UNFI Plans Efficiency Gains in 2011

United Natural Foods plans for gains in efficiency to trump a less-profitable — but fast-growing — sales mix in its new fiscal year.

PROVIDENCE, R.I. — United Natural Foods [3] plans for gains in efficiency to trump a less-profitable — but fast-growing — sales mix in its new fiscal year.

In financial results announced Wednesday, the distributor said that moderating inflation and an increasing mix of sales to larger customers contributed to a decline in gross margin for the fourth quarter and 2010 fiscal year that ended July 31.

While those trends are expected to continue in 2011, a new national supply chain platform launching later this month with a new distribution center in Texas is expected to begin to reduce expenses at a faster rate, according to Steven Spinner, president and chief executive officer.

"Lower gross margin supernatural and supermarket customer growth will continue to outpace high gross margin independent sales," Spinner told analysts in a conference call. "Our opportunity will be to reduce expenses at a rate that exceeds the decline in the gross margin attributed to higher growth supermarket and supernatural customer segments. And I'm confident the company will attain its three-year objective of 10 to 15 basis points per year in operating margin."

Gross margin as a percent of sales declined by 44 basis points in the fourth quarter to 18.5%. Annual gross margin of 18.5% was down by 60 basis points as compared to fiscal 2009. Sales of $989 million in the fourth quarter increased by 15.8% over the same period last year and by 13.2% excluding acquisitions, the company said. Net income of $17.6 million increased 13.5%.

For the fiscal year, UNFI posted net earnings of $68.3 million, a 15.4% increase, on a sales gain of 8.7% to $3.8 billion.