United Natural (UNFI) Gains on Network Optimization, Automation
United Natural Foods, Inc.’s UNFI progress in network optimization, including the consolidation of distribution centers and the expansion of automation, reflects its commitment to modernizing operations. The company's investment in technology infrastructure is a forward-looking move to enhance profitability and growth in a dynamic market.
UNFI made significant progress in network optimization and automation, especially with two major projects completed in the first quarter of fiscal 2024. This involved the consolidation of its Logan Township facility into the Allentown distribution center. This move brings the company’s fresh and conventional business operations in the region under one roof, enhancing efficiency.
Also, UNFI finished expanding its automation system at the Carlisle Distribution Center. This expansion focuses on enhancing the center's unit pick capabilities, which is expected to significantly support increased capacity and output.
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E-commerce Efforts
United Natural benefits significantly from its strong e-commerce operations, which are supported by improved digital services. The company has been actively enhancing its online sales capabilities. It launched UNFI Insights, a program designed to add value for suppliers. Additionally, UNFI introduced the Community Marketplace, an online platform aimed at businesses. This platform is particularly designed for emerging and expanding brands, aiding them in reaching a broader customer base through United Natural's extensive network.
Value Creation Initiative Bode Well
The Value Creation Initiatives at United Natural are focused on addressing challenges and improving operational performance. The company has effectively managed shrink throughout its supply chain, which was significantly impacted by the volatility from COVID-19 and the post-pandemic environment. This initiative led to a reduction in shrink by $7 million more than planned in the first quarter of fiscal 2024, indicating successful operational improvements.
The company is rapidly realizing near-term value creation initiatives, which are expected to deliver $150 million of operating efficiencies in fiscal 2024. This substantial efficiency gain is a key target in its overall strategy. The company is also focusing on network optimization and expanding automation systems, including consolidating distribution centers.
Also, the fiscal first-quarter results showcase a sequential enhancement in adjusted EBITDA by $24 million. This improvement was primarily due to refined operational execution and advancements in its near-term value-creation initiatives.
Retail Unit - A Concern
In the first quarter of fiscal 2024, United Natural observed a slight decrease in sales within its retail business segment. This segment experienced a 1.1% reduction in sales from the previous year, largely attributed to wider economic and industry-wide challenges. These challenges include a range of factors, such as changes in consumer behavior, increased competition and economic pressures impacting consumer spending patterns.
Shares of this Zacks Rank #3 (Hold) company have lost 6% in the past three months compared with the industry’s growth of 11.4%.
Three Solid Picks
We have highlighted three better-ranked stocks, namely Lamb Weston Holdings, Inc. LW, Freshpet Inc. FRPT and Sysco Corporation SYY.
Lamb Weston is a leading global manufacturer, marketer and distributor of value-added frozen potato products. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Lamb Weston’s current fiscal-year sales and earnings suggests growth of 28.1% and 26.3%, respectively, from the fiscal 2023 reported numbers. LW has a trailing four-quarter earnings surprise of 28.8%, on average.
Freshpet is a pet food company. The company manufactures and markets natural fresh foods, refrigerated meals, and treats for dogs and cats. FRPT currently has a Zacks Rank #2.
The Zacks Consensus Estimate for Freshpet’s current financial-year sales suggests growth of 26.8% from the 2022 reported figure. FRPT delivered an earnings surprise of 25% in the third quarter of 2023.
Sysco, through its subsidiaries, markets and distributes a range of food and related products. It currently carries a Zacks Rank #2.
The Zacks Consensus Estimate for SYY’s current fiscal-year sales and earnings suggests growth of 4.1% and 8%, respectively, from the fiscal 2023 reported numbers.
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