United Natural Sales Dip Slightly at Start of Q4

PROVIDENCE, R.I. — United Natural Foods Inc. last week said an increasing number of crossover consumers shoppers who buy both organic and conventional products helped boost financial results for the fiscal third quarter, which ended April 30. However, Steven L. Spinner, president and chief executive officer, said the company has seen some sequential declines of 300 to 400 basis points in overall sales

PROVIDENCE, R.I. United Natural Foods Inc. [4] last week said an increasing number of crossover consumers — shoppers who buy both organic and conventional products — helped boost financial results for the fiscal third quarter, which ended April 30.

However, Steven L. Spinner, president and chief executive officer, said the company has seen some sequential declines of 300 to 400 basis points in overall sales growth during the first weeks of the fourth quarter.

“We were a little bit surprised by the fall-off that occurred in the early couple of weeks of this quarter,” he said. “We typically see a fall-off following Easter, but I think sales fell off a little bit more than we anticipated, and for a longer period.”

Mark E. Shamber, senior vice president and chief financial officer, said UNFI has experienced sales declines of 1% to 3% in the fourth quarter for the last four to five years, “so I think we expected a portion of that, though there was a little bit more than we expected, at least from what we've seen to date.”

Spinner said the declines were driven by several factors, including an overlap of previously announced new business; the shift of Easter to late in the third quarter, which affects business for one or two weeks after the holiday; “and a moderate drop in consumer demand, possibly caused by high fuel costs.”

Andrew Wolf, an analyst with BB&T Capital Markets, Richmond, Va., said the softness in sales can logically be attributed to “the post-Easter lull. But I also see it as a normalization of natural food sales.

“The category, which has been experiencing an average growth rate of 10%, saw growth of 12% this year as people recovered from the effects of the recession. But now that pent-up demand has been satiated, it's possible the sales slowdown simply reflects a return to more normal levels.”

Meredith Adler, managing director for Barclays Capital, New York, said she attributed the slowdown to “the usual drop after all holidays, especially Easter, and it's also possible it's because of higher gas prices, as the company pointed out.”

Net income for the quarter rose 19.9% to $23.4 million, while sales grew 22.2% to a record $1.2 billion.

Sales increased consistently across all customer channels, Spinner noted, including 19.8% among supermarkets, 10.3% at Whole Foods Market [5], Austin, Texas, and 8% in the independent channel, excluding the impact of two acquisitions earlier in the year.

The company acquired SunOpta Distribution Group in Canada last June and the business at two nonperishables warehouses from Whole Foods last October, which combined for estimated sales of $95.9 million. Excluding those items, overall sales for the quarter rose 12.4% to $1.1 billion.

For the nine-month period, net income increased 17.4% to $59.5 million, while sales jumped 21.8% to $3.4 billion.