United Natural (UNFI) Reports Q4 Loss, Lags Sales Estimate
United Natural Foods, Inc. UNFI posted sluggish fourth-quarter fiscal 2023 results, with the top line missing the Zacks Consensus Estimate and the bottom line tumbling year over year. Reduced inflation-led procurement gains and increased shrinkage hurt profitability. Management expects to keep witnessing these headwinds as it continues to cycle escalated inflationary benefits in the first half of fiscal 2024.
UNFI is on track to invest across the supply chain and technology infrastructure to improve cost structure and enhance customer and supplier experience.
Quarter in Detail
United Natural’s adjusted loss came in at 25 cents per share against earnings of $1.27 reported in the year-ago quarter. The metric was narrower than the Zacks Consensus Estimate of a loss of 47 cents.
Net sales rose 2% to $7,417 million, missing the Zacks Consensus Estimate of $7,426 million. The year-over-year upside can be attributed to gains from inflation and new business. Benefits from new business resulted from selling expanded or new categories to existing and new customers. A decline in total units sold somewhat offset these factors.
Sales increased across most of UNFI’s channels, except Retail and Other. Chains, Independent retailers and Supernatural channels witnessed sales growth of 0.5%, 1.3% and 9.5%, respectively. Retail and Other channel sales fell 1.9% and 3.7%, respectively.
United Natural’s gross profit fell 8.3% to $966 million. We had expected gross profit to decline 9.9% to $948.4 million. Excluding the non-cash LIFO charge in both periods, gross profit fell 9.6%. Gross margin (excluding non-cash LIFO charges) of 13.5% contracted from 15.2% in the year-ago quarter. The downside can mainly be attributed to reduced levels of procurement gains, fewer benefits from inflation and increased levels of shrink.
Operating expenses were $1,004 million compared with $980 million reported in the year-ago quarter. Investments in the transformation initiatives that resulted in increased costs and escalated occupancy-related costs were a downside.
Adjusted EBITDA came in at $93 million, down 56.3% from $213 million reported in the year-ago quarter. We had expected adjusted EBITDA to come in at $ $87.6 million, down 58.9% year over year.
Other Updates
The Zacks Rank #3 (Hold) company ended the quarter with total liquidity of nearly $1.52 billion, including cash of nearly $37 million and a borrowing capacity of about $1.48 billion under the company’s asset-backed lending facility. Total outstanding debt (net of cash) was $1.95 billion.
Free cash flow during the fourth quarter was $117 million. United Natural bought back nearly 791,000 shares for nearly $21 million during the quarter.
The company expects capital expenditures of nearly $400 million for fiscal 2024.
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Fiscal 2024 Guidance
For fiscal 2024, the company anticipates net sales in the range of $30.9-$31.5 billion. The company expects adjusted EBITDA in the $450-$550 million range. Net loss is envisioned to be $36-$110 million. The company anticipates fiscal 2024 bottom line to be between a loss of 88 cents per share and earnings of 38 cents.
UNFI’s stock has lost 32.3% in the past three months compared with the industry’s decline of 10.4%.
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