With its three-year business strategy now in full swing and a natural and organic food business continuing to gain momentum, United Natural Foods, Inc., had a strong finish to fiscal 2024.
UNFI released fourth-quarter earnings on Tuesday, ending the fiscal year at the upper end of the outlook range for key financial metrics and steadily increasing profitability for the fourth consecutive quarter.
Net sales rose 10% to $8.2 billion, which includes an estimated $582 million benefit from an extra week in fiscal 2024. Excluding the extra week, sales rose 2.1% driven by improved unit volumes that turned positive at the end of the fourth quarter.
Fourth-quarter gross profit rose 15.5% year over year to $1.1 billion. On a comparable 13-week basis, gross profit was up 7%. Adjusted EBITDA increased 53.8% year over year to $143 million.
UNFI’s stock price rose Tuesday — over 25% — after the earnings report as the company also forecast fiscal 2025 sales to be in the range of $30.3 billion to $30.8 billion.
Free cash flow in the fourth quarter was $71 million, down year-over-year, but it enabled the company to reduce net debt to below $2.1 billion.
UNFI is also moving volume from its Billings, Mont., and Bismarck, N.D., distribution centers to nearby facilities. The Billings and Bismarck distribution centers will be closed and sold, which will also help UNFI pay down debt.
The Fargo, ND, distribution center will also provide access to a wider product assortment and enable suppliers to reach more customers from a single distribution center, UNFI CEO Sandy Douglas said on the call, resulting in benefits for both customers and suppliers and helping to reduce the capital intensity of UNFI’s conventional network by reducing operating costs.
The network optimization strategy is an essential part of UNFI’s three-year plan. A distribution center will also open in Manchester, Pa., which will use new technology and be automated sometime next spring.
The capital intensity for the company is decreasing. UNFI expects capital expenditures to be about $300 million in fiscal year 2025, a decrease of $70 million compared to fiscal year 2024. The reduced intensity is driven by a shift in spending based on the use and wear and tear of assets rather than a calendar approach where maintenance dollars are spent at a regular pace with less focus on need.
UNFI announced a three-year plan at the start of the fiscal year aimed at increasing customer and supplier value, expanding margins, generating free cash flow and reducing leverage.
“We are confident that our new strategy and multi-year financial objectives, informed by our ongoing board and management-led financial review, will continue to drive accelerated performance and create sustainable value for our customers and suppliers together with our shareholders,” Douglas said during earnings. call.
UNFI’s revamped trade program for suppliers allows for the consolidation of 15 to 20 unique tariffs into one, and the program is providing suppliers with access to enhanced data and insights.
“We have a significant base of suppliers…who are now signed up to the new marketplace sales model and are already seeing early returns, faster growth and less friction,” Douglas said.
Douglas also pointed to a falling inflation rate and a shopper eager for more natural and organic products. UNFI’s wholesale volume improvement turned positive in the 49th week of the 52-week fiscal year “primarily driven by the natural side of our business,” Matteo Tarditi, UNFI’s president and CFO, said on the call.
UNFI is seeing natural, organic and specialty retailers growing faster than conventional natural retailers. Ethnic retailers are also performing well.