Post Earnings Coverage as United Natural Foods' Quarterly Sales Jumped 11.6%; Net Income Climbed 12.3%
Upcoming AWS Coverage on US Foods Holding Post-Earnings Results
LONDON, UK / ACCESSWIRE / March 22, 2017 / Active Wall St. announces its post-earnings coverage on United Natural Foods, Inc. (NASDAQ: UNFI). The Company announced its second quarter fiscal 2017 financial results on March 08, 2017. The organic and specialty foods distributor's earnings numbers met market expectations. Register with us now for your free membership at:
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One of United Natural Foods' competitors within the Food Wholesale space, US Foods Holding Corp. (NYSE: USFD), reported on February 15, 2017, its financial results for Q4 2016 and FY16. AWS will be initiating a research report on US Foods Holding in the coming days.
Today, AWS is promoting its earnings coverage on UNFI; touching on USFD. Get our free coverage by signing up to:
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Earnings Reviewed
For the three months ended January 28, 2017, United Natural Foods reported net sales of $2.29 billion, up 11.6%, or $237.8 million, from $2.05 billion in Q2 FY16. The Company's net sales were positively impacted by the acquisitions of Haddon House Food Products, Inc., Global Organic/Specialty Source, Inc., Nor-Cal Produce, Inc., and Gourmet Guru, Inc. United Natural Foods' net sales were impacted by deflation of approximately 0.30% in the reported quarter, compared with inflation of approximately 2.15% in the year earlier same quarter. The Company's reported numbers came in below analysts' consensus of $2.34 billion.
United Natural Foods' gross margin for Q2 FY17 totaled 15.09%, a 56 basis point increase on a y-o-y basis, primarily driven by acquisitions and margin improvement initiatives, which was partially offset by competitive pricing pressure. The Company's operating income increased 11.0% to $46.3 million for Q2 FY17 compared to $41.7 million for Q2 FY16. EBITDA for the reported quarter was $67.5 million, an increase of 16.7% from $57.8 million in the same period last year. EBITDA as a percentage of net sales was 2.95% in Q2 FY17, up 13 basis points from 2.82% for the same period last year.
From a channel perspective, United Natural Foods' super natural's net sales were up approximately 3.5% on a y-o-y basis and represented 34.2% of total net sales, which was a 270-basis-point reduction in net sales concentration versus Q2 FY16. Supermarket channel net sales increased 26.2% in Q2 FY17 versus Q2 FY16 and landed at 29.1% of total net sales. Supermarkets concentration was up 336 basis points versus 25.8% in the year ago comparable period.
The independent channel grew 9.6% on a y-o-y basis, and represented 26.4% of total net sales in Q2 FY17. Lastly, food service net sales were up 5.1% on a y-o-y basis, and ecommerce increased approximately 15.4% compared to the prior year's corresponding period.
United Natural Foods' net income for Q2 FY17 increased 12.3% to $25.5 million from $22.7 million for Q2 FY16. Earnings per diluted share for the reported quarter increased 11.5% to $0.50 per diluted share compared to $0.45 per diluted share for Q2 FY16. The Company's net income as a percentage of net sales for Q2 FY17 was 1.11%, which is flat compared to the same period last year. The Company's earnings numbers met Wall Street's estimates of $0.50 per share.
Cash Flow & Balance Sheet
United Natural Foods' cash flow from operations was $104.2 million and capital expenditures were $13.5 million, resulting in free cash flow of $90.7 million for Q2 FY17. Cash flow from operations was $119.1 million and capital expenditures were $12.9 million, resulting in free cash flow of $106.2 million for Q2 FY16. The Company's reported quarter free cash flow represented its second highest quarter in its history. As a result of the Q2 FY17 free cash flow, United Natural Foods' raised its guidance for the year.
Total working capital at the end of Q2 FY17 was $1 billion, up 4.2% on a y-o-y basis. The working capital favorability was due to targeted initiatives that improved days of inventory outstanding, days sales outstanding, and days payables outstanding. United Natural Foods' debt to EBITDA leverage at the end of Q2 FY17 was 1.82 times. Leverage was down from 1.99 times at the end of Q1 FY17, driven primarily by the working capital improvements.
Restructuring Announcement
In H2 FY17, United Natural Foods' expects to incur restructuring charges of between $3.5 million and $4.0 million, before taxes, primarily related to expenses for severance and other employee separation costs. In connection with the initiative, the Company estimates the elimination or relocation of approximately 265 positions under a plan that will be largely completed in Q3 FY17, with certain shared service related transitions extending into Q2 FY18.
Fiscal 2017 Guidance
For the fiscal year ending July 29, 2017, United Natural Foods' estimates net sales in the range of approximately $9.38 billion to $9.46 billion, an increase of approximately 10.7% to 11.7% on a y-o-y basis. The Company estimates GAAP earnings per diluted share for FY17 in the range of $2.49 to $2.54 compared to FY16 GAAP earnings per diluted share of $2.50. Adjusting for costs related to the aforementioned restructuring plan of approximately $3.5 million to $4.0 million, before taxes, adjusted earnings per diluted share for FY17 is estimated to be in the range of approximately $2.53 to $2.58. Capital expenditures for FY17 are expected to be approximately 0.5% to 0.6% of estimated FY17 net sales.
Stock Performance
At the close of trading session on Tuesday, March 21, 2017, United Natural Foods' stock price slipped 1.54% to end the day at $42.93. A total volume of 401.72 thousand shares were exchanged during the session. The Company's share price has gained 1.61% in the past twelve months. The stock currently has a market cap of $2.17 billion and has a PE ratio of 17.00.
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