related to cost reduction actions. Adjusted EBITDA and Adjusted EPS, which exclude these amounts, are expected to be higher than the previously provided outlook:
|
Fiscal Year Ending August 3, 2024 (53 weeks) |
|
Previous Full Year Outlook Provided March 6, 2024 |
|
Previous Midpoint |
|
Updated Full Year Outlook |
|
Updated Midpoint |
|
Change in Midpoint |
|
Net sales ($ in billions) |
|
$30.5 – $31.0 |
|
$30.8 |
|
$30.5 – $31.0 |
|
$30.8 |
|
$— |
|
Net loss ($ in millions) |
|
$(101) – $(65) |
|
$(83) |
|
$(109) – $(85) |
|
$(97) |
|
$(14) |
|
EPS (2) |
|
$(1.70) – $(1.08) |
|
$(1.39) |
|
$(1.85) – $(1.45) |
|
$(1.65) |
|
$(0.26) |
|
Adjusted EPS (2)(3)(4) |
|
$(0.56) – $0.06 |
|
$(0.25) |
|
$(0.20) – $0.20 |
|
$0.00 |
|
$0.25 |
|
Adjusted EBITDA (4) ($ in millions) |
|
$475 – $525 |
|
$500 |
|
$490 – $520 |
|
$505 |
|
$5 |
|
Capital and cloud implementation expenditures (4)(5) ($ in millions) |
|
~ $400 |
|
|
|
~ $370 |
|
|
|
~ $(30) |
|
(1) |
The outlook provided above is for fiscal 2024 only. The 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. Figures presented include the impact of the term loan amendment and extension and ABL loan amendment, each of which occurred on May 1, 2024. |
|
|
(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.
