UNFI EXPECTS START-UP COSTS FOR WILD OATS MARKETS' RETURN

DAVID GHITELMAN

DAYVILLE, Conn. -- United Natural Foods Inc. here said last week it expects to gain between $160 million and $200 million in annualized revenue from once again becoming the primary supplier to Wild Oats Markets, Boulder, Colo., but the new business will come at a cost.

During a conference call with industry analysts to discuss results for the first quarter ended Oct. 31, Steven Townsend, UNFI's chief executive officer and chairman of the board, said he expects to give an estimate of the cost next month, after the company has reached a final contract agreement with Wild Oats. Townsend was elected chairman of UNFI's eight-member board last week, replacing Michael S. Funk, who stepped down as part of the company's executive succession plan, according to a media release.

"Those costs would be primarily hiring people and bringing on equipment before we have any sales dollars offsetting that," Townsend explained.

He said the company will probably not be able to rehire the truck drivers it had to lay off in September 2002 when UNFI lost its role as Wild Oats' primary distributor to Tree of Life, St. Augustine, Fla., a subsidiary of Dutch-owned Wessanen. "We're going to hire experienced drivers, but they may not be experienced with natural and organic products, so we're going to have to go through the full training we would normally go through," he said.

UNFI will probably not have "fully absorbed the Wild Oats business" until fourth-quarter 2004, he added.

Previously, UNFI did approximately $150 million in annual business with Wild Oats, and will do between $12 million and $15 million this year as the chain's secondary distributor, according to Townsend. Wild Oats was -- and is expected to become again -- UNFI's second-largest customer, he said.

In the 13-week quarter, sales rose 22.6% to $381.4 million, net income increased 70% to $6.8 million, and income per share was 34 cents, vs. 20 cents for last year's first quarter.