Dive Brief:
- United Natural Foods, Inc. (UNFI) recorded a $39 million net loss during its fiscal first quarter, continuing a string of turbulent quarterly results for the grocery retailer and wholesaler.
- UNFI’s overall net sales ticked up 0.3% year over year during Q1, to $7.6 billion, while retail sales dropped 1.1%, to $606 million.
- UNFI has started to see benefits stemming from “improved management routines and standardized processes” it has introduced in recent quarters as it looks to restore its financial health, CEO Sandy Douglas said Wednesday during an earnings call.
Dive Insight:
While UNFI posted another loss during its latest quarter, the company is encouraged by its performance during the period and believes its results will strengthen as the year progresses, Douglas said.
UNFI has made what Douglas described as “early progress” in executing the “transformation agenda” the company announced in March when it shocked investors with a sharp drop in profitability executives did not predict. Those changes have included key management changes, including the recent appointment of a new chief information officer and new CEO of its retail business.
UNFI has also made a series of expense cuts, including the elimination of about 150 jobs in June, mostly management or supervisory positions. The company is on track to realize about $150 million in “operating efficiencies” in fiscal 2024, Douglas said.
UNFI has benefited as supply chain disruptions have abated and worker turnover in distribution centers has decreased, according to Douglas. Shrink, meanwhile, fell during Q1 to its lowest level during the past seven quarters, while operating costs as a percentage of sales were flat compared with Q4 of last year, CFO John Howard said during the earnings call.
On the other hand, shoppers have continued to curtail purchases and shift transactions away from the grocery channel — a trend that has driven down volumes, played into the hands of mass merchandisers and discounters, and created “even greater urgency for us to be successful in both our short-term and longer-term transformation efforts,” according to Douglas.
“We will continue to drive operational improvement and transformation as quickly as possible given the tremendous long-term shareholder value creation opportunity that we see by improving the economics of our business and enhancing the value we bring to customers and suppliers. We refuse to be incremental in our approach,” Douglas said.
Douglas added that UNFI is focusing more on helping its wholesale customers build their businesses than on its own supermarket unit, which includes the Cub Foods and Shoppers Food banners.
“We’re committed to our retail business in the Twin Cities and in the mid-Atlantic. But, in general, our focus is not to expand our retail presence but to help the retailers we serve,” he said.
While UNFI’s overall sales were up only marginally during Q1, its supernatural segment, which comprises its business with Whole Foods Market, posted a 6.5% year-over-year increase. Asked about the unit’s solid performance, Douglas said the company has “a very strong relationship with that customer and they’re executing well and we're working hard to help them in every way we possibly can.”
