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UNFI Cites Strike Impact on Q2 Profits

PROVIDENCE, R.I. — United Natural Foods Inc. here said it has lowered earnings guidance for fiscal 2013 to reflect the impact of a nine-week strike at its distribution center in Auburn, Wash.

The revised guidance anticipates earnings in the range of $2.12 to $2.18 per diluted share, compared with the previous range of $2.14 to $2.24, “which is not a reflection of any challenges in the back half of 2013 but points directly to the impact of the labor action,” Steven L. Spinner, president and chief executive officer, told analysts during a conference call.

Steven Spinner
Steven Spinner

He said the labor dispute, which began Dec. 10 and ended Feb. 7, is expected to cost the company $5.6 million for the year, or approximately 7 cents per share on a non-recurring basis, including between $600,000 and $1 million of strike-related costs that will impact third-quarter results.

For the second quarter ended Jan. 26 net income rose 2.8% to $22.6 million, while sales climbed 12.3% to $1.5 billion. Net income for the half increased 18.8% to $44.2 million, while sales were up 14% to $2.9 billion.

Gross margin was 16.7% for the half, down 90 basis points from last year’s 17.6% and about even with first-quarter gross margin, which Spinner said he attributed to a shift in UNFI’s customer base to encompass more lower-margin supermarket business; a higher rate of out-of-stocks due to problems at the supplier level; and a drop of inflation to less than 2%.

The out-of-stock problems have subsided “as manufacturers have geared up production to meet increasing demand,” he said.

Read more: UNFI Teamsters Return to Work

However, while he anticipates increases in gross margin going forward, “it is certainly not going to be significant over the next year or so,” he said.

UNFI plans to open a new distribution center in Denver later this year, which will combine operations from four separate facilities there, Spinner said. The company also plans to open two new facilities next year — one in Wisconsin, which will ease the load on a distribution center in Iowa, and one in a location the company has not yet disclosed, he added.

Spinner also described details of a new field sales force UNFI is implementing for its independent customers. “We decided one way to grow our independent business was to add more value to them, and the best way to add more value is to let them see the UNFI territory manager more frequently than the once a month our regional people used to call on them.”

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