United Natural Foods Inc. (UNFI) on Wednesday said it is mounting a "transformation plan" after lackluster second quarter earnings prompted the wholesaler's stock price to plummet nearly 30%.
UNFI's net sales for the period ended Jan. 28 increased 5.4% year over year, to $7.8 billion. Net income, however, plunged 71.2% vs. the year-ago period, to $19 million, the company announced. Earnings per diluted share (EPS) decreased 71.3% to 31 cents, UNFI reported.
“While I’m pleased with our continued sales growth, profitability in the quarter was lower than recent levels and our plan,” said Sandy Douglas, UNFI’s CEO, on a call with analysts. “Profits were challenged as we did not repeat the significant level of procurement gains from rapidly accelerating inflation and inventory gains, due to supply chain volatility, that we experienced in the second quarter of last year. As a result of these challenges, we are reducing our profitability expectations for fiscal 2023 and withdrawing our fiscal 2024 targets.”
Looking ahead, the Providence, Rhode Island-based company has withdrawn its long-term fiscal year 2024 financial targets, citing challenges ahead. UNFI, meanwhile, cut its fiscal year 2023 adjusted EPS forecast from $4.85-$5.15 to $3.05-$3.90.
For the quarter, gross profit decreased $6 million, or 0.6%, to nearly $1.1 billion; prior to LIFO, gross profit rose 0.4%, UNFI reported. Adjusted EBITDA decreased 17.7% to $181 million while adjusted EPS decreased 42.6% to 78 cents.
The distributor of natural and organic foods said private brands continued to perform well for the company, but noted that profitability fell significantly during the quarter.
“Our second quarter sales grew over 5% compared to the prior year as more customers bought more categories, private brands and professional services driving sales to over $7.8 billion,” said Douglas.
The wholesaler said it is working on a turnaround plan.
"Our improvement efforts are already well underway," Douglas said. "We’ve assembled a highly skilled and motivated management team that is developing a multifaceted transformation plan to continue to drive improvements in our customer and supplier experience, and address legacy integration and capability gaps in our digital and physical infrastructure. We look forward to sharing our transformation agenda and how we expect it to generate sustained improvements to shareholder returns.”