UNFI Reports Q2 Net Sales of $6.15B

UNFI (United Natural Foods Inc.) reported that net sales hit $6.15 billion, which includes $3.47 billion from Supervalu, for its fiscal second quarter, which ended Jan. 26. Other Q1 results include a 5.5 percent legacy UNFI sales increase and a $370.9 million noncash good will impairment charge.

“I’m pleased by the tremendous work and meaningful progress our team accomplished this quarter on the integration of Supervalu and the positioning of UNFI as the premier food distribution company in North America,” said Steven L. Spinner, UNFI's chairman and CEO. “We know realizing all the benefits of this combination will take time, and we’re focused on executing against our plan for the long term. We experienced higher than anticipated costs, largely associated with our network realignment projects resulting primarily from Supervalu’s previous acquisitions, which we believe will be short-term in nature. I’m confident we have the people and resources focused on this integration and remain optimistic about our drive towards operating as one company with the broadest product selection, services offering and scaled supply chain.”

Net sales from continuing operations by customer channel for the second quarter of fiscal 2019 compared with the second quarter of fiscal 2018 were as follows ($ in millions):

Gross margin for the second quarter of fiscal 2019 was 12.39 percent of net sales and included an $8.6 million, or 0.14 percent of net sales, inventory fair-value adjustment charge related to the acquisition of Supervalu. When excluding this charge, gross margin in the second quarter of fiscal 2019 was 12.53 percent of net sales, compared with 14.70 percent of net sales for the second quarter of fiscal 2018. The decline in the gross margin rate was driven by the addition of Supervalu at a lower gross profit rate, as well as a shift in customer mix, including the faster growth of the supernatural channel relative to the other customer channels.

UNFI has elected to move onto the LIFO method of inventory valuation for certain product categories. This, combined with a higher inflation assumption for the combined business, is expected to add an additional $10 million to $15 million in noncash expense to fiscal 2019 results.

Adjusted EBITDA for the second quarter of fiscal 2019 was $142.6 million, versus $79.8 million for the second quarter of fiscal 2018. The increase was predominantly driven by the addition of Supervalu.

Providence, R.I.-based UNFI is a North American food wholesaler delivering a wide variety of products to customer locations throughout North America, including natural product superstores, independent grocery stores, conventional supermarket chains, ecommerce retailers and foodservice customers.