After reaching an all-time high in the first quarter, shares of United Natural Foods, Inc. (UNFI, Financial) the largest distributor of natural, organic and specialty products to North American supermarkets, declined meaningfully. This occurred after the company’s largest customer, Whole Foods Market, Inc., reported disappointing results, and United also experienced decelerating sales trends. While organic revenue growth slowed from its historically consistent 10% rate to 7% last quarter, United remains the market leader in the distribution of healthier and natural foods, one of the most attractive categories within grocery. We believe a variety of one-time factors contributed to the recent sales slowdown. We remain excited by the opportunity within the company’s core business, as well as the meaningful contribution from Tony’s Fine Foods, a recent acquisition that we believe has the potential to double United’s addressable market by adding fresh and perishable foods to its product offering.
From Baron Funds' second quarter commentary.
