Dive Brief:

• United Natural Foods, Inc. (UNFI) on Tuesday posted a 0.5% year-over-year decline in net sales during its fiscal second quarter, marking the first time the grocery retailer and wholesaler has seen revenue fall by that measure since the fourth quarter of 2021.
• The company reported a $15 million net loss during Q2, and saw sales in its retail division sag 4.4%.
• UNFI revised its guidance to reflect reduced sales expectations for the full fiscal year, but indicated that its performance during Q2 was better than it had expected.

Dive Insight:

UNFI’s results during its latest quarter underscore the challenges the grocery company continues to face as it works to get back on firm financial footing following a string of rough quarters.

The net sales drop the company reported in Q2 follows six consecutive quarters during which the company saw revenue growth consistently weaken. UNFI now projects that sales for fiscal 2024, which ends Aug. 3, will come in at no more than $31 billion, down by half a billion dollars from its previous guidance.

Sales in UNFI’s retail division, which includes its Cub Foods and Shoppers banners, dropped more precipitously in Q2 than they did during the prior quarter, when the unit saw sales fall by just over 1 percent.

Speaking during an earnings call, UNFI CEO Sandy Douglas said the company remains optimistic about prospects for Cub. UNFI is “engaged heavily with our franchisees to discuss the best ways to drive the brand forward and a number of very good ideas are on the table,” Douglas said. “We will continue to do that in a way that's good for the brand, good for the franchisees, and good for our shareholders.”

Douglas added that Andre Persaud, who became president and CEO of UNFI’s retail group last November, has been “taking a fresh look at both the Cub and the Shoppers brand.”

Douglas did not directly answer a question from an analyst about whether UNFI is considering selling Cub. “We believe the Cub brand is a very viable brand and has a lot of success ahead in its future,” he said during the call.

While UNFI’s sales have been on a downward trajectory, the company’s net loss during the second quarter was significantly lower than the loss it generated in Q1, bringing it closer to becoming profitable again. The company also said Wednesday that it has named a new president and chief financial officer as it looks to regain strength.

Douglas noted that UNFI has been working to streamline its relationships with suppliers and make it easier for them to deliver promotions to shoppers.

“We have traditionally had a very fee-based approach to how we work with suppliers, and what we’re doing is we’re eliminating a lot of that and creating a much simpler relationship, so that they’ll be able to make a simple investment, and then we put their focus and our focus on driving value to the shelf,” he said.

Douglas also said UNFI has made substantial progress in its efforts to reduce shrink and believes it is in position to show continued improvement going forward. “We now believe, based on the progress that we’re making, that we actually can trim that below pre-COVID [levels] in the reasonable near term,” Douglas said.

UNFI’s “supernatural” business was another bright spot for the company in Q2. That unit, which comprises the company’s sales to Whole Foods Market, posted a year-over-year net sales increase of 5.5%, suggesting that shoppers who favor organic products are continuing to spend on those goods.