Unified’s Q2 Operating Income Dented by Supervalu Merger

Unified Grocers Inc., the largest wholesale grocery distributor in the western United States, posted a $2.8 million drop in operating income for the second quarter of fiscal 2017, ended April 1, which the Los Angeles-based company attributed mainly to the substantial transaction costs and other expenses it incurred ahead of its merger with Minneapolis-based Supervalu, which was revealed last month.

Other factors contributing to the decrease in operating income, according to Unified, were a change in the dairy program in July 2016 in which prices were lowered and the dairy patronage dividend was discontinued, and an equity adjustment related to the company’s investment in Western Family. Logistics improvements and reduced administrative expenses partially offset this loss of income.

Commerce, Calif.-based Unified reported an overall Q2 net sales decline of $37.7 million, or 4.1 percent, to $877.4 million, versus $915.1 million for the year-ago period, which the company attributed to various factors, among them the loss of some unprofitable non-member business, some loss in business after the sale of its Los Angeles bakery manufacturing facility, and lower meat sales prices due to declines in the related commodity cost that were passed along to customers.

“The business is on a steady track, despite the distractions and expenses associated with the Supervalu transaction and other one-off expenses that negatively impacted operating income in the second quarter,” said Unified President and CEO Bob Ling. “Total sales to our existing customer base have remained stable, and even in a deflationary cycle, our margins are sound after removing the impact of lowering prices in the dairy. We have made tremendous improvements in our core business, which remains sound despite the headwinds our broader industry is facing.”

Retailer-owned Unified Grocers supplies independent retailers throughout the western U.S.