A rather long article, here are a few quotes (in order of appearance):
"MENTION THE REVOLUTION IN ORGANIC FOODS and the typical investor is likely to bring up supermarket-chain Whole Foods Market. But Whole Foods shares have wilted in the past year like stale produce. A better bet might be to buy shares of one of Whole Food's distributors, United Natural Foods. But United Natural still looks poised to turn leafy greens into plenty of crisp dollar bills for patient investors. The operational hiccups that impacted United Natural's third-quarter results are short term and limited to the company's Western region, while issues surrounding Whole Foods' acquisition of Wild Oats are still theoretical. The merger plan, which was announced on Feb. 21, has yet to be finalized and is still awaiting approval from the Federal Trade Commission. As more conventional grocers carry organic products and as Whole Foods and Wild Oats expand, Warshawsky adds, "it is going to be United Natural that will probably be the only company to service them" because of its size and infrastructure advantages. In addition, the company expects new distribution centers in Portland, Ore., and Sarasota County, Fla., to boost operating efficiency and lower transportation costs, Funk says. Whole Foods has stated that it plans to increase revenue to $12 billion in 2010 from the $5.6 billion it reported last fiscal year. United Natural, which signed a new seven-year distribution deal with the organic behemoth last October, "can certainly benefit from that," says Warshawsky. Of course, if the Whole Foods and Wild Oats merger goes through, that may impact United Natural's margins because some Wild Oats stores may close. As a combined company, Whole Foods and Wild Oats will also be able to command lower prices, thereby slicing further into United Natural's margins. And while United Natural expects its gross margins to begin recovering from last quarter's operational woes by the end of the fiscal year, it may take longer than that. But the company's business execution has been strong in the past, as evidenced by United Natural's ability to grow its top line, says Krestell. Furthermore, market jitters about the merger may be premature, especially considering that the issues investors are concerned about are still theoretical at this point. "I think the market is discounting this whole, long-term secular challenge, but I think it's discounting it a little bit too soon," says Gutman of Goldman Sachs. In the meantime, United Natural Foods' position at the forefront of the organic-foods explosion means that the stock is fit to produce some healthy gains for investors to chew over."