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United Natural's (UNFI) Growth Pillars & Online Sales Solid

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·4 min read
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Focus on growth pillars and growing e-commerce business favor United Natural Foods, Inc. UNFI. North America's premier food wholesaler has been undertaking various acquisitions over the years to expand its business.

The company’s business gains from existing and new customers, including benefits from cross-selling, are key growth drivers. United Natural expects food-at-home sales to remain solid as people continue to work from home and manage household budgets amid an inflationary environment. Management anticipates fiscal 2022 net sales of $28.2-$28.7 billion. At the mid-point, the metric suggests a 6% rise from the fiscal 2021 reported levels. The company expects adjusted earnings of $3.90-$4.20 per share for the year. At the midpoint, the metric suggests a 4% rise from the fiscal 2021 reported levels.

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Zacks Investment Research


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Factors Favoring United Natural

The company is on track to undertake growth initiatives under its future pillar, which includes brands, professional services and fresh. As part of growing its brands business, management is making progress with the three-pronged strategy based on deepening its penetration with existing customers, introducing owned brands to new customers and channels and undertaking customer-friendly innovations. United Natural is on track to expand its professional services by bringing new ideas to its customers. Lastly, the company has been investing in its people, infrastructure and technology as part of its fresh growth pillar.

United Natural’s sales benefit from e-commerce strength, thanks to increased e-commerce solutions offered by the company. A number of the company’s Independents channel and a Chains channel provide e-commerce solutions to their customers. United Natural offers digital platforms and the support to its customers. On its second-quarter fiscal 2022 earnings call, management highlighted that its Cub's e-commerce platform has been performing well. Management is on track to roll out additional marketing and analytics capabilities to improve customers’ brand experience.

UNFI has been undertaking various acquisitions over the years to expand its distribution network and customer base as well as boost long-term growth. In this regard, United Natural completed the buyout of SUPERVALU in October 2018. The enhanced scale of the combined entities has been boosting United Natural’s performance. The merger has provided better-competing grounds to the company in the grocery space by augmenting offerings.

Is All Rosy For United Natural?

United Natural is witnessing continued supply chain challenges, affecting the company and its customers in the short and long term. The company is battling declining fill rates stemming from upstream supply chain challenges. Deteriorating fill rates stemming from high demand, the adverse impact of omicron and persistent raw material and packaging shortages, among other reasons. Escalated inflation, negative unit elasticity, reduced inbound fill rates and higher fuel expenses are a concern. The company is battling labor shortages, higher wages and increased use of third-party labor.

Nonetheless, we believe that the aforementioned upsides are likely to keep United Natural stay afloat amid such hurdles. The Zacks Rank #3 (Hold) company’s shares have gained 4.2% in the past year against the industry’s 11.7% decline.

3 Solid Food Stocks

Some better-ranked stocks are Pilgrim’s Pride PPC, Sysco Corporation SYY and Medifast MED.

Pilgrim’s Pride, which produces, processes, markets and distributes fresh, frozen and value-added chicken and pork products, sports a Zacks Rank #1 (Strong Buy). PPC has a trailing four-quarter earnings surprise of 31.4%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Pilgrim’s Pride’s current financial year EPS suggests growth of almost 43% from the year-ago reported number.

Sysco, which engages in the marketing and distributing of various food and related products, carries a Zacks Rank #2 (Buy). SYY has a trailing four-quarter earnings surprise of 9.1%, on average.

The Zacks Consensus Estimate for Sysco’s current financial year sales and EPS suggests growth of 32.6% and 124.3%, respectively, from the year-ago reported number.

Medifast, which manufactures and distributes weight loss, weight management, healthy living products and other consumable health and nutritional products, currently carries a Zacks Rank #2. MED has a trailing four-quarter earnings surprise of 12.9%, on average.

The Zacks Consensus Estimate for Medifast’s current financial year sales and EPS suggests growth of almost 19% and 11.5%, respectively, from the year-ago reported figure.


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