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UNFI: No worries on Whole Foods

Supply expertise ‘hard to replicate,’ store visits up, CEO says

Amazon’s takeover of Whole Foods has triggered plenty of anxiety for United Natural Foods (UNFI) shareholders, but as far as Whole Foods’ major distributor is concerned, it’s business as usual — with a little extra potential.

“I am really excited about the opportunities I believe this combination brings to UNFI,” Steven Spinner (pictured), UNFI’s president and CEO, said in a conference call late Wednesday discussing the distributor’s fourth-quarter earnings. “Amazon and Whole Foods are both incredible brands and we believe UNFI is well positioned to service them in our digital and brick-and-mortar growth strategy through our network of distribution centers, our logistics capabilities and our breadth of differentiated and unique product offerings.”

UNFI shares — which have taken a beating ever since Jana Partners introduced the idea of optimizing distribution for Whole Foods this past spring — were up by nearly 9% early Thursday following UNFI’s after-market earnings announcement and Spinner’s remarks in the conference call. Jana’s pressure helped to trigger a deal between Whole Foods and Amazon that was announced in June and completed late last month.

Whole Foods is UNFI’s single largest single customer, accounting for nearly one-third of UNFI’s sales. When asked by an analyst to comment on the prospect of Amazon needing UNFI less than Whole Foods might, Spinner replied, “We feel good about the value that we bring to both Whole Foods and Amazon, we've got a lot of scale across a lot of products and a lot of suppliers that quite frankly, is very hard to replicate. And so … we feel really good about the direction that they're taking. And quite frankly, I think it's bringing more people into all the stores and so we'll just have to see how it plays out.”

Spinner also reminded investors that a supply contract between UNFI and Whole Foods remains valid through 2025: “That’s a long time from now,” he said.

As reported previously, UNFI said quarterly sales improved as a result of acquisitions of Haddon House Food Products and Gourmet Guru, specialty providers aiding what Spinner called UNFI’s “building out the store” strategy, designed to expand offerings of fresh and specialty items to its customers. Spinner identified expanding sales of dairy, deli and proteins to be one of the company’s five strategic objectives for its 2018 fiscal year, which began last month.

UNFI will also aim to win new customers and expand business with existing customers; optimize gross margins; grow e-commerce infrastructure and sales; and maintain the balance sheet strength to make additional acquisitions.

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