Dive Brief:

• United Natural Foods, Inc. (UNFI) recorded $7.5 billion in net sales during its fiscal third quarter, a slight decline from the same period a year ago, the grocery retailer and wholesaler announced Wednesday.
• The company posted a net loss of $21 million during Q3, compared with a $7 million net profit during the same period in 2023. Retail sales slid 4.5% year-over-year, to $571 million.
• UNFI, which is pursuing a turnaround following several quarters of lower results, sees “a meaningful opportunity” to improve its supply chain footprint and save money, CEO Sandy Douglas said during an earnings call.

Dive Insight:

UNFI plans to make several key strategic shifts as it looks to rebound from a string of dismal results that began during the second quarter of 2023, when the company shocked investors with a sharp drop in profitability, Douglas said.

The company intends to strengthen its operations by focusing on “controllable variables,” including expanding its network optimization, cutting capital spending, optimizing its cost structure and reducing its net working capital position, according to Douglas.

“We believe this will help us to reallocate resources and strengthen our broader business and balance sheet while enhancing our ability to strategically invest in higher margin parts of the business,” said Douglas.

Douglas added that UNFI wants to help retailers “deliver a compelling consumer experience and a unique assortment” at a time when grocery shoppers remain heavily focused on value and discounters are gaining a larger share of the market.

The company has calculated that there is a “resilient segment” of its current and potential customer base that includes more than $90 billion in sales, a figure that is poised to grow at a “low single-digit rate” over the long term, Douglas said.

“Importantly, the large majority of our existing customers are in this segment and we believe these retailers will be increasingly important to suppliers focused on brand building and profitable growth,” he added.

While UNFI’s sales were mostly down during Q3, the company saw sales in its “supernatural” segment, which includes Whole Foods, rise more than 5%. The company recently extended its relationship with the Amazon-owned chain through 2032 last month, reflecting what Douglas described as “an even stronger strategic commitment” between the companies.

Douglas added during the call that UNFI sees an opportunity to expand its services business, which he said is the company’s highest-margin segment and is poised to “grow significantly faster than the total company.”

While promotions remain below where they were before the COVID-19 pandemic, UNFI is seeing them increase gradually and expects to see that trend continue, Douglas noted.

“That’s consistent with what we see industrywide based on what some of the large retailers are reporting,” he said.

Investors responded positively to UNFI’s earnings report, driving its shares up about 12% in morning trading Wednesday. The company’s stock price has declined 17% since the beginning of the year, but is up by more than half since closing at a multi-year low of $8.82 on April 24.