United Natural Foods Inc. (UNFI) rebounded with strong 2022 fourth-quarter and fiscal year sales gains after cycling pandemic-driven results a year ago, with adjusted earnings per share in line with Wall Street estimates.
Also on Tuesday, Providence, R.I.-based UNFI unveiled a partnership with robotics specialist Symbotic to automate several of its distribution centers over the next few years.
For the fourth quarter ended July 30, net sales totaled $7.27 billion, rising 8% from $6.74 billion in the fiscal 2021 quarter, when the top line dipped 0.5% as UNFI lapped sharp customer demand fueled by COVID-19. The grocery distributor said the Q4 increase mainly reflects the impact of inflation and new business from current and new customers — including the benefit of cross-selling between natural/organic and conventional grocery — partially offset by supply-chain challenges and lower unit-sales growth.
"We see great opportunity to further harness our competitive advantages, including our scale, network, data, diversification and talent." — UNFI CEO Sandy Douglas (Photo courtesy of UNFI)
Full-year 2022 net sales climbed 7.3% to $28.93 billion from $26.95 billion in 2021, when UNFI recorded a 1.5% uptick atop robust pandemic-fueled growth in the prior year.
“Our fourth quarter capped a year of improving operational performance driving strong financial results. Our commitment to delivering higher customer-service levels amidst significant industry and economic uncertainty helped us achieve market share gains,” UNFI CEO Sandy Douglas said in a statement. “We also generated meaningful growth across our key financial metrics, including mid-teens adjusted earnings growth, while we reduced net leverage to under 2.6x and increased liquidity to approximately $1.7 billion.”
Growth in UNFI’s customer channels was led by the supernatural category — Whole Foods Market, the distributor’s largest single customer — and the independent retailer category. Fourth-quarter net sales surged by 13.5% to $1.42 billion (+13.2% to $5.72 billion in fiscal 2022) for the supernatural segment and by 12.4% to $1.87 billion (+10.9% to $7.36 billion in fiscal 2022) for the independent segment. Chain retailers, UNFI’s biggest customer channel, posted a 3.7% net sales gain to $3.13 billion (+3.8% to $12.56 billion for fiscal 2022).
The Retail channel, including the UNFI’s Cub Foods and Shoppers stores, saw sales edge up 1.3% to $621 million in Q4 and 1.1% to $2.47 billion for fiscal 2022. Sales in the Other channel — including international customers outside Canada, foodservice, e-commerce, conventional military business and additional sales — rose 7.7% to $616 million in Q4 and 4.4% to $2.4 billion for the full year.
“As we look to the new fiscal year, we see great opportunity to further harness our competitive advantages — including our scale, network, data, diversification and talent — to continue to improve our execution and drive ever higher levels of value for our customers, suppliers, associates and our shareholders,” Douglas added. “We plan to build on our momentum by investing to accelerate long-term growth, efficiency and value creation, while continuing to strengthen our balance sheet.”
A big effort on that front will be the agreement with Wilmington, Mass.-based Symbotic. The deal calls for UNFI to deploy Symbotic’s artificial intelligence-powered robotics and software automation in five distribution centers during the next four years. UNFI reported that it also has an option to roll out Symbotic’s warehouse automation systems to more DC locations.
With robotic case-pick functionality, Symbotic’s end-to-end automation is expected to transform UNFI’s DCs by adding capabilities, sharpening efficiency, improving order accuracy for customers, expanding storage capacity within facilities and facilitate planned future growth, the distributor said. The system, too, will be able to fulfill customer-specific orders, enhancing operating efficiencies at the store level and raising safety for associates, the company noted.
North America’s largest publicly traded grocery distributor, UNFI operates 56 distribution centers and supplies more than 30,000 retailers in the United States and Canada, including natural product superstores, independent retailers, conventional supermarket chains, e-commerce retailers and foodservice providers.
Symbotic’s technology — also used by Walmart — stands to benefit customers, suppliers and associates, according to Mark Bushway, chief supply chain officer at UNFI.
“We currently have automation in a number of our distribution centers, but we believe the Symbotic system will improve the accuracy, efficiency, quality and speed of our supply chain and help take our operations to a new level,” Bushway commented.
At the bottom line, UNFI said 2022 fourth-quarter net income came in at $39 million, or 63 cents per diluted share, compared with $43 million, or 69 cents per diluted share, a year ago. Excluding a $56 million pretax LIFO charge and $5 million of pretax restructuring-, acquisition- and integration-related expenses, among other costs, adjusted net earnings per share were $1.27 versus $1.25 in the 2021 quarter. Analysts, on average, had forecast adjusted EPS of $1.27, with estimates ranging from $1.16 to $1.45, according to Refinitiv.
Full-year net income totaled $248 million, or $4.07 per diluted share, compared with $149 million, or $2.48 per diluted share, in 2021. Adjusted EPS for 2022 was $4.83 versus $4.18 in 2021. Excluded adjustments for 2022 include a gain of $1.42 per share for the sale of UNFI’s Riverside, Calif., DC in the third quarter as well as $2.59 for the LIFO charge, among other items. Wall Street’s consensus estimate was for fiscal 2022 adjusted EPS of $4.81, with projections running from $4.73 to $5.00, according to Refinitiv.
For fiscal 2023, UNFI forecasts reported EPS of $3.95 to $4.25 and adjusted EPS of $4.85 to $5.15, on net sales of $29.8 billion to $30.4 billion. Analysts’ average projection is for adjusted EPS of $5.09, with estimates ranging from $4.60 to $5.55.