Dive Brief:
- United Natural Foods, Inc. (UNFI) recorded a loss in its fiscal fourth quarter — the third straight quarter during which the grocery retailer and wholesaler’s net income and earnings per share have declined.
- UNFI posted a net loss of $68 million during Q4, compared with a $39 million profit during the same period in 2022. Net sales rose 2% during the quarter, to $7.4 billion.
- The company also said Tuesday that it has added three new directors and launched a financial review process as it proceeds with an ongoing “transformation agenda” designed to improve its financial performance.
Dive Insight:
UNFI’s latest round of dismal results underscores the daunting challenges the grocery company continues to grapple with as it tries to reverse a string of poor results stemming back to Q2 — results it has attributed to an array of factors, including deficits in its technology infrastructure.
The company has been taking a variety of steps to improving its performance, including investing in automation and critical infrastructure, and expects the upcoming 12 month-period “will be a pivotal year for our transformation,” CFO John Howard said Tuesday during an earnings call.
UNFI has been cutting staff, reviewing its contracts and rationalizing its SKU assortment in an effort to reduce costs in the near term. Longer term, the company aims to better utilize data, automation and other digital tools to become a “more modernized technology enabled partner” for suppliers and retailers, Howard said.
UNFI CEO Sandy Douglas said he expects savings from its near-term actions to offset higher costs related to labor, supply chain operations and the company’s efforts to restore profitability.
“Our transformation agenda is challenging and it will take time,” Douglas said during Tuesday’s earnings call. “In the meantime, our management team is focused on working through the near term environmental challenges. We’re resetting the business and taking action to turn profitability around while simultaneously investing in the business to sustain and significantly accelerate profitable growth over time.”
UNFI’s sales increased 4.6%, to $30.3 billion, during all of fiscal 2023, which ended July 29. The company turned in net income of $24 million for the year, a year-over-year drop of more than 90%.
The company’s shares dropped more than 20% Tuesday morning following the company’s latest announcements, bringing them to their lowest level since mid-2020.
UNFI also said its board of directors will oversee a financial review intended to strengthen the company’s performance and bring up its share price as part of its agreement with JCP Investment Management.
Under the arrangement with JCP, UNFI is temporarily boosting its board of directors bench to 14 through the addition of three new members. The company plans to return to an 11-member board when it holds its 2024 annual meeting of stockholders next year.
The newly appointed directors include JCP Managing Member James C. Pappas, JCP’s owner; Lynn Blake, a former State Street Global Advisors executive vice president; and former Stanley Black & Decker CEO James Loree.
“The financial review with the new board and the new skill sets is just going to help us make sure that we’re sweating every decision we make in the most detailed way,” Douglas said. “We have strong liquidity. We have the resources we need to invest in the plan, but we want to make sure that every stakeholder of ours — customers, suppliers and shareholders — are getting the best possible return.”
