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United Natural Foods Inc. Reports Operating Results (10-Q)

December 06, 2012 | About:
10qk

10qk

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United Natural Foods Inc. (UNFI) filed Quarterly Report for the period ended 2012-10-27.

United Natural Foods, Inc. has a market cap of $2.54 billion; its shares were traded at around $52.48 with a P/E ratio of 25.8 and P/S ratio of 0.5. United Natural Foods, Inc. had an annual average earning growth of 11.9% over the past 10 years. GuruFocus rated United Natural Foods, Inc. the business predictability rank of 4-star.

Highlight of Business Operations:

Our net sales for the three months ended October 27, 2012 increased approximately 15.8%, or $192.6 million, to $1,410.0 million from $1,217.4 million for the three months ended October 29, 2011. This increase was primarily due to organic growth (sales growth excluding the impact of acquisitions) in our wholesale division from our supernatural chain customer as well as increased sales within our conventional supermarket channel. Our organic growth is due to the continued growth of the natural and organic products industry in general, increased market share as a result of our focus on service and value added services and broader selection of products, including specialty foods. In addition to net sales growth attributable to our organic growth, we also benefited from the inclusion of $11.2 million in incremental sales during the three months ended October 27, 2012 related to our acquisitions of certain assets of three distributors completed during the quarter ended October 27, 2012. Net sales for the quarter ended October 27, 2012 also benefited from food price inflation of approximately 2.2% compared to price levels in the first quarter of the prior fiscal year.

Our gross profit increased approximately 8.7%, or $18.8 million, to $236.0 million for the three months ended October 27, 2012, from $217.1 million for the three months ended October 29, 2011. Our gross profit as a percentage of net sales was 16.7% for the three months ended October 27, 2012 and 17.8% for the three months ended October 29, 2011. The decline in gross profit as a percentage of net sales between the first quarter of fiscal 2013 and the comparable period in fiscal 2012 is primarily due to a reduced number of forward buying transactions and lower backhaul volumes as a result of the initial launch of a new transportation routing software, combined with higher fuel costs, which together represented approximately 75 to 80 basis points of the year-over-year decline. The continued shift in our customer mix towards the supernatural and conventional supermarket channels, along with changes in the product mix and higher shrink levels also negatively impacted gross margin in the quarter ended October 27, 2012.

Our total operating expenses increased approximately 4.4%, or $8.3 million, to $199.4 million for the three months ended October 27, 2012, from $191.1 million for the three months ended October 29, 2011. The increase in total operating expenses for the three months ended October 27, 2012 was primarily due to higher sales volume as well as intangible asset impairment of $1.6 million related to the termination of a long-term licensing agreement. Total operating expenses for the three months ended October 29, 2011 included approximately $5.3 million in severance and other costs related to the previously announced divestiture of our conventional non-foods and general merchandise lines of business and approximately $1.6 million in start-up expenses which were incurred in connection with onboarding a large national conventional supermarket customer. In addition, during the three months ended October 29, 2011 we recorded approximately $0.3 million for severance payments to a former executive, and our bad debt expense included $0.6 million associated with a bankruptcy filing by one of our customers.

Operating income increased approximately 40.3%, or $10.5 million, to $36.6 million for the three months ended October 27, 2012, from $26.1 million for the three months ended October 29, 2011. As a percentage of net sales, operating income was 2.6% for the three months ended October 27, 2012 compared to 2.1% for the three months ended October 29, 2011. The increase in operating income is primarily attributable to the operating expense management discussed above as well as the $3.7 million decrease in restructuring and asset impairment charges, partially offset by the lower gross profit as a percentage of net sales during the quarter.

Net cash used in operations was $55.5 million for the three months ended October 27, 2012, a decrease of $38.0 million from the $93.5 million used in operations for the three months ended October 29, 2011. The primary reasons for the net cash used in operations for the three months ended October 27, 2012 were an increase in inventories of $140.1 million due to our sales growth during the year and inventory build-up for the holiday season, and an increase in accounts receivable of $30.2 million, partially offset by an increase in accounts payable of $76.2 million and net income of $21.5 million. The primary reasons for the net cash used in operations for the three months ended October 29, 2011 were an increase in inventories of $135.4 million due to our sales growth during the year, inventory build-up for the holiday season and our new national customer, and an increase in accounts receivable of $54.1 million, partially offset by an increase in accounts payable of $52.5 million and net income of $15.2 million. Days in inventory remained at 50 days at October 27, 2012, the same level as at July 28, 2012. Days sales outstanding decreased slightly to 21 days at October 27, 2012, from 22 days at July 28, 2012. Working capital increased by $46.5 million, or 7.6%, to $659.2 million at October 27, 2012, compared to working capital of $612.7 million at July 28, 2012.

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