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United Natural Foods Inc. (UNFI) reported net sales for the first quarter of fiscal 2012 ended Oct. 29 of $1.217 billion, a rise of 15.6 percent, or $164.5 million, from the $1.053 billion posted in the year-ago period. Excluding the impact of sales related to the wholesaler’s acquisition last year of certain inventory and distribution assets of Whole Foods Market Inc., which generated incremental net sales of about $25.4 million during the first quarter of fiscal 2012, the quarter’s net sales grew13.2 percent, or $139.1 million, to $993.6 million.
“Sales growth in the first quarter of fiscal 2012 was robust as we geared up for what we believe should be a strong holiday season,” noted said Steven Spinner, president and CEO of Providence, R.I.-based UNFI. “We also successfully rolled out service to our newest national customer while maintaining high service levels to our broad customer base.”
Gross margin was 17.8 percent for the first quarter, versus 18.3 percent last year. According to UNFI, gross margin for the first quarter of fiscal 2012 was adversely affected by the ongoing shift in customer mix, and about $1.0 million in incremental inventory write-offs of products in certain categories. The company’s gross margin during the first quarter of fiscal 2012 was further diminished by higher freight and service costs incurred, in part, because of the initial period of distribution to its newest national customer.
Total operating expenses increased $28.4 million, or 17.4%, to $191.1 million, compared with the year-ago period’s $162.7 million. Operating expenses for the first quarter of fiscal 2012 included expenses of about $6.9 million in connection with the restructuring and divestiture of the company's conventional nonfoods and general merchandise lines of business, and onboarding expenses related its newest national customer.
Not counting those expenses, operating expenses as a percentage of net sales were 15.1 percent for the first quarter of fiscal 2012, a decrease of 33 basis points versus the first quarter of fiscal 2011. Total operating expenses including the restructuring and onboarding expenses were 15.7 percent as a percentage of net sales for the first quarter of fiscal 2012, a rise of 24 basis points from the year-ago period. Share-based compensation expense went up $1.3 million to $3.9 million in the first quarter of fiscal 2012, compared with $2.7 million last year. The majority of this increase was attributable to a lower-than-expected forfeiture rate on restricted stock units that vested during the quarter, UNFI said.
Operating income as a percentage of net sales fell to 2.1 percent for the first quarter of fiscal 2012 from 2.8 percent last year. Excluding the approximately $6.9 million of restructuring and onboarding expenses noted earlier, operating income as a percentage of net sales was 2.7 percent for the first quarter of fiscal 2012.
Net income for the first quarter of fiscal 2012 declined $2.2 million, or 12.9 percent, to $15.2 million, or 31 cents per diluted share, from $17.4 million, or 39 cents per diluted share, last year. Excluding the restructuring and onboarding expenses, earnings per diluted share were 40 cents for the first quarter of fiscal 2012. Additionally, earnings per diluted share compared with the first quarter of fiscal 2011 were affected by the dilutive impact from the company's equity offering, which was completed late in that quarter.
“We have continued to demonstrate our ability to build market share across channels through new customers and existing customer expansion,” said Spinner. “Looking forward, we’ll have an enhanced focus toward driving efficiencies and expense control as we continue to adapt to higher growth in lower-margin customers.”
UNFI carries and distributes more than 60,000 products to more than 23,000 customer locations across 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.