•  Nine-month sales rise 
  •  9M profit up
  •  FY outlook raised

United Natural Foods Inc has raised its full-year sales forecast after booking an increase in its revenue and earnings for the first nine months of the year.

In the year-to-date, UNFI has grown sales to US$4.4bn, up from $3.9bn in the comparable period of the previous year. Gains were driven by continued demand for its natural and organic products and services, the group said.

The company also reported higher earnings in the first nine months of the year. Operating profit rose to $129.4m, up from $112.2m last year. Net income increased to $77.8m in the period, up from $66.2m.

On the back of the improved performance, UNFI raised its full-year outlook. The group said it now expects sales to fall in a range of $6.03-6.06bn, which represents a 15.2-15.7% increase in total net sales over 2012. Previously the company's guidance range was $5.88-$5.98bn. UNFI also narrowed its EPS guidance to $2.12-2.14,

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United Natural Foods, Inc. Announces Third Quarter Fiscal 2013 Results

Q3 Fiscal 2013 Net Sales Increased 12.8% Year-over-Year to $1.57 Billion

PROVIDENCE, R.I.--(BUSINESS WIRE)--United Natural Foods, Inc. (Nasdaq: UNFI) (the "Company") today reported financial results for the third fiscal quarter ended April 27, 2013.

“We are pleased to report increased top and bottom line results in the third quarter of fiscal 2013, underscoring the continued demand for our products and services”

Third Quarter Fiscal 2013 Highlights

  • Net sales increased 12.8%, or $178.2 million to $1.57 billion compared to $1.39 billion in the same period last fiscal year
  • Operating income increased 13.8% to $55.4 million, excluding the $1.5 million in expenses related to the Auburn labor action, or 10.7% to $53.9 million on a GAAP basis, compared to $48.6 million in the same period last fiscal year
  • Net income increased 8.9% to $31.6 million compared to $29.0 million in the same period last fiscal year

"We are pleased to report increased top and bottom line results in the third quarter of fiscal 2013, underscoring the continued demand for our products and services," said Steven Spinner, President and Chief Executive Officer. "In the quarter, our team focused on driving further operational excellence through the execution of our initiatives to increase leverage of UNFI's cost structure."

Gross margin was 16.8% for the third quarter of fiscal 2013, a 7 basis point increase from the second quarter of fiscal 2013 and an 83 basis point decline from gross margin of 17.6% for the third quarter of fiscal 2012. Gross margin for the third quarter of fiscal 2013 was impacted primarily by the continued shift in customer mix to the conventional supermarket and supernatural channels and an increase in inbound freight expenses.

Total operating expenses were 13.4% as a percentage of net sales for the third quarter of fiscal 2013, a decrease of 76 basis points compared with the third quarter of fiscal 2012. This improvement was driven by the Company's ongoing initiatives to enhance productivity and reduce operating expenses throughout the organization, which were partially offset by $1.5 million in operating expenses related to the labor action at the Company's Auburn, Washington facility. Total operating expenses increased $13.2 million or 6.8%, to $209.1 million in the third quarter of fiscal 2013 as compared to $195.9 million in the third quarter of fiscal 2012, primarily due to higher sales volume.

Operating income as a percentage of net sales for the third quarter of fiscal 2013 decreased 6 basis points to 3.4% compared to the third quarter of fiscal 2012. Net income for the third quarter of fiscal 2013 increased $2.6 million, or 8.9%, to $31.6 million, or $0.64 per diluted share, from $29.0 million, or $0.59 per diluted share, for the third quarter of fiscal 2012. Adjusted for the Auburn labor action costs, operating income as a percentage of net sales increased by 4 basis points to 3.5% compared to the third quarter of fiscal 2012.

The following table details the amounts and effect of the labor action costs related to the Company's Auburn, Washington facility described above and the reconciliation of total operating income including the labor action costs (GAAP basis), to total operating income excluding the labor action costs (non-GAAP basis) for the three months ended April 27, 2013:

       
      Three months ended
      April 27, 2013
(in millions)     Pretax   % of Sales
           
Operating income     $ 53.9     3.44 %
Labor action costs     1.5     0.10 %
Operating income, excluding labor action costs     $ 55.4     3.54 %
                 

Fiscal 2013 Year to Date Summary

Net sales for the nine months ended April 27, 2013 totaled $4.4 billion, a 13.6% increase compared to the same period last fiscal year. Gross margin for the period was 16.7%, an 84 basis point decrease versus the comparable prior year period. The decline in gross margin was attributed to increased inbound freight costs throughout the first nine months of fiscal 2013 as well as the Company’s focus on maintaining higher service levels despite greater supplier out of stocks. The continued shift in customer mix towards the supernatural and conventional supermarket channels, and to customers within the conventional supermarket channel who are migrating to limited service programs, also continued to negatively impact gross margin compared to the first nine months of fiscal 2012.

Total operating expenses for the nine months ended April 27, 2013 were 13.8% of net sales or 89 basis points lower than the comparable prior fiscal year period. Total operating expenses increased $38.6 million, or 6.7%, to $611.2 million, compared to $572.6 million for the nine months ended April 28, 2012. Total operating expenses for the nine months ended April 27, 2013 included approximately $6.1 million in expenses related to the labor action at the Company's Auburn, Washington facility. Excluding these expenses, operating expenses were $605.1 million, a 103 basis point decline as a percentage of net sales versus the same period last fiscal year. Total operating expenses for the nine months ended April 27, 2013 also included expenses of approximately $1.6 million related to the termination of a licensing agreement and the write-off of the associated intangible asset. Total operating expenses for the nine months ended April 28, 2012 included $5.3 million in expenses related to the restructuring and divestiture of the Company's conventional non-foods and general merchandise lines of business and $1.7 million in expenses related to the onboarding of a national customer.

The following table details the amounts and effect of the labor action costs related to the Company's Auburn, Washington facility described above and the reconciliation of total operating expenses including the labor action costs (GAAP basis), to total operating expenses excluding the labor action costs (non-GAAP basis) for the nine months ended April 27, 2013:

       
      Nine months ended
      April 27, 2013
(in millions)     Pretax   % of Sales
           
Total operating expenses     $ 611.2     13.82 %
Labor action costs     (6.1 )   (0.14 )%
Total operating expenses, excluding labor action costs     $ 605.1     13.68 %
                 

Operating income as a percentage of net sales was 2.9% for the nine months ended April 27, 2013, an increase of 5 basis points over the same period in fiscal 2012. Excluding the $1.6 million of expenses related to the write-off of an intangible asset in the nine months ended April 27, 2013 and the $6.9 million of expenses related to the restructuring of the Company's conventional non-foods and general merchandise lines of business and the onboarding of a new national customer in the nine months ended April 28, 2012, operating expenses as a percentage of net sales were 13.8% for the first nine months of fiscal 2013, a decrease of 74 basis points compared to 14.5% for the same period in fiscal 2012.

Net income for the nine months ended April 27, 2013 increased $9.6 million, or 14.5%, to $75.8 million, or $1.53 per diluted share, from $66.2 million, or $1.35 per diluted share, for the nine months ended April 28, 2012.

“As we begin the final quarter of fiscal 2013, we are opening two new distribution facilities,” added Mr. Spinner. “Our Albert's Organics division recently completed a successful relocation to a new, larger facility in New Jersey that nearly doubled their existing warehouse space, positioning the division to further capitalize on the demand for organic produce and perishables. In June, we expect to consolidate our four existing locations in Aurora, Colorado into a single, new 500,000 square foot broadline facility in Aurora, Colorado.”

Updated Fiscal 2013 Guidance

Based on UNFI's fiscal 2013 performance to date and the current outlook for the remainder of the 2013 fiscal year, the Company is raising its net sales guidance for the fiscal year ending August 3, 2013, to a range of $6.03 billion to $6.06 billion, which represents a 15.2% to 15.7% increase in total net sales over fiscal 2012. On September 11, 2012, the Company previously provided fiscal 2013 net sales guidance of a range of $5.88 billion to $5.98 billion, an increase of approximately 12.3% to 14.2% over fiscal 2012. The Company's fiscal 2013 is a 53 week fiscal year, with the additional week occurring in the fourth quarter of fiscal 2013. The Company expects that the additional week in fiscal 2013 will contribute approximately 2.2% to 2.3% to the Company's overall anticipated fiscal 2013 net sales growth.

The Company is also narrowing its GAAP earnings per diluted share guidance for fiscal 2013 to a range of approximately $2.12 to $2.14, an increase of approximately 14.0% to 15.1% compared to fiscal 2012 GAAP diluted earnings per share of $1.86. Excluding the impact of the $1.6 million write-off of the intangible asset, the $4.9 million unclaimed property settlement and the discrete tax benefit of $2.7 million primarily related to the reversal of reserves for uncertain tax positions (collectively, the "special items"), the Company expects diluted earnings per share for fiscal 2013 in the range of $2.15 to $2.17 per share, an increase of approximately 10.8% to 11.9% versus fiscal 2012 diluted earnings per share of $1.94 excluding the expenses associated with the restructuring and divestiture of the Company's conventional non-foods and general merchandise lines of business and the expenses related to the onboarding of a national customer. The Company previously provided GAAP earnings guidance of $2.12 to $2.18 per diluted share on February 26, 2013.

Original source: United Natural Foods Inc