United Natural Foods, Inc. (UNFI, Financial) reported a robust third quarter, surpassing revenue expectations with $8.06 billion compared to the anticipated $7.79 billion. This marks their continued growth, driven by solid sales performance and a steady improvement in Adjusted EBITDA for the seventh consecutive quarter. CEO Sandy Douglas expressed satisfaction with the company's strategic focus on enhancing value for both customers and suppliers, leading to improved margins and increased free cash flow. The company's efforts in becoming more efficient and effective are evident in these positive results.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 9 analysts, the average target price for United Natural Foods Inc (UNFI, Financial) is $30.00 with a high estimate of $33.00 and a low estimate of $25.00. The average target implies an upside of 15.65% from the current price of $25.94. More detailed estimate data can be found on the United Natural Foods Inc (UNFI) Forecast page.
Based on the consensus recommendation from 12 brokerage firms, United Natural Foods Inc's (UNFI, Financial) average brokerage recommendation is currently 2.8, indicating "Hold" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for United Natural Foods Inc (UNFI, Financial) in one year is $25.00, suggesting a downside of 3.62% from the current price of $25.94. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the United Natural Foods Inc (UNFI) Summary page.
UNFI Key Business Developments
Release Date: March 11, 2025
- Revenue: Second quarter sales grew nearly 5% to $8.2 billion.
- Natural Products Sales: Increased by over 8% compared to last year's second quarter.
- Conventional Products Sales: Up just over 2% due to new business wins and customers.
- Retail Sales: Down about 3% primarily due to five store closures over the past 12 months.
- Same-Store Sales: Down about 40 basis points, a sequential improvement of about 100 basis points compared to Q1.
- Gross Margin: Consolidated gross margin rate, excluding LIFO, declined 20 basis points to 13.2% of net sales.
- Adjusted EBITDA: Grew over 13% to $145 million, with an adjusted EBITDA margin rate of nearly 1.8%.
- Adjusted EPS: $0.22 compared to $0.07 in last year's second quarter.
- Free Cash Flow: $193 million in the quarter, an improvement of approximately $77 million from last year.
- Net Leverage: Reduced to 3.7 times, the lowest level since fiscal 2023.
- Full Year Net Sales Guidance: Updated to a range of $31.3 billion to $31.7 billion.
- Full Year Adjusted EBITDA Guidance: Raised to a range of $550 million to $580 million.
- Full Year Free Cash Flow Guidance: Expected to be at least $150 million.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- United Natural Foods Inc (UNFI, Financial) reported a strong quarter with sales growth of nearly 5% to $8.2 billion, led by an 8% increase in their Natural Products business.
- The company achieved an EBITDA growth of over 13% and significant improvement in year-over-year free cash flow.
- UNFI has successfully implemented Lean Daily Management in nine distribution centers, resulting in improved efficiency and reduced shrink to the second lowest level in the past 10 quarters.
- The company raised its full-year outlook for all financial metrics except capital spending, reflecting confidence in its multiyear strategy.
- UNFI's strategic realignment into two product-centered divisions is expected to offer more tailored solutions to customers and suppliers, enhancing their competitive edge.
Negative Points
- Total sales in UNFI's Retail business were down about 3% compared to last year, primarily due to five store closures over the past 12 months.
- The company's consolidated gross margin rate declined by 20 basis points compared to the prior year period, driven by a lower wholesale margin rate and a mix shift towards wholesale.
- UNFI's conventional products business saw a modest growth of just over 2%, indicating slower growth compared to the Natural Products segment.
- The company anticipates a sequential deceleration in sales growth from 4.6% in the first half of fiscal 2025 to around 3% in the second half of the year.
- UNFI is still in the process of optimizing its distribution network, with ongoing efforts to sell closed distribution centers and consolidate operations, which may pose operational challenges.
