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    UNFI Sees Double-digit Q3 Net Sales Rise

    Wholesaler opening 2 more DCs to meet demand

    By Bridget Goldschmidt, Stagnito Business Information

    For its third quarter of fiscal 2014 ended May 3, 2014, United Natural Foods Inc. (UNFI) reported a net sales increase of 13.8 percent, or $215.5 million, to $1.78 billion, compared to $1.57 billion for the year-ago period. Diluted EPS was 73 cents for the third quarter of fiscal 2014, a 14.1 percent increase from 64 cents last year, and operating income rose 16.3 percent to $62.6 million, versus $53.9 million for the year-ago period.

    "Each of our sales channels continued to benefit from consumers increasingly choosing better-for-you natural, organic and specialty foods as illustrated by our second consecutive quarter of net sales growth in excess of $200 million," noted Steven Spinner, president and CEO of Providence, R.I.-based UNFI. "To support these positive growth dynamics and enhance service levels to our customers, in the fourth quarter, we opened our distribution center in Racine, Wis., and we are scheduled to open our Hudson Valley, N.Y., facility in the first quarter of fiscal 2015."

    The third quarter of fiscal 2014 included incremental net sales of about $18.0 million, or 1.2 percent, resulting from the UNFI's acquisition of Burnsville, Minn.-based Trudeau Foods in the first quarter of fiscal 2014. Gross margin of 16.7 percent for the third quarter of fiscal 2014, compared with 16.8 percent last year, was mainly because of foreign exchange from the declining value of the Canadian dollar on the company's Canadian business, according to UNFI.

    Total operating expenses came to 13.2 percent as a percentage of net sales for the third quarter of fiscal 2014, a decline of 13 basis points versus last year. The prior-year quarter was negatively affected by labor action costs of $1.5 million related to UNFI's Auburn, Wash., facility.

    Operating expenses for the third quarter of fiscal 2014 included nonrecurring costs of about $0.9 million related to the startup of the company's Racine DC, in addition to $0.6 million of acquisition costs in connection with the recently revealed agreement to purchase Tony's Fine Foods, which is expected to close late in the fourth quarter of fiscal 2014.

    Operating income grew 16.3 percent, or $8.8 million, to $62.6 million for the third quarter of fiscal 2014, compared with $53.9 million for the year-ago period. Operating income as a percentage of net sales for the third quarter of fiscal 2014 rose seven basis points to 3.5 percent versus last year.

    Fiscal 2014 Year to-date Summary

    Net sales for the nine months ended May 3, 2014, totaled $5.03 billion, a 13.7 percent increase over the year-ago period. Gross margin fell 10 basis points to 16.7 percent, compared to the nine months ended April 27, 2013. Gross margin in the first nine months of fiscal 2014 was negatively affected by severe weather, foreign exchange for UNFI's Canadian business, and the ongoing shift in sales growth toward supernatural, national supermarket and multiunit independent customers. These challenges were partially offset by improved execution by the company's supply chain group, particularly in the areas of inbound logistics and procurement, UNFI noted.

    At 13.5 percent of net sales, total operating expenses for the nine months ended May 3, 2014, were 34 basis points lower than the year-period. Total operating expenses rose $66.8 million, or 10.9 percent, to $678.0 million, from $611.2 million last year. Total operating expenses for the nine months ended April 27, 2013, included about $6.1 million of expenses related to the labor action at the Auburn DC. Excluding these incremental expenses, operating expenses were $605.1 million, or 13.7 percent of net sales.

    Operating income for the nine months ended May 3, 2014, increased 23.2 percent, or $30.1 million, to $159.5 million from $129.4 million for the nine months ended April 27, 2013. Operating income as percentage of net sales grew 24 basis points to 3.2 percent compared with the year-ago period.

    Net income for the nine months ended May 3, 2014, went up $16.3 million, or 21.6 percent, to $92.1 million, or $1.85 per diluted share, from $75.8 million, or $1.53 per diluted share, last year.

    "Our additional distribution capacity in New York and Wisconsin, and our pending acquisition of Tony's Fine Foods will enable us to build our platform of organic, natural protein and specialty products for new and existing customers throughout North America," said Spinner.

    Updated Fiscal 2014 Guidance

    Based on the company's performance to date and the current outlook for the rest of fiscal 2014, UNFI is narrowing and updating its previous guidance. For fiscal 2014, ending Aug. 2, 2014, a 52-week fiscal year compared with the 53-week fiscal 2013, the company expects net sales in the range of about $6.73 billion to $6.77 billion, an increase of about 11 percent to 11.6 percent over fiscal 2013. Adjusting for $118.7 million of net sales for the 53rd week in fiscal 2013, net sales growth for fiscal 2014 is expected to be in the range of about 13.2 percent to 13.8 percent.

    UNFI carries and distributes 65,000-plus products to more than 31,000 customer locations throughout the United States and Canada. The company serves a wide variety of retail formats, among them conventional supermarket chains, natural product superstores, independent retail operators and the foodservice channel.

    By Bridget Goldschmidt, Stagnito Business Information
    • About Bridget Goldschmidt In addition to serving as Progressive Grocer’s Managing Editor, Bridget writes many print and digital features encompassing a range of grocery and fresh categories across the store. Bridget also enjoys on-site reporting assignments at such key industry events as the New York Fancy Food Show and the International Boston Seafood Show, in addition to visiting stores for PG’s prestigious Store of the Month feature. In her years with the magazine, she has developed into a knowledgeable voice on grocery industry trends, sought by such distinguished publications as The New York Times.

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