United Natural Foods Inc (UNFI) Faces Net Loss in Q1 Fiscal 2024 Despite Slight Sales Increase
UNFI reports a marginal increase in net sales by 0.3% to $7.6 billion in Q1 fiscal 2024.
Net loss recorded at $39 million, with a loss per diluted share (EPS) of $(0.67).
Adjusted EBITDA sees a significant drop of 43.5% to $117 million, and Adjusted EPS decreases to $(0.04).
Company affirms fiscal 2024 outlook for net sales, Adjusted EBITDA, Adjusted EPS, and capital and cloud implementation expenditures.
On December 6, 2023, United Natural Foods Inc (NYSE:UNFI) released its 8-K filing, detailing the financial outcomes for the first quarter of fiscal 2024, which ended on October 28, 2023. Despite a slight increase in net sales, the company faced a net loss and a substantial decline in both Adjusted EBITDA and Adjusted EPS.
Financial Performance Overview
UNFI's net sales saw a minor uptick of 0.3% to $7.6 billion, primarily driven by inflation and new business within the Supernatural channel, which grew by 6.5%. However, this growth was largely negated by a decrease in units sold across other channels, with Chains and Independent retailers experiencing declines of 1.2% and 2.5%, respectively.
The company's net loss stood at $39 million, a stark contrast to the net income of $66 million in the same quarter of the previous fiscal year. This resulted in a loss per diluted share (EPS) of $(0.67), compared to an income per diluted share of $1.07 in the prior year. Adjusted EPS also fell to $(0.04) from $1.13 year-over-year.
Adjusted EBITDA decreased by 43.5% to $117 million, reflecting challenges in procurement gains due to decelerating inflation. Gross profit decreased by 6.0% to $1.0 billion, with a gross profit rate of 13.6% of net sales, including a $7 million LIFO charge. Operating expenses as a percentage of net sales increased slightly due to investments in transformation initiatives, despite lower transportation and distribution center labor costs.
Balance Sheet and Cash Flow Highlights
UNFI's balance sheet shows a total asset value of $7.848 billion, with current assets amounting to $3.957 billion. The company ended the quarter with $2.29 billion in net outstanding debt, reflecting a net debt to Adjusted EBITDA leverage ratio of 4.2x. Total liquidity was approximately $1.29 billion, including cash and the unused capacity under the Companys asset-based lending facility.
Free cash flow for the quarter was negative at $(328) million, consistent with the first quarter of fiscal 2023. This reflects net cash used in operating activities of $254 million, which included seasonally higher levels of holiday-driven working capital, and payments for capital expenditures of $74 million.
Outlook and Strategic Initiatives
UNFI's CEO, Sandy Douglas, emphasized the company's improved operational execution and the delivery of $150 million in near-term value creation initiatives ahead of schedule. These initiatives are part of a broader multi-year transformation agenda aimed at enhancing shareholder value, capabilities, efficiency, and profitability, as well as improving the customer and supplier experience.
For fiscal 2024, UNFI has updated its outlook for net loss and EPS to reflect non-cash asset charges and a gain on sale, while reaffirming expectations for net sales, Adjusted EBITDA, Adjusted EPS, and capital and cloud implementation expenditures. The company anticipates net sales to remain between $30.9 and $31.5 billion, with Adjusted EBITDA between $450 and $550 million.
In conclusion, while UNFI faces a challenging quarter with a net loss and declines in key financial metrics, the company remains committed to its strategic initiatives and transformation agenda. The reaffirmed outlook for fiscal 2024 suggests a steady course ahead, with management focused on operational improvements and long-term value creation.
Investors and stakeholders are encouraged to review the detailed financial tables and reconciliations in UNFI's 8-K filing for a comprehensive understanding of the company's financial position and performance.
Explore the complete 8-K earnings release (here) from United Natural Foods Inc for further details.
This article first appeared on GuruFocus.
