UNFI reports third-quarter fiscal 2023 results

United Natural Foods Inc. (UNFI) reported financial results for the third quarter of fiscal 2023 (13 weeks) ending April 29, 2023.

Third-quarter fiscal 2023 highlights (comparisons to third-quarter fiscal 2022)

Net sales increased 3.7% to $7.5 billion.
Gross profit decreased $12 million, or 1.2%, to $1.0 billion; prior to LIFO charge, gross profit declined 4.7%.
Net income decreased 89.6% to $7 million; Earnings per diluted share (EPS) decreased 89.1% to $0.12.
Adjusted EBITDA decreased 18.9% to $159 million.
Adjusted EPS decreased 50.9% to $0.54.
Reduced net debt by $46 million compared to the end of the second quarter
Lowering FY2023 profitability outlook; maintaining sales and capital expenditure outlook
Actioning over $100 million of annualized near-term profitability enhancements while continuing longer-term value creation plan.

“Our third quarter results continue to demonstrate the strength of our customer value proposition as sales and product penetration increased despite significant industry headwinds,” UNFI CEO Sandy Douglas, said in the announcement. “However, our profitability was impacted by a greater than expected decline in gross margins reflecting a challenging operating and macroeconomic backdrop, which contributed to lower inflationary benefits primarily related to reduced procurement gains, as well as higher shrink. Because of this pressure, we are reducing fiscal 2023 outlook for adjusted EBITDA and adjusted earnings per share.”

“Customers continue to tell us we have the right products and value-added services. They’re optimistic we’re taking the appropriate actions to help them plan and execute their go-to-market strategies and continuing to improve our execution capabilities in support of their business growth,” Douglas continued. “While work is underway on our longer-term improvement efforts, we’re also focused on taking immediate cost mitigation actions to improve the profitability of our business in the near term, with these near-term profitability enhancements projected to deliver over $100 million of annualized benefits. We are confident that our short and longer term actions will make UNFI a stronger, more efficient company better positioned to serve customers and suppliers and deliver increasing shareholder value.”

Third-quarter fiscal 2023 summary

Net sales increased 3.7% in the third quarter of fiscal 2023 compared to the same period last year, primarily driven by inflation and new business. This new business resulted from selling new or expanded categories to existing customers and adding new customers from its robust pipeline. These increases were partially offset by a decrease in units sold.

Gross profit in the third quarter of fiscal 2023 was $1.0 billion, a decrease of $12 million, or 1.2%, compared to the third quarter of fiscal 2022. Excluding the non-cash LIFO charge in both periods, gross profit decreased $51 million, or 4.7%. The gross profit rate in the third quarter of fiscal 2023 was 13.3% of net sales and included a $33 million LIFO charge. Excluding this non-cash charge, gross profit rate was 13.8% of net sales. Gross profit rate in the third quarter of fiscal 2022 was 14.0% of net sales and included a $72 million LIFO charge. Excluding this non-cash charge, gross profit rate in the third quarter of fiscal 2022 was 15.0% of net sales. The decrease in gross profit rate, excluding the LIFO charge, was primarily driven by the volatile macroeconomic environment, which led to lower inflationary benefits and reduced procurement gains. Gross profit also reflects higher levels of shrink and costs related to operational improvements.

Net income for the third quarter of fiscal 2023 was $7 million. Net income for the third quarter of fiscal 2022 was $67 million.

Net income per diluted share (EPS) was $0.12 for the third quarter of fiscal 2023 compared to net income per diluted share of $1.10 for the third quarter of fiscal 2022. Adjusted EPS was $0.54 for the third quarter of fiscal 2023 compared to $1.10 in the third quarter of fiscal 2022.

Adjusted EBITDA for the third quarter of fiscal 2023 was $159 million compared to $196 million for the third quarter of fiscal 2022.