UNFI Q3 Sales Have Soft Areas, Including from Independents

In its third-quarter financial results update, United Natural Foods, Inc. (UNFI) reported $41.7 million in net income, an increase of $5.4 million (14.7%) from the previous year.

Sales from supermarkets grew 22% (representing 26% of UNFI’s sales), while independents’ growth was  up 16.6% (comprising 32% of UNFI’s sales). Supernaturals grew 14.9% (35% of UNFI’s sales) and food service was up by 53.5% (5% of sales).

UNFI President, CEO and Director Steven L. Spinner stated in a call to investors (transcribed by Seeking Alpha) that the brand has been focused on bumping up its fresh foods offerings, with “perimeter products” accounting for 15% of UNFI’s total revenue. He also noted that organic offerings are growing in the market as a whole, and UNFI’s market share of natural and organic food space is about 12%.

“I believe that the fastest growth for organic consumption and distribution is in front of us despite the headwinds we face today,” he stated. Spinner also predicted that ethnic/gourmet products and fresh foods will be areas of growth for the firm.

Spinner also noted that overall sales have been sluggish in some areas, thanks to factors like stores creating their own private label organic products and competition from organic products sold at a wider variety of retail outlets like e-tailers and conventional foodservice.

One investor on the call noted that sales from the independent channel “slowed pretty meaningfully this quarter.” To this, Spinner says these stores are more susceptible to the growth of organic sales at more diverse retailers. “So, independents have to shift their business model,” he stated. “They have to be better at perimeter; they have to be better at being differentiated because if they're going to try to compete on a price-per-price basis on organic cereal, it's not going to end well.”

UNFI says it now has more than 1,000 trucks and 30 distribution centers within 200 miles of 85% of the North American population. It is said to deliver more than two million cases every day.

Published in WholeFoods Magazine, August 2015 (online 6/11/15).