Yahoo Finance United Natural (UNFI) Cuts Profit View on Q3 Earnings Miss
United Natural Foods, Inc. UNFI posted soft third-quarter fiscal 2023 results, wherein the top and bottom lines missed the Zacks Consensus Estimate, and the bottom line tumbled year over year. Profitability was largely hurt by a decline in the gross margin stemming from increased shrinkage and reduced inflationary benefits due to a tough operating landscape.
Consequently, management sharply reduced its adjusted EBITDA and adjusted earnings per share (EPS) guidance for fiscal 2023 while retaining the net sales view.
Quarter in Detail
United Natural’s adjusted earnings came in at 54 cents per share, down 50.9% from the year-ago quarter’s figure. The metric missed the Zacks Consensus Estimate of 63 cents.
United Natural Foods, Inc. Price, Consensus and EPS Surprise
United Natural Foods, Inc. price-consensus-eps-surprise-chart | United Natural Foods, Inc. Quote
Net sales rose 3.7% to $7,507 million, though it missed the Zacks Consensus Estimate of $7,524 million. The year-over-year upside was mainly backed by inflation and new businesses. Gains from new businesses resulted from selling expanded or new categories to existing and new customers. These factors were somewhat offset by a decline in units sold.
Sales increased across most of UNFI’s channels, other than Retail. Chains, Independent retailers and Supernatural channels witnessed sales growth of 0.6%, 2.3% and 12.2%, respectively. Other channel sales advanced 2.4%. Meanwhile, Retail channel sales dipped 0.7%.
United Natural’s gross profit fell 1.2% to $1,000 million. Excluding non-cash LIFO charges, the gross profit declined 4.7%. Gross margin (excluding non-cash LIFO charges) of 13.8% contracted from 15% in the year-ago quarter. The downside can be attributed to reduced procurement gains and decreased inflationary benefits stemming from a volatile macroeconomic landscape. Apart from this, increased shrinkage levels and costs associated with operational improvements affected the gross profit.
Operating expenses were $967 million compared with $969 million reported in the year-ago quarter. However, elevated occupancy-related costs remained a downside.
Adjusted EBITDA came in at $159 million, down from $196 million reported in the year-ago quarter.
Other Updates
The company ended the quarter with total liquidity of nearly $1.62 billion, including cash of nearly $38 million and a borrowing capacity of about $1.58 billion under the company’s asset-backed lending facility. Total outstanding debt (net of cash) was $2.02 billion.
Free cash flow during the third quarter was $65 million. During the quarter, United Natural bought back nearly 368,000 shares for nearly $12 million.
The company expects capital expenditures of nearly $350 million for fiscal 2023.
Fiscal 2023 Guidance
For fiscal 2023, the company still anticipates net sales in the range of $30.1-$30.5 billion.
The company now expects adjusted EBITDA in the range of $610-$650 million. Earlier, management had anticipated adjusted EBITDA in the range of $715-$785 million.
Net income is envisioned to be $11-$41 million compared with the prior projection of $90-$142 million.
The company now anticipates fiscal 2023 adjusted earnings in the range of $1.80-$2.30 per share, down from the previous guidance range of $3.05-$3.90 per share.
Shares of the Zacks Rank #4 (Sell) company have lost 19.8% in the past three months against the industry’s growth of 7.1%.
Better-Ranked Food Bets
Some better-ranked food stocks are Lamb Weston LW, The Kraft Heinz Company KHC and Conagra Brands CAG.
Lamb Weston, which operates as a frozen potato product company, currently sports a Zacks Rank #1 (Strong Buy). LW has a trailing four-quarter earnings surprise of 47.6%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Lamb Weston’s current fiscal-year EPS suggests an increase of 116.8% from the year-ago reported number.
The Kraft Heinz Company, a food and beverage product company, currently flaunts a Zacks Rank #1. KHC has a trailing four-quarter earnings surprise of 10.7%, on average.
The Zacks Consensus Estimate for The Kraft Heinz Company’s current fiscal-year sales and earnings suggests growth of 2.8% and 3.6%, respectively, from the year-ago reported figures.
Conagra Brands, which operates as a consumer-packaged goods food company, currently carries a Zacks Rank #2 (Buy). CAG has a trailing four-quarter earnings surprise of 13.2%, on average.
The Zacks Consensus Estimate for Conagra Brands’ current fiscal-year sales and earnings suggests growth of 7.1% and 16.5%, respectively, from the year-ago reported numbers.
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