UNFI Q1 Income, Sales Up by Double Digits
United Natural Foods Inc. has posted a net income increase for the first quarter of fiscal 2011 ended Oct. 30, 2010, of $1.9 million, or 12.0 percent, to $17.4 million, or 39 cents per diluted share, from $15.5 million, or 36 cents per diluted share, for year ago. Net sales for the first quarter of fiscal 2011 came to $1.053 billion, a rise of 19.0 percent, or $168.2 million, over year-ago net sales of $884.8 million.
Excluding the impact of sales related to the Providence, R.I.-based company's June 2010 Canadian acquisition and its October 2010 acquisition of certain inventory and distribution assets of Whole Foods Market Inc., which generated combined net sales of about $59.4 million, first-quarter fiscal 2011 net sales grew 12.3 percent, or $108.8 million, to $993.6 million. This occurrence marked the first time UNFI has attained more than $1 billion in net sales during a quarter.
"The operating results for our fiscal 2011 first-quarter reflect the sales strength we continue to achieve across our distribution channels,” said UNFI president and CEO Steven Spinner. “In addition, we closed on our previously announced transaction with Whole Foods Market in October and began to serve Whole Foods Market as their primary grocery distributor in both their Rocky Mountain and Southwest regions.”
Gross margin was 18.3 percent for the first quarter of fiscal 2011, representing a 33 basis point decline from the gross margin of 18.6 percent reported last year. UNFI attributed the lower gross margin vs. the prior year mainly to startup costs in addition to unanticipated inventory expenses and incremental freight and service costs incurred during the initial period of operations of its new distribution facility in Lancaster, Texas. The gross margin was further adversely affected by the continued shift in the mix of sales by channel.
Operating expenses as a percentage of net sales fell to 15.4 percent for the first quarter of fiscal 2011, a decline of about 0.1 percent compared with the fiscal 2010 first quarter. Operating expenses grew $25.3 million, or 18.4 percent, to $162.7 million, vs. the year-ago period, which had operating expenses of $137.4 million. Operating income as a percentage of net sales declined to 2.8 percent for the first quarter of fiscal 2011 from 3.1 percent last year. The estimated non-recurring costs related to the initial period of operations of the company’s Lancaster facility totaled about $3.8 million.
“During the quarter, we successfully on-boarded all of our previously announced new specialty and organic business,” noted Spinner. “In addition, UNFI Canada is progressing positively against our anticipated results, and sales trends across all channels continue to improve. We also remain committed to the continued implementation of UNFI's supply chain technology, which began during the quarter in Lancaster, Texas.”
Based on its performance through the first three months of fiscal 2011 and the current outlook for the remainder of the year, UNFI confirmed its net sales guidance for fiscal year 2011, ending July 30, 2011, in the range of $4.35 billion to $4.45 billion, representing a 15.8 percent to 18.4 percent rise in total net sales over fiscal 2010. The company additionally confirmed its earnings per share guidance for fiscal 2011 in the range of $1.62 to $1.71 per diluted share, and its capital expenditure guidance for fiscal 2011 in the range of $42 million to $45 million.
UNFI carries and distributes more than 60,000 products to more than 23,000 customer locations throughout the United States and Canada. Retail formats served by the company include conventional supermarket chains, natural product superstores, independent retail operators and the foodservice channel.