United Natural Foods Inc. (UNFI) posted a solid performance in its fourth-quarter earnings report, pushing its stock higher after a challenging year.
The company saw a 10% year-over-year increase in sales to $8.15 billion, surpassing the consensus estimate of $7.94 billion. This positive result was largely driven by inflation and an uptick in unit volume as the quarter progressed. UNFI’s quarterly earnings of $0.01 per share beat expectations of a loss of $0.08, signaling the company’s ability to outperform during a difficult period.
The earnings surprise of 112.50% reflects the positive impact of efficiency initiatives and improved operational metrics, as UNFI successfully reversed the $0.25 per share loss recorded in the same quarter last year.
The earnings surprise of 112.50% reflects the positive impact of efficiency initiatives and improved operational metrics, as UNFI successfully reversed the $0.25 per share loss recorded in the same quarter last year.
Turnaround Efforts Start to Pay Off
The company's recent struggles, including a 56% stock decline since the start of 2023, were driven by a tough operating environment. However, its turnaround plan is beginning to show results. In Q4, UNFI recorded its strongest revenue growth since Q2 2021, supported by lower shrink expenses, efficiency improvements, and stronger volume trends.
Operating expenses as a percentage of sales declined by 30 basis points to 13.2%, thanks to a range of cost-saving initiatives, including general and administrative (G&A) expense reductions. Adjusted EBITDA rose by 54% year-over-year to $143 million, helping UNFI improve its bottom line.
Despite headwinds such as increased competition from bulk-buying retailers like Costco (COST) and Walmart’s (WMT) Sam’s Club, UNFI benefited from growth in its existing customer base. Its largest customer, Amazon-owned (AMZN) Whole Foods Market, operates in the premium grocery space, which remains a critical part of UNFI’s business.
The company's recent struggles, including a 56% stock decline since the start of 2023, were driven by a tough operating environment. However, its turnaround plan is beginning to show results. In Q4, UNFI recorded its strongest revenue growth since Q2 2021, supported by lower shrink expenses, efficiency improvements, and stronger volume trends.
Operating expenses as a percentage of sales declined by 30 basis points to 13.2%, thanks to a range of cost-saving initiatives, including general and administrative (G&A) expense reductions. Adjusted EBITDA rose by 54% year-over-year to $143 million, helping UNFI improve its bottom line.
Despite headwinds such as increased competition from bulk-buying retailers like Costco (COST) and Walmart’s (WMT) Sam’s Club, UNFI benefited from growth in its existing customer base. Its largest customer, Amazon-owned (AMZN) Whole Foods Market, operates in the premium grocery space, which remains a critical part of UNFI’s business.
Optimism for FY25 and Beyond
Much of the market’s excitement is focused on UNFI’s three-year business plan, aimed at expanding margins and increasing free cash flow. As part of this strategy, the company has optimized its distribution network by consolidating facilities in Billings and Bismarck. Capital expenditures (capex) for FY25 are now projected at $300 million, down from the previous estimate of $370 million, with plans to further reduce costs through supply chain efficiencies and lower transportation expenses.
Looking ahead, UNFI expects FY25 sales of $30.3 billion to $30.8 billion, slightly below consensus estimates of $30.9 billion. Adjusted EPS is projected to fall between $0.20 and $0.80, compared to the consensus of $0.57.
UNFI’s improving financial outlook, coupled with management’s focus on operational efficiency and cost reduction, signals that the company is on track for a stronger performance in the coming years. Investors will be closely watching how UNFI continues to execute its turnaround plan as it seeks to expand margins and grow its market share in a competitive grocery industry.
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