E-commerce Efforts Aid United Natural (UNFI), Retail Unit Hurts
Strength in e-commerce business has been working favorably for United Natural Foods, Inc. UNFI. North America's premier food wholesaler is on track to transform and realize the full value of its business. That being said, UNFI has witnessed a challenging industry backdrop in the past few quarters.
Let’s delve deeper.
E-commerce Strength
United Natural is benefiting from e-commerce strength thanks to increased digital solutions offered by the company. Several of the company’s independent and Chains channels provide e-commerce solutions to their customers. Management also offers digital platforms and the support its customers need.
The company is keen on strengthening its e-commerce business. In this regard, the latest value-added supplier program, UNFI Insights, bodes well. The company launched Community Marketplace — a business-to-business digital e-commerce solution. The platform is designed for emerging brands, which helps the company expand distribution with United Natural’s customers.
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Transformation Efforts on Track
The Zacks Rank #3 (Hold) company is on track to transform and realize the full value of its platform. Management is strengthening the supply chain for retailers and suppliers via distribution network automation and optimization, introducing smarter technology systems and investing in operational excellence and efficiency. Management is on track with undertaking actions to revamp and reduce its sustaining cost structure. It is committed to its four transformation pillars based around network automation and optimization, commercial value creation, enhancing digital offering and work related to technology infrastructure unification and modernization.
On its fiscal fourth-quarter earnings call, management highlighted that it has generated approximately $100 million in benefits on a run-rate basis from growth efforts like organizational structure, SG&A spending, and wholesale efficiency initiatives.
Hurdles on the Way
United Natural continues to battle softness in the Retail business, as witnessed in the fourth quarter of fiscal 2023. Retail segment sales fell 1.9% in the quarter due to reduced unit volumes. Management continues to see pressure in the retail footprint, mainly located in the Minneapolis-Saint Paul market, stemming from tightening consumer demand, lower government support programs, and stiff price competition.
The company’s gross profit fell 8.3% in the fourth quarter of fiscal 2023. The downside can mainly be attributed to reduced levels of procurement gains, fewer benefits from inflation and increased levels of shrinkage. The persistence of any of these factors is a concern.
UNFI’s shares have declined 23.6% in the past three months compared with the industry’s decline of 5.2%.
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The Zacks Consensus Estimate for Lamb Weston’s current financial-year sales and earnings suggests growth of 28.3% and 24.8%, respectively, from the year-ago reported numbers.
The Kraft Heinz Company KHC, a food and beverage product company, currently carries a Zacks Rank #2 (Buy). KHC has a trailing four-quarter earnings surprise of 9.9% on average.
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Vital Farms Inc. VITL offers a range of produced pasture-raised foods. It currently has a Zacks Rank #2. VITL has a trailing four-quarter earnings surprise of 145% on average.
The Zacks Consensus Estimate for Vital Farms’ current financial-year sales suggests growth of 29.4% from the year-ago reported figure.
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United Natural Foods, Inc. (UNFI) : Free Stock Analysis Report
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