A month has gone by since the last earnings report for United Natural Foods (UNFI). Shares have added about 2.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is United Natural due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
United Natural Q1 Earnings Beat Estimates, FY25 View Up
United Natural Foods started fiscal 2025 on a robust note with first-quarter revenues and earnings surpassing the Zacks Consensus Estimate. Also, both metrics showed year-over-year growth. The solid performance reflects the success of the company’s multi-year strategic plan. This plan focuses on delivering value to customers and suppliers, enhancing operational efficiency, improving free cash flow and reducing net leverage. The upswing was further supported by positive volume growth, improvements in adjusted EBITDA and enhanced free cash flow.
UNFI’s Quarterly Performance: Key Metrics & Insights
United Natural reported adjusted earnings of 16 cents per share for the quarter under review, beating the Zacks Consensus Estimate of 1 cent. The company reported an adjusted loss of 4 cents in the year-ago period.
Net sales rose 4.2% year over year to $7,871 million, surpassing the Zacks Consensus Estimate of $7,619 million. The increase was driven by a 2% rise in wholesale unit volumes, reflecting new business with existing and new customers, along with the effects of inflation.
Chains, Supernatural and Other Channels experienced year-over-year sales growth of 3.5%, 13.8% and 3.1%, respectively. In contrast, sales for Independent Retailers and Retailers declined by 2.4% and 3.3%, respectively.
Analysis of UNFI’s Costs & Margins
UNFI’s gross profit rose 0.8% year over year to $1,038 million. The gross profit margin of 13.2% contracted 40 basis points (bps) from 13.6% reported in the year-ago quarter. The factors attributable to the decline were lower product margin rates and changes in business mix, partially offset by supplier programs and reduced shrink.
Operating expenses were $1,015 million compared with $1,023 million in the year-ago quarter. As a percentage of sales, operating expenses were 12.9% compared with 13.5% in the year-ago period. The decrease was led by the benefits of cost-saving initiatives and the leveraging impact of increased sales.
Adjusted EBITDA came in at $134 million, up 14.5% from $117 million in the year-ago quarter. This growth marks the fifth consecutive quarter of sequential growth in adjusted EBITDA. The increase was further supported by lower-than-expected costs related to our accounts receivable monetization facility and investment gains, which were more than offset by higher depreciation, amortization and net interest expenses.
UNFI’s Financial Health Snapshot
The company had a total liquidity of $1.17 billion as of Nov. 2, 2024, including cash of nearly $37 million and $1.14 billion under the company’s asset-backed lending facility.
Total outstanding debt, net of cash, reached $2.23 billion at the end of the quarter, representing a $164 million increase over the fourth quarter of fiscal 2024. The net debt to adjusted EBITDA leverage ratio was 4.2 as of Nov. 2, 2024.
United Natural’s Guidance for FY25
For fiscal 2025, the company anticipates net sales of $30.6-$31 billion compared to $30.3-$30.8 billion expected earlier. The company reported net sales of $31 billion in fiscal 2024.
Adjusted EBITDA is expected to be $530-$580 million now, compared with $520-$580 million mentioned earlier. UNFI expects to deliver a net loss of $31-$3 million in fiscal 2025 versus the net loss of $41-$3 million expected earlier.
United Natural envisions fiscal 2025 adjusted earnings between 40 cents and 80 cents versus the previous projection of 20 cents and 80 cents. It reported adjusted earnings of 14 cents in fiscal 2024.
The company projects capital and cloud implementation expenditure of around $300 million for fiscal 2025. It anticipates a free cash flow of more than $100 million for fiscal 2025.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -5.79% due to these changes.
VGM Scores
Currently, United Natural has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, United Natural has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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United Natural Foods, Inc. (UNFI) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
